Iranian and Drug Cartels money-laundering aided by the opium bank HSBC

HSBC Aided Money-Laundering by Iran, Drug Cartels, Probe Shows

By Jesse Hamilton and David Voreacos – Jul 16, 2012 10:25 PM GMT+0100

HSBC Holdings Plc (HSBA) did business with firms linked to terrorism, let money-laundering safeguards in its Mexico operations erode and circumvented U.S. sanctions against Iran, according to U.S. Senate investigators.

The Permanent Subcommittee on Investigations released a 335-page report today detailing a decade of lax controls that allowed HSBC affiliates around the world to give terrorists, drug cartels and other criminals a portal into the U.S. financial system. Lawmakers plan to question senior executives from Europe’s largest bank at a hearing in Washington tomorrow.

“HSBC used its U.S. bank as a gateway into the U.S. financial system for some HSBC affiliates around the world to provide U.S. dollar services to clients while playing fast and loose with U.S. banking rules,” said Senator Carl Levin, the Michigan Democrat who heads the subcommittee. “The failure of accountability here is dramatic.”

The report said HSBC ignored ties to terrorist financing among its customer banks, including Riyadh, Saudi Arabia-based Al Rajhi Bank (RJHI), which it said had links to terrorist groups through its owners. Internal documents show HSBC decided to cut ties with the bank before reversing itself under pressure from Al Rajhi, the report said, detailing $1 billion in U.S. dollars shipped to it from HSBC Bank USA NA between 2006 and 2010.

One of the report’s largest sections focuses on HSBC Mexico, which shipped $7 billion in cash to HSBC’s U.S. bank in 2007 and 2008 — outpacing all HSBC affiliates and other banks in Mexico and leaving U.S. authorities concerned the volumes could only be supplied by the illegal drug trade, the report said. The Mexico bank, acquired by HSBC in 2002, has a history of “severe” deficiencies in anti-money-laundering controls, and the U.S. bank failed to monitor its activity, the report said.
Iran Transactions

In the six years until 2006, two HSBC affiliates sent thousands of Iran-involved transactions through the U.S. bank without telling the U.S. bankers they involved Iran. Internal communications show the U.S. bankers were aware that some of the transactions were linked to Iran in violation of U.S. sanctions. Similar transactions came from a list of other prohibited jurisdictions including North Korea, Cuba, Sudan and Burma.

Many Iran transfers involved so-called “U-turn” transactions, which were allowed under Treasury Department regulations before November 2008. Those rules let U.S. banks process dollar payments involving Iran that began and ended with non-Iranian institutions.

In 2005 and 2006, HSBC processed about 1,800 U-turn transactions through a correspondent account at JPMorgan Chase & Co. (JPM) The report quoted an e-mail from HSBC Middle East Deputy Chairman David Hodgkinson saying that HSBC’s U.S. unit was “unwilling to process them for reputational risk reasons.”
Regulators Deficient

The Senate investigation also accuses the Office of the Comptroller of the Currency, the primary regulator of HSBC’s U.S. bank, of failing to treat repeated findings of violations in the bank’s money-laundering controls with sufficient weight. The OCC has tolerated severe money-laundering deficiencies “for years,” the report said, while HSBC’s examiners were suggesting action to their supervisors.

Levin said that the kind of failures HSBC exhibited should be cause for U.S. regulators to consider whether to revoke its charter. The bank has expressed remorse about “unacceptable behavior,” according to a memo written by Chief Executive Officer Stuart Gulliver, and Senate investigators said it has pumped up its compliance staff from 200 to about 1,000.


  • Please remember that the controls over the HSBC are The Worshipful Company of Mercers and Fuellers utilizing the Chinese Er-Bu and British MI6. Study the connection of the House of Keswick to the HSBC and the banks roots with The Honourable East India Company. These are the Livery pirates of old continuing today. All working for Emperor Juan Carlos of Spain and the House of Bourbon controlling the World’s drug empire using peon cartels as front puppets to veil the real power. The truth of the matter is simple, the drugs trade of the military intelligence is worth five times the visible economy they let you see and of what they are currently destroying with the planned economic depression.

    -= The Unhived Mind

  • HSBC executives to apologise at US Senate hearing

    17 July 2012 Last updated at 14:57

    HSBC will apologise to the US Senate after an investigation claimed that the bank had been used to launder dirty money around the world.

    In a statement, Europe’s largest bank, said it expected to be held accountable for what went wrong.

    A Senate report said suspicious funds from countries including Mexico and Syria had passed through the bank.

    HSBC will give evidence shortly to a Senate committee hearing after it first hears from US officials.

    Senator Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations said HSBC’s lack of controls in the US and at its subsidiaries had been “a recipe for trouble.”

    The bank had allowed itself to be used as a conduit for “drug kingpins and rogue nations,” added Mr Levin in his opening remarks.

    The session, which began at 13:30GMT will hear first from, David Cohen, Under Secretary for Terrorism and Financial Intelligence and Leigh Winchell, assistant director, of the customs enforcement unit ICE, which is part of Homeland Security.

    Black-market funds

    “We will apologise, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong,” HSBC said in a statement released on Monday.

    The Senate report said large sums of drug money from Mexico had almost certainly been laundered through the bank, as well as questionable funds from the Cayman Islands, Iran and Saudi Arabia.

    Senator Carl Levin, chairman of the subcommittee that released the report, spoke of a “polluted” system that allowed black-market funds to move through the US banking system.

    “In an age of international terrorism, drug violence in our streets and on our borders, and organised crime, stopping illicit money flows that support those atrocities is a national security imperative,” said Mr Levin.

    The report also concludes that the US bank regulator, the Office of the Comptroller of the Currency, failed to properly monitor HSBC.

    The report comes at a difficult time for the British banking sector, which is having its standards and practices scrutinised by regulators and policymakers.

    Critics say the current furore over the manipulation of the Libor inter-bank interest rate is the latest example of a banking system in need of fundamental reform.
    Mexico Cash

    According to the Senate committee, HSBC accepted more than $15 billion in cash from subsidiaries in Mexico, Russia and other countries at high risk of money laundering but failed to conduct any monitoring of these bulk cash transactions between mid-2006 and mid-2009.

    Furthermore, the report found that HSBC knew of lax anti-money laundering practices at its Mexican subsidiary HBMX which had dated back to its purchase in 2002.

    HBMX was warned, on at least two occasions, by Mexican authorities that drug money was probably being laundered through HBMX accounts.

    The report names individual cases such as that of Chinese-Mexican citizen, Zhenly Ye Gon.

    Mr Ye Gon, and his three Mexican pharmaceutical firms including Unimed Pharmaceutical were long-standing clients of HBMX.

    In 2007, a joint operation between the Mexican government and US Drug Enforcement Agency seized more than $205m in cash at Mr Ye Gon’s residence – described as the largest drug-related cash seizure in history – along with $17m in Mexican pesos, firearms, and international wire transfer records.

    Mr Ye Gon is currently in a US prison awaiting extradition to Mexico on charges relating to the import, manufacture, and sale of chemicals to drug cartels for use in manufacturing methamphetamine.
    Miami office

    Many of HSBC’s breaches of US anti-money laundering relate to its use of bearer share accounts. Under the rules for these accounts, ownership of shares and the income they incur can be passed from person to person in secrecy.

    HSBC’s US subsidiary HBUS had opened more than 2,550 accounts for bearer share corporations.

    These businesses are commonly set up in tax havens such as the British Virgin Islands.

    Most of the bearer share accounts – some 1,670 – were opened at the Miami office of HBUS.

    At their peak, these Miami accounts held $2.6bn of assets and generated annual revenues of $26m.

    The report highlights the case of Miami Beach hotel developers, Mauricio Cohen Assor and Leon Cohen Levy.

    The father and son used HBUS accounts opened under the names Blue Ocean Finance Ltd. and Whitebury Shipping Time-Sharing Ltd. to help hide $150m in assets and $49m of income.

    The pair were jailed for 10 years for criminal tax fraud and filing false tax returns in 2010.
    ‘Held accountable’

    The report into HSBC was released by the Senate Permanent Subcommittee on Investigations, a Congressional watchdog that looks at financial improprieties.

    The year-long inquiry, which included a review of 1.4 million documents and interviews with 75 HSBC officials and bank regulators, will be the focus of the hearing on Tuesday.

    Among the executives who will appear is HSBC’s chief legal officer Stuart Levey, who joined the bank in January and was previously one of the top officials on terrorism and finance at the US Treasury Department.

    The head of the Office of the Comptroller of the Currency, Thomas Curry, will also testify.

    In a memo released ahead of the hearing, HSBC chief executive Stuart Gulliver said: “It is right that we will be held accountable and that we take responsibility for fixing what went wrong.

    “As well as answering the subcommittee’s questions, we will explain the significant changes we have already made to strengthen our compliance and risk management infrastructure and culture,” he said.

  • Drug money saved banks in global crisis, claims UN advisor

    Drugs and crime chief says $352bn in criminal proceeds was effectively laundered by financial institutions

    Rajeev Syal
    The Observer, Sunday 13 December 2009

    Drugs money worth billions of dollars kept the financial system afloat at the height of the global crisis, the United Nations’ drugs and crime tsar has told the Observer.

    Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were “the only liquid investment capital” available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result.

    This will raise questions about crime’s influence on the economic system at times of crisis. It will also prompt further examination of the banking sector as world leaders, including Barack Obama and Gordon Brown, call for new International Monetary Fund regulations. Speaking from his office in Vienna, Costa said evidence that illegal money was being absorbed into the financial system was first drawn to his attention by intelligence agencies and prosecutors around 18 months ago. “In many instances, the money from drugs was the only liquid investment capital. In the second half of 2008, liquidity was the banking system’s main problem and hence liquid capital became an important factor,” he said.

    Some of the evidence put before his office indicated that gang money was used to save some banks from collapse when lending seized up, he said.

    “Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities… There were signs that some banks were rescued that way.” Costa declined to identify countries or banks that may have received any drugs money, saying that would be inappropriate because his office is supposed to address the problem, not apportion blame. But he said the money is now a part of the official system and had been effectively laundered.

    “That was the moment [last year] when the system was basically paralysed because of the unwillingness of banks to lend money to one another. The progressive liquidisation to the system and the progressive improvement by some banks of their share values [has meant that] the problem [of illegal money] has become much less serious than it was,” he said.

    The IMF estimated that large US and European banks lost more than $1tn on toxic assets and from bad loans from January 2007 to September 2009 and more than 200 mortgage lenders went bankrupt. Many major institutions either failed, were acquired under duress, or were subject to government takeover.

    Gangs are now believed to make most of their profits from the drugs trade and are estimated to be worth £352bn, the UN says. They have traditionally kept proceeds in cash or moved it offshore to hide it from the authorities. It is understood that evidence that drug money has flowed into banks came from officials in Britain, Switzerland, Italy and the US.

    British bankers would want to see any evidence that Costa has to back his claims. A British Bankers’ Association spokesman said: “We have not been party to any regulatory dialogue that would support a theory of this kind. There was clearly a lack of liquidity in the system and to a large degree this was filled by the intervention of central banks.”

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