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HSBC Accused Of Letting Cartels Launder Money

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AUDIE CORNISH, HOST:

This is ALL THINGS CONSIDERED from NPR News. I'm Audie Cornish.

ROBERT SIEGEL, HOST:

And I'm Robert Siegel. The British bank, HSBC, has come under intense scrutiny in the Senate. A subcommittee released a report saying the bank played fast and loose with U.S. banking rules and became - and this is a quote - "a sinkhole of risk attracting and aiding organized crime, drug traffickers and terrorists."

Top officials testified before a Senate committee today and NPR's Andrea Seabrook was listening.

ANDREA SEABROOK, BYLINE: Senator Carl Levin, a Democrat from Michigan, led this investigation. He made clear from the outset of today's hearing that he and his colleagues aren't just interested in HSBC, but all international banks that set up affiliates in the United States, giving them access to the U.S. dollar, because, he said, converting profits into dollars is what terrorists, drug cartels and corrupt dictators want most.

SENATOR CARL LEVIN: Wrongdoers can use U.S. dollars and U.S. wire transfers to commit crimes, arm terror groups, produce and transport illegal drugs, loot government coffers and even pursue weapons of mass destruction.

SEABROOK: The top Republican on the committee, Oklahoma's Tom Coburn, said the U.S. financial system has strong controls on money and open transparency laws and that's exactly why criminals want access to it because money that comes out of U.S. accounts is assumed to be clean. So Coburn said...

SENATOR TOM COBURN: If they can pass criminal proceeds through a U.S. bank unnoticed and untouched, the funds are unlikely ever to be stopped or ever to be recovered.

SEABROOK: Among the biggest, most egregious offenders among international banks, said Levin, is HSBC. The bank is based in London, but has offices in more than 80 countries. It is among the most active banks in emerging and high risk markets: Asia, the Middle East, Africa and Latin America.

LEVIN: One HSBC executive told us that a major reason why HSBC opened its U.S. bank was to provide its overseas clients with a gateway into the U.S. financial system.

SEABROOK: At today's hearing, Levin ran through a jaw-dropping list of offenses by HSBC. In Mexico, the bank maintained an account for a known drug kingpin who supplied precursor chemicals of methamphetamine to two violent cartels. It allowed huge transactions to go through the bank that were likely the purchase of airplanes to smuggle drugs to the U.S.

In the Cayman Islands and the Bahamas, HSBC affiliates maintained accounts for corrupt officials in Angola, Nigeria and the Republic of Congo. And, in the Middle East, say Senate investigators, HSBC affiliates helped Iran get around U.S. sanctions by scrubbing wire transfers of any mention of the rogue nation. That made it impossible for U.S. regulators to catch the transactions and look into them.

Several top HSBC employees appeared before the committee today and Chairman Levin asked David Bagley, the head of compliance, about those Iranian wire transfers.

LEVIN: Why was not the practice simply stopped right then? Why did it take so long to fix?

DAVID BAGLEY: Mr. Chairman, that is an absolutely appropriate question and, with the absolute benefit of hindsight, this clearly took far too long to resolve.

SEABROOK: How long did it take, pushed Levin? Three years. Bagley announced today he is resigning. Other HSBC officials detailed a top-to-bottom overhaul of the bank's practices. Analysts expect HSBC to be slapped with a fine of some $1 billion.

Andrea Seabrook, NPR News, the capital. Transcript provided by NPR, Copyright NPR.

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