Senate Throws The Book At HSBC Accusing It Of Massive "Money Laundering And Terrorist Financing", No Comment On NAR Money Laundering Yet

Tyler Durden's picture

Just because there is already an overflow of confidence in the financial system, here comes the Senate's Permanent Subcommittee On Investigations with a 340 page report detailing how HSBC "exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls." Of course, since HSBC is one of the world's largest banks, what it did was not in any way unique, and it is quite fair to say that every other bank has the same loose anti-money "laundering" provisions. What HSBC was likely most at fault for was not providing sufficient hush money to the appropriate powers in the highest US legislative administration. But at least tomorrow we will have yet another dog and pony show, accusing that HSBC did what the NAR does every single day. Because let's not forget that the National Association of Realtors lobbied for and received a waiver for anti-money laundering provision regulations: after all how else will US real estate remain at its current elevated levels if not for the drug, blood, and fraud money from various Russian, Chinese, and petrodollar kingpins, mafia bosses and otherwise rich people who need to launder their money in the US, in the process keeping Manhattan real estate in the stratosphere? But one can't possibly pursue the real truth if it just may impair the fair value of that backbone of honest, hard-working US society: still massively overpriced housing in a world in which those who need mortgages will never get them.

Here is what the NAR has to say on the topic,  courtesy of Elanus Capital Management, with their commentary:

Briefly, as I am pushing my luck, I want to note something that I feel is important for all of us to consider. Namely, that we haven’t learned a damn thing over the past few years.


In quick succession over the past two weeks I’ve read articles in both the New York Times and the Financial Times discussing the phenomenon of UHNW buying of real estate property in New York and London. The Financial Times’ article was particularly pathetic and read a bit like a IPO note in 1999. In short, the gist of the article was that real estate in London was the best thing there is to a sure thing because Russians and others are dying to get their money out of their home country. First of all, there are myriad things that bother me about such an article, but the mere fact that these folks are the source of capital flight is surely a sign that their ability to maintain such flight is surely limited. And when Russian oligarchs stop buying 200-meter yachts and £100M flats, just who is going to step in to keep the bubble going?


That noted, hat’s off to Amanda Staveley, not only can she organize SWF bailouts of British banks at ludicrous prices, she can defend the London real estate market as “a great British success story.”


For whom? For fabulously wealthy central London property owners? Well, then three cheers for Tony, Gordon and David. Public policy is doing wonders for the world’s super-rich. I wonder, was there a class at Cambridge Economic policymaking in support of rapacious asset strippers? I thought public policy was about supporting economic growth that provided jobs and opportunity to the broadest possible segment of (usually domestic) society. Has anyone reading this been to the English Midlands or Wales lately? Are there signs that the sale of Gordon House is helping increase literacy, lower crime, improve infant mortality in Birmingham? Are jobs getting created in Leeds? Frankly, I wonder if the London elites have been watching a spot too much Downton Abbey.


Alright, so it’s just a market like any other and I should accept that. And I do. But I think we should all remember, that every Ruble, Real, Renminbi and Rupee that goes into buying property abroad is a currency unit that is not getting invested in productive activity back home. Developing market elites are sending very large signals that we should be paying attention to.


In the late 1990’s Russia’s biggest export market was Cyprus. A decade later, Kazakhstan’s second largest was Bermuda. Notice a pattern? Mind you, all of this going on while BRIC funds were raking it in…


Finally, many of you reading this will undoubtedly have spent time in an international bank and been forced to sit through countless hours of “know your client” and AML training. Fascinating to note that the National Association of Realtors lobbied for and received a waiver from such regulation. That’s right, realtors actually went to the U.S. government and said: we want to be able to help foreign business oligarchs and other nefarious business people launder money through the real estate markets of the United States – and prevailed.


Here’s their official position:


"NAR supports continued efforts to combat money laundering and the financing of terrorism through the regulation of entities using a risk-based analysis. Any risk-based assessment would likely find very little risk of money laundering involving real estate agents or brokers. Regulations that would require real estate agents and brokers to adopt anti-money laundering programs may prove to be burdensome and unnecessary given the existing ML/TF regulations that already apply to United States financial institutions."


Hat’s off to the NAR – that is some serious doublespeak. My translation: We’ll support you as long as we don’t have to support you.

But back to HSBC - here is more from the WSJ:

The findings will be aired Tuesday when senior HSBC officials are scheduled to testify before a Senate subcommittee looking into the matter. In a nearly 400-page report, the subcommittee detailed a regulatory culture at the bank where some officials allegedly engaged in risky behavior in pursuit of profits.


The report said that HSBC did little to clean up operations that should have raised concerns, including its Mexico bank. That bank had a branch in the Cayman Islands with no offices or staff but held 50,000 client accounts and $2.1 billion in 2008, the report said.


The report said that HSBC did little to clean up operations that should have raised concerns, including its Mexico bank. That bank had a branch in the Cayman Islands with no offices or staff but held 50,000 client accounts and $2.1 billion in 2008, the report said.


The Mexico operation, Senate investigators allege in the report, should have been the global bank's most worrisome because it continued doing business with money-changing businesses known as "casas de cambio." These businesses were cited by U.S. authorities to be fronts for drug-cartel money laundering, and HSBC conducted business with them years after other big banks cut them off.


HSBC Mexico's top anti-money laundering official, as he prepared to leave the bank, told an official from HSBC's London compliance office in 2008 that he believed there was "a culture [of] pursuing profits and targets at all costs" and that it "was only a matter of time before the bank faced criminal sanctions," Senate investigators found.

And from the Senate:

Global banking giant HSBC and its U.S. affiliate exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls, a Senate Permanent Subcommittee on Investigations probe has found.


“In an age of international terrorism, drug violence in our streets and on our borders, and organized crime, stopping illicit money flows that support those atrocities is a national security imperative,” said Sen. Carl Levin, D-Mich., subcommittee Chairman. “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.  Due to poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions.  The bank’s federal bank regulator, the OCC, tolerated HSBC’s weak AML system for years.  If an international bank won’t police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the U.S. bank being used to aid and abet that illicit money.”


The Subcommittee conducted a year-long investigation into HSBC and has detailed its findings in a 330-page report to be released at the hearing Tuesday, along with more than 100 documents, including bank records and internal emails.  The hearing, which begins at 9:30 a.m., will include testimony from HSBC officials and federal regulators.


The Subcommittee investigation focused on HSBC’s key U.S. affiliate, HSBC Bank USA, N.A., known as HBUS, which functions as the U.S. nexus for HSBC’s worldwide network.  HSBC has 7,200 offices in more than 80 countries and 2011 profits of $22 billion; HBUS has 470 branches across the United States with 4 million customers.  HBUS provides accounts to 1,200 other banks including more than 80 HSBC affiliates.  Called correspondent banking, HBUS provides these banks with U.S. dollar services, including services to move funds, exchange currencies, cash monetary instruments, and carry out other financial transactions.  Correspondent banking can become a major conduit for illicit money flows unless U.S. laws to prevent money laundering are followed.


In 2010, HSBC was cited by its federal regulator, the Office of the Comptroller of the Currency (OCC), for multiple severe AML deficiencies, including a failure to monitor $60 trillion in wire transfer and account activity; a backlog of 17,000 unreviewed account alerts regarding potentially suspicious activity; and a failure to conduct AML due diligence before opening accounts for HSBC affiliates.  Subcommittee investigators found that the OCC had failed to take a single enforcement action against the bank, formal or informal, over the previous six years, despite ample evidence of AML problems.


The Subcommittee investigation focused on five areas of abuse:


--Servicing High Risk Affiliates.  HSBC’s U.S. bank, HBUS, offered correspondent banking services to HSBC Bank Mexico, and treated it as a low risk client, despite its location in a country facing money laundering and drug trafficking challenges, high risk clients like casas de cambio, high risk products like U.S. dollar accounts in the Cayman Islands, a secrecy jurisdiction, and weak AML controls.  The Mexican affiliate transported $7 billion in physical U.S. dollars to HBUS from 2007 to 2008, outstripping other Mexican banks, even one twice its size, raising red flags that the volume of dollars included proceeds from illegal drug sales in the United States.


--Circumventing OFAC Safeguards.  Foreign HSBC banks actively circumvented U.S. safeguards at HUBS designed to block transactions involving terrorists, drug lords, and rogue regimes.  In one case examined by the Subcommittee, two HSBC affiliates sent nearly 25,000 transactions involving $19.4 billion through their HBUS accounts over seven years without disclosing the transactions’ links to Iran.


--Disregarding Terrorist Financing Links.  HBUS provided U.S. dollars and banking services to some banks in Saudi Arabia and Bangladesh despite links to terrorist financing.


--Clearing Suspicious Bulk Travelers Checks.  In less than four years, HSBC cleared $290 million in obviously suspicious U.S. travelers cheques for a Japanese bank, benefiting Russians who claimed to be in the used car business.


--Offering Bearer Share Accounts.  HSBC offered more than 2,000 accounts to bearer share corporations, despite the high risk of money laundering and illicit conduct that results since their ownership can be readily transferred without a trail. 


The report recommends a number of changes at HSBC’s U.S. bank, including higher scrutiny of HSBC affiliates for money-laundering risk, closing accounts of banks linked to terror financing, and steps to ensure the bank does not process transactions with prohibited entities such as terrorists, drug lords, and rogue regimes.  It also recommends overhauling the AML controls on travelers cheques and eliminating bearer share accounts.

Full Senate report:


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THX 1178's picture

Wow! The S continues to HTF...

Mr Lennon Hendrix's picture

And tonight America will watch the Bacholerette discuss her love life.

AldousHuxley's picture

Senate Throws The Book At HSBC Accusing It Of Not Massively money laundering enough into their campaign contribution coffers.


"Look at JP Morgan. They funnel drug and terrorist money into campaign contributions, but you HSBC, what have you done for US lately?" ---voice of US Senate

Pladizow's picture

“Where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control.” – Lord Acton

iDealMeat's picture

Two Squids on the BOD:


Sir Simon Robertson† 70

Deputy Chairman and senior independent non-executive Director

Chairman of the Nomination Committee.

Skills and experience: a background in international corporate advisory with a wealth of experience in mergers and acquisitions, merchant banking, investment banking and financial markets; honoured with a knighthood in recognition of his services to business; extensive international experience having worked in France, Germany, the UK and the US.

Former appointments include: Managing Director of Goldman Sachs International and chairman of Dresdner Kleinwort Benson.


J L Thornton† 58

Chairman of the Group Remuneration Committee.

Current appointments include: non-executive Chairman and a director of HSBC North America Holdings Inc.; professor and director of the Global Leadership Program at the Tsinghua University School of Economics and Management; Chairman of the Brookings Institution Board of Trustees; a non-executive director of Ford Motor Company, News Corporation, Inc. and China Unicom (Hong Kong) Limited; a director of National Committee on United States-China Relations; a Trustee of Asia Society, China Institute, The China Foreign Affairs University, a member of the Council on Foreign Relations and the China Securities Regulatory Commission International Advisory Committee.

Former appointments include: non-executive director of Industrial and Commercial Bank of China Limited and Intel Corporation, Inc.; and President of the Goldman Sachs Group, Inc.

gmrpeabody's picture

Soon, the FBI, at the request of Eric Holder, will comb thru the offices of HSBC making sure that any and all evidence is lost or otherwise corrupted and of little future use. But not until HSBC settles out of court.

Bringin It's picture

Where's Slewie-the-pi-rat?  This is what I was telling you about HK RE.  Remember?  Cosmo had all this mumbo-jumbo for why.  When the main 'why' is that it is a way out.

Stackers's picture

Uh, news flash - HSBC has been doing this for about 200 years since the China Opium wars

No One's picture

U.S. Banks hate international competition. 



JohnG's picture

<--- Electioneering.

<--- HSBC forgot to pay the hush money.

Ignorance is bliss's picture

Certainly JPM is a piece smelly garbage doing the Fed's dirty work, but what about Eric Holder and the Obama administration? That scum bag armed the drug cartel "Fast and Furious" Yet the Senate has the balls to accuse HSBC? Smacks of tit for tat currency wars. I seem to recall HSBC with their good mafioso friends JPM dominate the short side of the metals. Makes me wonder what the next tit for tat will look like. Smells like change is in the air either that or its the smell of genitalia in the wind. Could be both.

Gringo Viejo's picture

Fuck the senate! They're bought & paid for by the bankers. HSBC will pay a fine "without agreeing to any wrong doing"....and pick up where they left off....fucking the general public. Listen to me people, if you do not take care of this shit while you own guns, when these asshole sonsabitches come to take them away, you won't have ANY recourse.

NONE! Wake up assholes!

Gringo Viejo's picture

Listen up people. I'm an old ex-marine from the 60s. The PTB will be coming for me soon; I'm their worst nightmare. An American patriot who's willing to die for America. When my woman has been given "free conduct"....and I'm facing down the SWAT team....REMEMBER ME! AVENGE ME! THIS IS MY COUNTRY & FUCK THE EVIL THAT HAS OVERTAKEN HER!

j0nx's picture

Marines are never EX-Marines. A Marine can be a former Marine but never an ex-Marine. I would assume a real Marine would know that.

Gringo Viejo's picture

Now that I've sobered up, I bow to your semantics sonny. Sorry for having offended you and the other ladies.

MonsterBox's picture

dude... really, switch to decaf

dig out you gilley suit and disappear.  dont let SWAT know your name, just your 300 grain calling card

Bringin It's picture

Disappear.  Live to fight another day.  Read Sun Tzu.  Pick your time and place.  By 2013 the people will surely be awake.

We all feel your pain.


JLee2027's picture

HSBC is/was one of the two major short players at COMEX precious metals with old JP the other.


So this can only be good news.

THX 1178's picture

If you hold physical. Especially silver. Gold is good too. But silver... HOBOY...

knukles's picture


If my fading memory severs me half assed well, hasn't HSBC historically been the BoE's agent within the precious metals markets as JPM has been Treasury/Fed's?
Which then begs two observations....
1.) Has anybody else but dimwitted little old me noticed that the lists of the banks on the rumored criminal hit list for LIBOR all been foreign domiciled?  None form the US.....
Gee willickers, we're on top of it Captain.
Somebody's gotta show the peasantry that there is justice in an election year.
(And PS, pass the campaign contributions along with the Grey Poopon) 
2.) Just as little Bobby Diamond "threatened" the City of London (Don't forget the old adage; "Nobody fucks with the City of London") HSBC couldn't be a better target for the investigators to isolate.  For being BoE's agent extraordinaire,  the chances of anything happening larger than a wrist tapping approach the probability of Moe, Larry and Curley being elected to public office.

Nothin's gonna come of this of substance.
Else ya'll gotta tag Wells, Citi, etc., etc., etc

And every single American Bank doing business within/via the City will be "vaporized".
Her Majesty, Whitehall, Downing Street, and the REAL pigmen ain't gonna allow even the venerable US Senate to interfere with them.

Senators are there to be bribed, purchased and maipulated.  Not to govern.
KabukiTheater?  Certainly.
Serious nailing of 'em?  Not a chance
Retribution?  Priceless.

     You do not fuck with the City.

Mentaliusanything's picture

Ya makes me chuckles knuckles. This poster puts the Acid on the Elephant.

End result - In the City where there was much ado about nothing.

"She dying, as it must be so maintain'd,
Upon the instant that she was accus'd,
Shall be lamented, pitied, and excus'd
Of every hearer"


WaterWings's picture

Left, right, up, down this is some funny sheisse. All youz ZHers... love you much.

RockyRacoon's picture

I think the real joke was just glossed over:

"...OCC had failed to take a single enforcement action against the bank, formal or informal, over the previous six years, despite ample evidence..."

Where are the hearings to put some OCC pukes in jail for not doing their job?   Talk of claw-back, how come we can't have them regurgitate some of the OCC salaries for the last 10 years?  After all, they got paid for doing nothing.

We don't need regulations, we need regulators.  What good are the laws if they are flaunted?   Doing business in the good ole U S of A used to be dependable and predictable since we had "the rule of law".   Right.

Real Estate Geek's picture

HSBC:  "But officer, I was just keeping up with traffic."

Problem Is's picture

AS Timmah's Aunt Jamie & Uncle Lloyd blow by in a red Porsche convertible...

deez nutz's picture

HSBC throws book back at Senate........  and laffs.

nasa's picture

The kick-back money HSBC owed must have been a little slow coming this month. 

slaughterer's picture

HSBC down = SILVER up.  

fonzannoon's picture

Won't HSBC just have to sell all that "silver" they "absolutely" own and would that not drive the "paper" price down?

Bohm Squad's picture

Fortunately, the market can absorb the 9000 ounces of physical silver they actually have...!  :)

Seriously, if they're short, then they'd probably need that silver to cover...especially if cash is needed elsewhere.  Like when Blythe told everyone they short silver for their customers...probably a delta neutral thing.

buzzsaw99's picture

Who are the terrorists?

BurningFuld's picture

The report "recommends some changes". That's as far as it goes boys and girls. They will pay the hush money and move on.

toady's picture

'Recommends some changes' does NOT equal Throws the book at them'

chunga's picture


John Corzine already told them what they could do with their "book".

Get Fucked!

Piranhanoia's picture

   "Honest, we had to make it look like we do something in the senate",  give me my campaign money bitch.

Johnk's picture

"Glorified.  Vilified. Gentrified.

Different Values make the world a richer place.




myshadow's picture

holder, buhler, holder, buhler?



q99x2's picture

Its Election Season. Time for setting the campaign stage by prosecuting a bankster near you.

Yeeeeehhhhhh Haaaaaaaaaa.

Hang em high and hang em low.

Movin movin movin keep them doggies rolling Rawhide.

Scapegoatin time has arrived for thems elite bankin folks. 

Satan's picture

Drug cartels and terrorists are the only clients left with any money...

Real Estate Geek's picture

Well, the banks can't discriminate against them. Drug cartels and terrorist are typically disadvantaged minorities and the ONE thing that Holder won't tolerate is discrimination.

Dr. Sandi's picture

The only terrorists with any money are getting it from government black ops. And that would be....

Drug Cartels.


The circle is complete as the snake swallows itself whole.

No One's picture

Oh that Hong Kong Shangai Banking Coproration. They should have HQ'd in NYC.


 I am sure the fact that is a London based bank has NOTHING to do with the Sentate looking at HSBC, rather than our FINE institutions like Citi, JPM, and BofA. 

silvertrain's picture


bankonzhongguo's picture

What a joke.  I used to run AML in a major bank.  A little IT access.  Some high school level SQL and statistics and Presto!  You have all the analysis you will ever need and then it is never to call the police.  You just politely ask the client to close their account.  You act before there is a smoking gun.

The global economy is predicated on 3 things.  Gold, Guns, and Drugs.  And the banks to facilitate it all.

People forget why Bush 1 invaded Panama - only after Noriega threatened to nationalize all those publicly traded drug money laundering banks.