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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YouAreBliss's picture

Not to mention Iran-Contra.  Drugs for Money - Money for Nothing - and the Chicks are for free.


Now shut-up and get back to loading those washing machines - we aren't paying you minumum wages for nothing.


Anyone under 30 should Wiki Iran-Contra.  What happened to that cast of characters?

One became President, another became a FOX News Hero, another now holds the similarly named chair at the Foundation for Defense of Democracies, another co-founded an international consulting company.


Wow what punishment!   That set the stage for anything goes.  Hello Niger Yellow Pudding Pie!

HardAssets's picture

"The global economy is predicated on 3 things. Gold, Guns, and Drugs."

Well 2 outta 3 ain't bad - - - unless you count all the aspirin I  take when reading these various ZH articles on the banksters. Definite headache material.

Johnk's picture

HSBC Values and Business Principles

Dependable and do the right thing

  • Stand firm for what is right, deliver on commitments, be resilient and trustworthy
  • Take personal accountability, be decisive, use judgment and common sense, empower others
YouAreBliss's picture
  • And be sure to use just a dap of grease - you must make them feel it.
world_debt_slave's picture

This is what you can do when you are the 800lb gorilla in the room. The Fed Gov has and does the same thing.

kill switch's picture


The PSOI is targeting them? when it's the U.S. that has been engaged in this for thirty years and more, the hypocrisy and utter hubris in this Creeping Coup we live in is astounding...Let's hear it for truth justice and the Amerikan way!!! USA USA USA USSA!!!

With Carl Levin who wrote the book on fraud!!!

His interrogation of George Galloway was pathetic...That took care of Norm Coleman the PNAC and Samuel P. Huntington cartel stooge...

And they skipped watching CITI, GOLDMAN JPM,WELLS.......on and on ad on...It's nice to live in a 750 trillion dollar mafia entity.

adr's picture

Is this supposed to be news? Tell us all something we didn't know.

Wait, what? HSBC is involved with money transfers involving human trafficking for hedge fund tycoons so they can have 14 year old Indonesian virgins delivered to NYC penthouses.

That wouldn't surprise me if it came out. It also wouldn't surprise me to learn that Barney Frank got the government goon squad to go after HSBC because his delivery of young boys didn't show up.

The reality is the lives of our politicians, bankers, traders, and CEOs truly do resemble the plot devices of Law and Order SVU. The sad part is that people actually believe those currently in power are good.

HardAssets's picture

"The sad part is that people actually believe those currently in power are good."

People are such fuckin' children when it comes to this stuff. Pisses me off to no end.

Dr. Sandi's picture

Wait a minute. What are you saying?????

blindman's picture

Warren Zevon - Lawyers Guns & Money - Acoustic Live
Werewolves Of London
".. little old lady got mutilated late last night,
were wolves of london again." ..w.z.

juggalo1's picture

This shit pisses me off, because I've had to fill out forms, and wait for verifications to come through when I helped foreigners open bank accounts and transfer money as an interpreter.  The guy at the auto plant down the street takes hours to get through the line, but they still let through the real criminals.

Dr. Sandi's picture

I believe there is an important lesson here.

FieldingMellish's picture

Drug trafficking?!?!?! They are totally fucked now! If only they had kept to extortion, murder, rape and fraud like the rest of the boys they would have been fine.

FieldingMellish's picture

Oh yeah... and to all the good members of the NAR... go fuck yourselves and your 6% commission.

machineh's picture

This HSBC diss is old news ... and serves as a smokescreen for Congress failing to exercise oversight in many other areas.

For instance, the CIA is running wild with its independent drone program. And there ain't shit that Senator Levin can do about it. He ain't in the loop.

Meanwhile, AG Holder is in declared contempt of Congress ... but they don't have the balls to arrest or impeach him. They are just impotent, angry old men.

LOSERS! POSEURS! Probably pissed that their guaranteed insider trades aren't making no money this year.

whoopsing's picture

Banking clampdown for the plebs in 3..2..1..

knukles's picture


Oh the humanity of it all.
False flag Alert!

surf0766's picture

Well now everyone get 820 credit scores.

Free shit for everyone

Meesohaawnee's picture

wake me up when theres a handcuff. until then .. yawn. i laugh.. and we used to make fun of the Chinese. Now they make fun of us. In china there would be no trial of the jamies, corzines, hsbc,, we know the conclusion there.

Johnk's picture

Going through the Senate report....apparently HSBC offered Osama bin Laden free checking with no minimum balance.

YouAreBliss's picture

Don't forget the 0% loans to OBL - have to keep the WAR machine alive.


Dr. Sandi's picture

Those bastards.

bin Laden should have been forced to use a credit union for that kind of privilege just like the rest of us.

YouAreBliss's picture

And in punishment - they have to forgo 10% of their bonus increases and write 100 times on the black board:

"I will not money launder, traffic drugs or finance terrorism"

Mentaliusanything's picture

"I will not get caught money laundering, trafficing drugs or financing terrorism"

Fix it for ya

tony bonn's picture

all of the tbtf banks are involved in drug trade and money laundering......anyone who thinks otherwise is uninformed and profoundly foolish....without this income, they would have required even greater bailout funds....

the banks and cia have the most incestuous relationship in offialdom....

the senate can huff and puff but it is a verity that its report will come and go and that will be that - just the same as with the cia's/bush crime syndicate's destruction of the trade towers and pentagon...

Peter Pan's picture

When I see the corrupt hounding the corrupt I begin to think that the upper echelons have almost finished stripping the plebs and are now cannibalsing each other. It's strange how the US government never chose to act on the UN findings that at the time of the GFC governments turned a blind eye to drug and crime money that was accepted into the banking system without any questions asked for the sake of propping up the banking system.

Why doesn't the Senate conduct an inquiry and an audit into all the charitable institutions in the USA to see how charitable their expenses are?

Our list of questions gets longer and longer while any hope of decency and recovery gets shorter and shorter.

Dr. Sandi's picture

The All Cannibal Revue is where all the shit we've been watching starts to get interesting.

KickIce's picture

I'm sure accusation against the CIA will follow...


RS2OOO's picture

This line got me:


"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."


Wow, imagine that, taking risks in pursuit of profit!

KCMLO's picture

Smacks of a shakedown when you go to press with a release rife with syntax and gramatical errors.  Also, HSBC transfered $60 trillion?  That's a crazy typo, or are we at that point of dollar dilution via QE?

Whoa Dammit's picture

"In 1966, Michael Hudson, a young Chase Manhattan balance-of-payments economist, was in a company elevator when he was handed a memo by a former State Department operative. The memo came from the U.S. government, and Hudson was tasked with figuring out how much foreign money the U.S. might attract. “They were saying, ‘We want to replace Switzerland,’ ” Hudson explains. “All this money will come here if we make this the criminal center of the world. We wanted foreign criminal money, which was patriotic, but not American criminal money.

In the years since then, almost unknown to most Americans, the United States has turned itself into a giant tax haven for foreigners, just as the memo suggested. Federal and state tax laws have been deliberately shaped to give foreigners special tax exemptions unavailable to Americans, plus financial secrecy and exemptions from regulatory restraints."

buzzsaw99's picture

Thank god for dick shelby. [/sarc.]

YouAreBliss's picture

What we need is the Tea party to investigate - you know Dick Armey and Freedom Works.......but wasn't he a lobbyist for....

YouAreBliss's picture

HSBC is suing the Senate for giving away it's trade secrets.

MIDTOWN's picture

Depending upon geographic location, approximately 20-30% of Realtors have left the business since 2006.

Not all Realtors agree with NAR actions, however, many are members of NAR in order to gain access to MLS.

Prior to 1986/1989 the Real Estate Market had the benefit of two factors that supported price levels and increased liquidity:

1. Real Estate loans were freely assumable, meaning if you had large enough downpayment to cover Sellers equity you could assume the Sellers loan (and bypass the bank).

2. "passive loss rules."  Losses from passive tax shelters and losses from operating rental real estate can only be used as a deduction, or credit, against profits from other passive tax shelters and real estate. 

The new rules reportedly resulted in significant declines in the values of real estate as high income individuals lost a considerable incentive to own real estate investments and thus gravitated towards the stock market.

ptolemy_newit's picture

Here’s where you should start if you have any patriotism in you!

An annual meeting of the association is held every year in January, in conjunction the American Economic Association and the North American Winter Meetings of the Econometric Society as a part of the Allied Social Sciences Association. The president speaks on a selected topic and there are presentations of various financial papers. The AFA and the Western Finance Association Meetings are considered to be the two top general finance conferences in the world.


FischerBlack's picture

LOL. HSBC to Carl Levin: Dude, we were a day late with your payoff money! We even killed the guy who fucked that up, just as you requested. What the hell? Call off the dogs and we'll pay triple next month!

HardAssets's picture

Ya'll have watched Senate/Congressional 'investigation' hearings before havent you ?

They either ask those called before them easy questions (because theyve been bought off)  or

ask dumb questions (because theyre clueless ).

At most there might be some small fine - - - a fraction of what HSBC made off of their investigated activities. A small pittance as tribute and to make the politicians look better during an election year when its definitely hitting the fan.

Real Estate Geek's picture

Ya'll have watched Senate/Congressional 'investigation' hearings before havent you ?

I swore off of them after watching Maxine Waters make a fool of herself . . . once again.

T-Silver's picture

This will be bullish for the thier stock

Catullus's picture

It's the US going after ex-pats for not having every transaction tracked by federal authorities. It's new under the "absence of evidence is absolute definitive proof of guilt" (see the Penn State investigation).

yogibear's picture

LOL, a public show, a slap on the wrist and backroom senators squeezing for bigger political contributions.

Fraud and looting has been legal for some time. The senators and congressmen have to shakedown the financial industry for more campaign money.


alfred b.'s picture


     So what's the fine gonna be....some 300 bucks or something!   Oh yeah, for sure, they will include the always infamous phrase:  "Now you guys make sure that you don't do that again."

     Corruption based on fraud with the assistance of gunerment...what else would you expect??


loveyajimbo's picture

Notice how few of these big news items ever come from the "regulators" at the CFTC, SEC or Justice?  What a cast of corrupt clowns Barry has put together... I bet HE has more offshore than Mitt!

sumo's picture

Wait. The Senate can't threaten HSBC. How is the CIA going to launder Afghan drug money to fund its portfolio of black operations?

Oh, through a hundred other banks eager for the business? Ok, then. Carry on.

Son of Loki's picture

House prices have a loooong way to drop.......Market Forces inevitably will win.

Dr. Sandi's picture
Senate Throws The Book At HSBC Accusing It Of Massive "Money Laundering And Terrorist Financing"

HSBC throws book back to Senate after signing 100 large checks contained within.