New York: US prosecutors, who have launched an investigation into the money transaction by some global banks, suspect HSBC could have laundered money for Mexican drug cartels and moved cash for Saudi Arabian banks with ties to terrorists.
According to a New York Times report, Federal authorities, with knowledge of the investigation, said federal and state prosecutors are also investigating whether HSBC flouted US law by transferring money through its American subsidiary for sanctioned nations, including Iran, Sudan and North Korea.
HSBC could have to cough up nearly a billion dollars to settle the inquiry, making it the largest such settlement in history, the authorities said.
"The money-laundering accusations against HSBC so far are more extensive than the potential violation of United States sanctions that is the focus of the investigations against other foreign banks, including Deutsche Bank and Commerzbank of Germany, BNP Paribas and Cr?dit Agricole of France and the Royal Bank of Scotland," the report quoted the law enforcement authorities as saying.
HSBC came under the US scanner in July when the Senate Permanent Subcommittee on Investigations said the bank "exposed the U.S financial system to money laundering and terrorist financing risks" between 2001 and 2010.
HSBC bank executives had testified at the hearing and apologised for the bank?s past conduct, promising reform.
A HSBC spokesperson said in a statement that the case is "not about HSBC complicity in money laundering".
The spokesperson added: "Rather, it?s about lax compliance standards that fell short of regulators? expectations and our expectations, and we are absolutely committed to remedying what went wrong and learning from it".
HSBC had reached out to federal prosecutors in July, hoping to resolve the matter by September.
However a settlement in the next couple of weeks is highly unlikely, the officials said.
The Justice Department and the Manhattan district attorney?s office are looking into HSBC records to gauge the full extent of the potential wrongdoing.
HSBC officials stress that they had strengthened controls to prevent money laundering and replaced employees tainted by the accusations, according to the law enforcement officials.
The Senate panel said in its report on HSBC that bank officials ignored warning signs and failed to stop illegal behavior at many points between 2001 and 2010.
An HSBC executive reportedly argued that the bank should resume its relationship with Al Rajhi Bank, a Saudi Arabian bank founded by an early supporter of Al Qaeda.
Ultimately, HSBC’s American operations furnished the bank with at least USD 1 billion, according to the Senate report.
Federal officials had repeatedly warned HSBC to closely monitor its bulk-cash business in Mexico amid concerns that drug traffickers could seize on these operations.
But HSBC officials from 2000 to 2009 gave Mexico, "a country under siege from drug crime, violence and money laundering," the bank?s lowest risk rating for money laundering, according to the Senate report.
HSBC’s Mexican branch became the "single largest exporter of U S dollars" to its United States operations from 2007 to 2008.
Even after this, money laundering controls at the bank did not improve, the Senate investigation found.
Between 2007 and 2008, HSBC?s Mexican operations moved at least USD 7 billion to its United States counterparts ? a volume that law enforcement officials cautioned at the time could include "illegal drug proceeds".
In their continuing investigations, the prosecutors are examining whether the global banks violated United States law by performing transfers for nations under sanction.
Since 2009, the Justice Department, the Treasury Department and the Manhattan district attorney’s office have brought charges against five foreign banks ABN Amro, Barclays, Credit Suisse, Lloyds and most recently ING.
First Published: Saturday, August 25, 2012, 13:57