HSBC’s iffy deals include trades with North KoreaA United States Senate report disclosed Monday that HSBC Holdings, Europe’s largest financial institution, handled financial transactions with North Korea until 2007, which was against U.S. sanctions.
On Monday, a subcommittee under the Senate’s Homeland Security and Governmental Affairs released a report entitled “U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History” that disclosed the bank’s financial transactions with countries on the U.S. sanctions list including North Korea, Iran, Sudan and Myanmar. The report was written by Senators Carl Levin and Tom Coburn.
According to the 335-page report, which came after a year-long probe, HSBC’s internal documents showed that the bank traded with North Korea between 2005 and 2007, when Washington had enforced financial restrictions on Pyongyang.
The report described a decade of compliance failures by Europe’s biggest bank. London-based HSBC enabled drug lords to launder money in Mexico, did business with firms linked to terrorism and concealed transactions that bypassed U.S. sanctions against Iran, Senate investigators said in the report.
HSBC executives apologized Tuesday for opening their U.S. affiliate to a river of Mexican drug lords’ cash, and the U.S. regulator that failed to stem the flow vowed to prevent a repeat.
“I deeply regret we did not act sooner and more decisively,” Comptroller of the Currency Thomas Curry said at a day-long hearing Tuesday of the Senate Permanent Subcommittee on Investigations.
In an internal document put together in 2005, HSBC wrote that it had three bank accounts used by a North Korean individual or group. Also, in May 2007, documents showed that the Mexican branch of HSBC and other affiliates in Latin America provided bank accounts in U.S. dollars to North Korean customers.
There were nine North Korean bank accounts with total dollar savings of $46,000. In addition, there were seven accounts with more than $2.3 million in U.S. dollar and Mexican peso deposits.
Between 2005 and 2007, the U.S. enforced financial restrictions on North Korea.
According to the Senate report, the U.S. affiliate of HSBC later canceled all transactions with North Korea. But it confirmed later that it had an active account in U.S. dollars for North Korea’s Foreign Trade Bank until April 2010, although no transactions took place after 2007.
The two Senators wrote in the paper that the U.S. affiliate of HSBC had financial transactions with Saudi Arabian and Bangladesh banks known to have helped terrorist groups including Al Qaeda.
By Lee Eun-joo, Bloomberg [email@example.com]