When HSBC was called before a US Senate permanent sub-committee in July as part of the committees investigations of US vulnerabilities to money laundering and terrorist financing, it was berated for failures involving money laundering, drug trafficking and terrorist financing. Unsurprisingly, given the sums involved (and the sensational nature of the subject), it was the staggering failures of the banks compliance team in Mexico from where several billion dollars of drug proceeds were laundered that grabbed the headlines.
"[HSBCs] Mexican affiliate transported $7 billion in physical US dollars to [HSBC in the US] 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," noted the sub-committee. "HSBCs compliance culture has been pervasively polluted for a long time," said Carl Levin, sub-committee chairman. Having acquired a Mexican bank, HSBC failed to integrate it effectively and ensure adequate standards of compliance or even visibility at a global level of what was happening in Mexico.
"What happened at HSBC appears to be a pretty serious failure of basic measures," says Robin Booth, general counsel at London-based law firm BCL. "It seems simply to have failed to pick up on multiple payments-in of cash that were questionable." HSBC declined to be interviewed for this article and referred only to its statement on the affair, which acknowledged that its "controls could and should have been stronger and more effective in order to spot and deal with unacceptable behaviour".