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HSBC says sorry for money laundering flaws

Wednesday, July 18, 2012    

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WASHINGTON, USA - THE CEO of the US division of the big international bank HSBC is apologising for lax controls that lawmakers say allowed Mexican drug cartels to launder billions of dollars through the US operation and many other illicit transactions for years.

Irene Dorner, president and CEO of HSBC Bank USA, said in testimony prepared for a hearing by the Senate Permanent Subcommittee on Investigations that "we deeply regret and apologise" for the lapses by HSBC.

An investigation by the subcommittee found persistent problems at HSBC which executives ignored.

Dorner and other HSBC executives scheduled to testify at yesterday's hearing say the bank has made deep changes to its policies and corporate culture to prevent illicit use of the bank. London-based HSBC, which is Europe's largest bank, changed its senior management last year.

"These changes will be embedded and sustained going forward," Dorner says.

The panel's chairman, Sen Carl Levin, a Michigan Democrat, says HSBC's new policies "are all good steps".

However, Levin said at the start of the hearing, while apologies are welcome, "accountability for past conduct is essential. And that is what is missing here".

Levin said HSBC needs to identify which of its affiliates pose a high risk of problems and put them under close monitoring. The bank should consider closing the account of its Mexican affiliate, he said.

HSBC should also close its accounts with banks suspected of providing funding to terrorist groups, Levin said.

The subcommittee's extensive report on HSBC also says US regulators knew the bank had a poor system to detect problems but failed to take action.

HSBC executives brushed off complaints from other bank employees, so that the problems persisted for eight years, the report says.

In addition, some HSBC bank affiliates skirted US government bans against financial transactions with Iran and other countries, according to the report. And HSBC's US division provided money and banking services to some banks in Saudi Arabia and Bangladesh believed to have helped fund al-Qaida and other terrorist groups, the report said.

The US Justice Department said it is conducting a criminal investigation into HSBC's operations but declined to confirm that the bank is in settlement talks.

HSBC's net income last year was US$16.8 billion ($1.5 trillion). It operates in about 80 countries around the world. Its US division is among the top 10 banks operating in the United States. It has assets of roughly US$210 billion in its US operations.

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