Hsbc Money Laundering
The HSBC Money-Laundering Scandal Case Facts
HSBC is one of the largest financial institutions in the world, with assets over $2.5 trillion, 89 million customers, 220,000 shareholders, operations/affiliates in 85 countries, and 2011 profits of nearly $22 billion (HSBC, 2011a). Drawing upon evidence revealed following a year-long investigation into HSBC (Levin et al., 2012), seven areas of case fact illustrating key anti-money laundering (AML) and terrorist financing problems can be seen including:
Longstanding Severe AML Deficiencies: HSBC operated its correspondent accounts for foreign banks with longstanding, severe AML deficiencies, including dysfunctional AML monitoring systems for account and wire transfer activity despite the risks associated with large cash transactions, an unacceptable backlog of 17,000 unreviewed alerts, insufficient and unqualified staffing, insufficient AML resources, AML leadership problems, inappropriate country and client risk assessments, ineffective methods for identifying suspicious activity, and late or absent reporting of suspicious activity to relevant legal or regulatory bodies (Levin et al., 2012).
Taking on High Risk Affiliates: HSBC failed to assess the money laundering risks associated with HSBC affiliates before opening American correspondent accounts for them, failed to identify high risk affiliates due to a failure to conduct due diligence checks, and failed to treat HSBC’s Mexican bank as a high risk despite known criminal problems in Mexico (Levin et al., 2012) resulting in money-laundering activities.
Circumventing Legal Prohibitions: American laws prohibit banks from engaging in financial dealings with high risk individuals and countries. However, HSBC frequently circumvented the rules designed to prevent dealings with high-risk countries which ultimately facilitated transactions on behalf of terrorists and criminals. Despite evidence that affiliates were acting to circumvent legal filters, HSBC failed to
HSBC is one of the largest financial institutions in the world, with assets over $2.5 trillion, 89 million customers, 220,000 shareholders, operations/affiliates in 85 countries, and 2011 profits of nearly $22 billion (HSBC, 2011a). Drawing upon evidence revealed following a year-long investigation into HSBC (Levin et al., 2012), seven areas of case fact illustrating key anti-money laundering (AML) and terrorist financing problems can be seen including:
Longstanding Severe AML Deficiencies: HSBC operated its correspondent accounts for foreign banks with longstanding, severe AML deficiencies, including dysfunctional AML monitoring systems for account and wire transfer activity despite the risks associated with large cash transactions, an unacceptable backlog of 17,000 unreviewed alerts, insufficient and unqualified staffing, insufficient AML resources, AML leadership problems, inappropriate country and client risk assessments, ineffective methods for identifying suspicious activity, and late or absent reporting of suspicious activity to relevant legal or regulatory bodies (Levin et al., 2012).
Taking on High Risk Affiliates: HSBC failed to assess the money laundering risks associated with HSBC affiliates before opening American correspondent accounts for them, failed to identify high risk affiliates due to a failure to conduct due diligence checks, and failed to treat HSBC’s Mexican bank as a high risk despite known criminal problems in Mexico (Levin et al., 2012) resulting in money-laundering activities.
Circumventing Legal Prohibitions: American laws prohibit banks from engaging in financial dealings with high risk individuals and countries. However, HSBC frequently circumvented the rules designed to prevent dealings with high-risk countries which ultimately facilitated transactions on behalf of terrorists and criminals. Despite evidence that affiliates were acting to circumvent legal filters, HSBC failed to
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