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HSBC Case:

HSBC bank was in news due to exposure of its money laundering activities.

According to US Senate Permanent subcommittee report on HSBC, following are the ways in which HSBC laundered Money .

  1. Mexican drug barons
  • HSBC US (HBUS) nevertheless classed Mexico as a low-risk country and as a result, failed to properly monitor its transfers and other dealings with it.
  • HSBC Mexico (HBMX) had inadequate money laundering controls.
  • Between 2007-8, for example, HBMX shipped $7bn to HSBC’s US operation, more than any other HSBC affiliate.
  • Mexican and US authorities expressed concern that drug traffickers were able to circumvent the anti-money laundering controls at US banks by transporting US dollars to Mexico, and then using HBMX to transfer it to the US.                                EXAMPLE OF MONEY LAUNDERING
  1. Dealings with Iran
  • HSBC was used by ‘drug kingpins’.
  • US laws prevent banks doing business with what it regards as the most dangerous individuals and countries.
  • HSBC frequently circumvented the rules designed to prevent dealings with Iran, Burma, North Korea and Iran.
  • HBUS carried out 28,000 undisclosed sensitive transactions between 2001 and 2007, an internal audit commissioned by the bank found. The vast majority of those transactions – worth $19.7bn – involved Iran.
  • Two affiliates, HSBC Europe and HSBC Middle East repeatedly altered transaction information to take out any reference to Iran, the report said.
  1. Terrorist financing links
  • HSBC did business with Saudi Arabia’s biggest financial institution, Al Rajhi Bank.
  • The report claims that after the terrorist attacks in the US on 11 September 2001, evidence emerged that Al Rajhi and some of its owners had links to financial organisations associated with terrorism.                                                      EXAMPLE OF MONEY LAUNDERING
  • HSBC Middle East was one of a number of affiliates which continued to work with the bank.
  • HBUS closed the accounts it provided to Al Rajhi, before resuming some ties with them in 2006.
  • The report claimed it had done this after pressure from HSBC, after At Rajhi threatened to withdraw all of its business from HSBC globally.
  1. Suspicious travellers’ cheques
  • The committee is concerned that HSBC cleared large amounts of travellers’ checks over a number of years, without proper anti-money laundering controls, despite evidence of suspicious activity.                                                EXAMPLE OF MONEY LAUNDERING
  • Between 2005 and 2008, HBUS cleared $290m worth of US dollar travellers’ cheques which were being presented at a Japanese bank.
  • The daily transactions were worth up to half a million dollars, with large blocks of sequentially numbered cheques being handed over.
  • After prompting from US regulators, HBUS found out that the travellers’ cheques were being bought in Russia (according to US Russia is at high-risk of money laundering)



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