In a preview of all-day hearings of the Senate Permanent Subcommittee on Investigations tomorrow, Sen. Carl Levin (D-Mich.) and subcommittee staff gave a briefing to several dozen journalists today on the extensive money laundering activities of HSBC. EIR's Jeffrey Steinberg attended the two-hour session at Sen. Levin's office.
The subcommittee staff conducted a year-long investigation into the bank, focusing on its U.S. branch, HBUS, and its extensive correspondent banking operations with other HSBC banks in Mexico, the Middle East, Africa and Asia. During the probe, the subcommittee obtained over 1.4 million documents and interviewed 75 bank officials. In brief on-the-record statements, Levin focused on HSBC's failure to oversee affiliates engaged in money laundering, and its dismal failure to adhere to U.S. anti-money laundering (AML) laws and standards.
HSBC has affiliates in 80 countries and they provide services to other banks, providing access to U.S. dollars and the U.S. banking system through HBUS. HSBC's Mexico bank, HBMX, was treated by HSBC headquarters in London as a low-risk correspondent bank with HBUS, despite the fact that Mexico is a hub of drug money laundering for all of South America. HBMX provided services to other Mexican banks and casas de cambio, as well as to Cayman Island banks that maintain secrecy jurisdictions. In 2007-2008 alone, Levin told the reporters, $7 billion in physical dollars were transported from HBMX to HBUS. HSBC is one of only 30 banks worldwide that are authorized to sell U.S. dollars, meaning that they are authorized to transport physical dollars around the world. An official of HSBC's Mexico bank, HBMX, conceded that he believes that 60-70% of all of the drug money laundered from Mexico into the U.S. comes through HSBC.
The subcommittee report, to be released to the public tomorrow morning at the hearing, covers a wide range of potential criminal activities by HSBC and its affiliates, including violation of U.S. anti-terrorist laws and U.S. embargoes. A whole chapter of the report deals with HSBC's correspondent banking with Al Rahjid Bank in Saudi Arabia, a bank associated with Al Qaeda both before and after the 9/11 attacks. HSBC also facilitated banned banking transactions with Iran, under an exemption referred to as "U-turn transactions," and allowed a small regional bank in northern Japan to process billions of dollars in travelers cheques for Russians suspected of being mafia front men.
Senator Levin also noted that one of the key U.S. regulatory agencies, the Office of the Comptroller of the Currency (OCC), was severely lax in enforcing AML standards. The subcommittee report makes a series of recommendations, including tougher enforcement of existing AML regulations.
The subcommittee conducted their year-long investigation without any communication with the Department of Justice, and will be submitting their report to the DOJ at Tuesday's hearings. U.S. regulators, including David Cohen, Under Secretary of Treasury for Terrorism and Financial Intelligence will testify on the first and last panels, and HSBC officials will be witnesses on the second and third panels. The hearings are expected to go all day. The subcommittee report and Tuesday's hearing tomorrow are titled "U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History."
The study makes clear that, while many other banks may be engaged in similar practices, it appears that HSBC facilitates money laundering on a global scale that vastly surpasses other banks. In other words, the key findings of the groundbreaking book Dope, Inc.—that the Hongkong and Shanghai Banking Corporation (now HSBC) was the central bank for the British Empire's Opium War and never stopped laundering drug money—are thoroughly corroborated by the subcommittee's investigation 34 years later.