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Behind HSBC's money laundering scandal


HSBC Bank will further shrink its presence in Western New York by laying off 77 employees here and shifting its money-laundering prevention unit from Buffalo to New York City and Delaware.

Jonathan Epstein gives some background in Friday's Buffalo News:

HSBC has been bulking up its compliance division in response to federal investigations and accusations that the global bank -- which operates in 82 countries around the world -- has been violating U.S. money-laundering rules, particularly provisions of the Bank Secrecy Act, as well as bans on U.S. banks doing business with certain countries or certain foreign individuals.

The laws are designed to prevent the U.S. financial system from being used to support criminal activities, including but not exclusively terrorism. They're also aimed at punishing certain foreign leaders or governments that have been identified as threats or violators of international law.


But the full story is much juicier. It's almost surreal. 

This special report from Reuters  digs into what's behind the allegations, uncovering what is said to be flagrant flouting of the law and a willful cover-up for known money launderers in order to keep large accounts.

Here's an excerpt from the article by Carrick Mollenkamp, Brett Wolf and Brian Grow:

HSBC [violated the law on a massive scale] by not adequately reviewing hundreds of billions of dollars in transactions for any that might have links to drug trafficking, terrorist financing and other criminal activity.

In some of the documents, prosecutors allege that HSBC intentionally flouted the law. The bank created an operation that was a “systemically flawed sham paper-product designed solely to make it appear that the Bank has complied” with the Bank Secrecy Act and is able to detect money laundering, wrote William J. Ihlenfeld II, U.S. Attorney for the Northern District of West Virginia, in a draft of a 2010 letter addressed to Justice Department officials.

In that letter, Ihlenfeld compared HSBC unfavorably to Riggs Bank. In 2004 and 2005, that scandal-plagued Washington bank was fined a total of $41 million after it was found to have violated anti-money laundering laws, and it was acquired by PNC Financial Services.

“HSBC is to Riggs, as a nuclear waste dump is to a municipal land fill,” Ihlenfeld wrote.

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