TOP BANK IN TROUBLEFinancial Times) -- HSBC's chief compliance officer resigned from his post during a US Senate hearing following publication of a damning report alleging that Britain's biggest bank may have inadvertently allowed the laundering of Mexican drug money.David Bagley told senators on Tuesday that HSBC was transforming its compliance function. "I recommended to the group that now is the appropriate time -- for me and for the bank -- for someone new to serve as the head of group compliance," he said Mr Bagley will, however, remain with the bank.
The report by the Senate permanent subcommittee on investigations alleged that HSBC ignored warnings that its compliance system may have inadvertently allowed drug proceeds from Mexico to be laundered through the bank and allowed terrorist financiers in the Middle East to obtain US dollars.
Mr Bagley is at least the second senior executive linked to activities described in the Senate report to have lost his position. Sandy Flockhart, who led HSBC's Mexican unit from acquisition until 2006, announced last week that he would retire from the bank at the end of the month. There is no suggestion of wrongdoing by Mr Flockhart, who is battling cancer.
The Senate report follows a multiyear investigation that mirrors investigations currently under way by the US justice and Treasury departments and the Manhattan district attorney. One analyst predicted HSBC's fines could be as high as $1bn in a settlement with those three US authorities.
The bank has not been formally accused of wrongdoing in connection with the most recent investigations. However, HSBC twice in the past 10 years has been cited by US bank regulators for deficient anti-money laundering policies and ordered to take corrective action.
Mr Bagley, who has led the bank's compliance department since 2002, is mentioned throughout the Senate report for compliance lapses and ignored warnings.
In 2008, the head of anti-money laundering at the bank's Mexico unit told Mr Bagley that there were allegations that as much as 70 per cent of laundered proceeds in Mexico went through the bank, according to Mr Bagley's own notes. The official told Mr Bagley that "it was only a matter of time before the bank faced criminal sanctions".
In 2010, the chief anti-money laundering officer at HSBC's US affiliate told Mr Bagley that he lacked the proper authority necessary to do his job.
On Tuesday Mr Bagley described a position that had limited power. Even though he was the banking group's chief compliance officer, he did not manage or control the various compliance departments at HSBC affiliates throughout the world. Instead, his job was to set policy and to escalate issues that were reported to him, Mr Bagley said.
Senate investigators found that HSBC supplied $1bn in cash to a Saudi Arabian bank with suspected links to terrorism, including the al-Qaeda organisation, despite internal concerns and a one-time directive that all affiliates sever ties to the Middle Eastern lender. HSBC's US arm later resumed ties with the bank, investigators allege.
In a sign of the significance of the US inquiry into HSBC, a top attorney at the Office of the Comptroller of the Currency -- HSBC's regulator -- noted to a colleague in a July 2009 email that "this has the makings of potentially being a major criminal case".
Stuart Levey, HSBC's chief legal officer, could not assure lawmakers that HSBC's numerous affiliates were presently compliant with US rules.
"I don't have knowledge of such a thing," Mr Levey said in response to questions. The bank has been criticised for promising reforms in the past only for allegedly improper activities to continue.
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Shameless people always do like this.Find others hole and put a finger!! aziz Post time: 2012-7-18 11:03 static/image/common/back.gif
In 2008, the head of anti-money laundering at the bank's Mexico unit told Mr Bagley that there were ...
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