18 Jul 2012

HSBC executive apologises for money laundering

11:59 am on 18 July 2012

HSBC US chief executive Irene Dorner has apologised at a US Senate Committee hearing, for the bank's failure to prevent massive money laundering by drug rings and rogue nations.

A Senate report says suspicious funds from countries including Mexico, Iran and Syria had passed through the bank.

Ms Dorner said on Tuesday she had worked hard to change the culture at the bank and she deeply regretted the bank's behaviour.

Earlier, HSBC's head of compliance, David Bagley, resigned at the hearing.

The bank said it was in the process of closing 20,000 accounts in the Cayman Islands as a result of the investigation.

Senate Permanent Subcommittee chairman Carl Levin said an audit had found that:

''From 2001 - 2007, HSBC affiliates sent almost 25,000 transactions involving Iran worth over $US19 billion through HBUS and other US accounts, while concealing any link with Iran in 85% of the transactions."

He said HSBC senior executives in London knew what was going on, but allowed the "deceptive conduct" to continue. HSBC officials in the United States were also informed early on, he said.

According to the Senate committee, HSBC accepted more than $US15 billion in cash from subsidiaries in Mexico, Russia and other countries at high risk of money laundering but failed to conduct any monitoring of these bulk cash transactions between mid-2006 and mid-2009.

The report also found that HSBC knew of lax anti-money laundering practices at its Mexican subsidiary HBMX, which had dated back to its purchase in 2002.

The BBC reports HBMX was warned, on at least two occasions, by Mexican authorities that drug money was probably being laundered through HBMX accounts.

HSBC is Europe's biggest bank. It could face penalties of $US1 billion.