A money-laundering ring moved $4.2bn through a network of 60 HSBC accounts in Hong Kong, starting only two years after the bank promised to clean up its act, investigators have discovered.
This is even as insiders have raised questions over whether HSBC management appropriately informed US monitors about the ring, which was uncovered by the bank during an internal review.
According to a news report on the fraud sourced by our correspondent from bureauinvestigative.com, the official website of Bureau of Investigative Journalism, the independent monitoring team was specifically installed by the US Department of Justice (DoJ) as part of a deal not to prosecute HSBC in 2012, when the bank admitted allowing Latin American drug cartels to launder hundreds of millions of dollars through its accounts.
HSBC, a British multinational investment bank and financial services holding company, then discovered the Hong Kong ring in 2016 while trying to assess its exposure to the wealthy Gupta family, who have been embroiled in corruption scandal allegations in South Africa. The Guptas denied any wrongdoing.
The Bureau further stated: “While the resulting report concluded that its exposure to Gupta-linked accounts was “contained and minimal”, HSBC’s financial investigations unit ended up raising concerns about “larger professional money laundering networks”, including the Hong Kong ring, which it said had processed more than $4.2bn worth of payments between 2014 and 2017.
“While much of this sum may not have been “dirty money”, laundering often relies on mixing legitimate and illegitimate funds together”, it added.
The bank, which has its headquarters in London, would have been expected to disclose the information to the independent monitors brought in by the DoJ when criminal proceedings were deferred on the condition the bank reform its anti-money laundering checks.
However, former members of the monitoring team claimed that they were never told about the Hong Kong ring.
Reacting to the latest reports, U.S. Senator, Elizabeth Warren, said: “HSBC had nearly a decade to clean up its act, yet it continued to break the law after receiving mere slaps on the wrist”
This is even as a former member of the monitoring team, who agreed to speak on the condition of anonymity, was quoted by the Bureau as saying that “HSBC never voluntarily disclosed money laundering. They waited to be asked about it.
“As far as I’m aware, this particular report … was never disclosed to the monitor,” adding that this appeared to be a bigger money-laundering network than any they had identified at the bank.
Another former official from the team suggested it was likely that the HSBC report “would have made it to board level,” adding executives at the bank could have been aware of the suspected network.
However, HSBC told the Bureau it reported suspected money laundering to local authorities “as appropriate”, but the monitor “serves a different role in helping a bank to improve its capabilities” and all discussions with the team were confidential.
The bank is facing criticism from senior political figures on both sides of the Atlantic, as are regulators for failing to adequately hold executives to account.
Commenting further, Senator Warren charged that “instead of relying on toothless deferred prosecution agreements like HSBC’s, the DoJ and Treasury must hold the executives of these giant banks personally accountable for allowing money laundering.”
In his remarks, the UK’s shadow Economic Secretary and a Labour member of Parliament, Pat McFadden, said the case illustrated the need for “tougher standards” on money laundering and financial crime.
“The UK rightly prides itself on having a global financial services sector. But that sector can only prosper in the future if it operates to the highest standards and rigorous action is taken against illicit finance and money laundering”, the lawmaker added.