HSBC Anti-Money Laundering Efforts Need ‘Much Work,’ According to U.S. Regulators
Earlier this week, federal prosecutors announced that while HSBC Holdings (NYSE:HSBC) has made improvements to its anti-money laundering system, “much work” remains for the U.K.-based bank as part of its $1.9 billion deferred prosecution agreement with the U.S. Department of Justice. Noting that the bank has been acting in good faith to meet the deal’s terms, regulatory monitors gave HSBC until later this month to work out the details surrounding compliance with the settlement based on findings that the bank’s weak controls allowed for Mexican drug cartels to launder hundreds of millions of dollars through its system.
The agreement, approved in July, includes two independent monitors to ensure HSBC’s compliance with its pledge to enact stricter oversights. Regulators also added that the bank did not begin to correct its money laundering weaknesses until early 2013, a claim HSBC denies. The report also adds that although HSBC needs to improve its integration of IT and transaction-monitoring systems, as well as the reliability of its customer data, monitors have assessed that the bank is “appropriately committed” to enacting the necessary changes. Judge John Gleeson will supervise the ongoing settlement compliance, in which HSBC agreed not to fight charges of failing to maintain an effective anti-money laundering system, failing to conduct due diligence, and violating the Trading With the Enemy Act and the International Emergency Economic Powers Act.
HSBC is not the only major bank to have been used to wash funds in recent years. In 2012, the U.S. Federal Bureau of Investigation released an affidavit stating that Los Zetas, Mexico’s largest drug cartel, had been laundering money into the U.S. through Bank of America (NYSE:BAC). Stressing that the bank had not been found of any wrongdoing, the statement filed in federal court detailed how Los Zetas used Bank of America accounts to purchase $4.2 million worth of racehorses over a four-year period with funds earned through cocaine trafficking.