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Here's the story, not the conspiracy.
It’s tough being the world’s second largest bank.
HSBC, the London-based British multinational banking and financial services giant operates in 85 countries with 7,200 offices worldwide with assets totaling more than $2.6 trillion (Â£4.06tn).
They’re also caught-up in serial scandals: the Libor interest rate-fixing scam, serious charges of drug money laundering as well as suspicions that bank officers “palled around” with terrorist financiers.
Founded in 1865 when the British Crown seized Hong Kong as a colony in the aftermath of the First Opium War, British merchants (today we’d call them drug lords) needed a bank to handle the brisk trade in the illicit substance and launched the Hongkong and Shanghai Banking Company Limited. Rebranded “HSBC” in 1991, the bank expanded at breakneck speed in the heady days after The Wall fell.
While some might call them a success story, exemplars of financial wizardry in tough economic times, more appropriately perhaps, we might borrow a term from Mafia lore to describe their preeminent position in the capitalist pantheon of corrupt institutions: juiced.
‘Sorry, now Go Away’
Today, the “War on Drugs” rivals the “War on Terror” for top spot on the global hypocrisy index.
Moral equivalencies abound. After all, when American secret state agencies manage drug flows or direct terrorist proxies to attack official enemies it’s not quite the same as battling terror or crime.
Pounding home that point, a new report by the Senate Permanent Subcommittee on Investigations accused HSBC of exposing “the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls.”
That 335-page report, “U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History,” (large pdf file available here) was issued after a year-long Senate investigation zeroed-in on the bank’s U.S. affiliate, HSBC Bank USA, N.A., better known as HBUS.
Drilling down, we learned that amongst the “services” offered by HSBC subsidiaries and correspondent banks were sweet deals with financial entities with terrorist ties; the transportation of billions of dollars in cash by plane and armored car through their London Banknotes division; the clearing of sequentially-numbered travelers checks through dodgy Cayman Islands accounts for Mexican drug lords and Russian mafiosi.
From richly-appointed suites at Canary Wharf, London, the bank’s “smartest guys in the room” handed some of the most violent gangsters on earth the financial wherewithal to organize their respective industries: global crime.
A case in point. In 2008 alone the Senate revealed that the bank’s Cayman Islands branch handled some 50,000 client accounts (all without benefit of offices or staff on Grand Cayman, mind you), yet still managed to ship some $7 billion (Â£10.9bn) in cash from Mexico into the U.S. Now that’s creative accounting!
Playing fast and loose with U.S. banking rules, Subcommittee Chairman Carl Levin (D-MI) said that by exploiting the bank’s “poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions.”
Describing a “compliance culture” that was “pervasively polluted for a long time,” Levin said it “will take more than words for the bank to change course.”
Yet weasel words and butt-covering were all that were proffered to the American people even before Senate hearings began. Bank spokesman Robert Sherman said in an emailed statement that HSBC “will acknowledge that, in the past, we have sometimes failed to meet the standards that regulators and customers expect. We will apologize, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong.”
Right on cue, chief compliance officer David Bagley dramatically fell on his sword during those hearings and resigned on camera. It was quite a performance even by Washington’s tawdry standards.
Appearing contrite, Bagley told the panel: “Despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators. … 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.”
While there’s no word yet just how big Bagley’s golden parachute will be, it’s a sure bet he won’t spend a day in jail, nor for that matter will Lord Stephen Green, HSBC’s former Chairman and Chief Executive Officer.
Between 2003-2010, Green tilled the helm after serial stints directing The Bank of Bermuda Ltd., HSBC Mexico, SA, HSBC Private Banking Holdings (Suisse) SA and HSBC North American Holdings Inc.; units which feature prominently in the scandal. Sensing perhaps that the jig was up, last year he joined David Cameron’s Conservative government as Minister of State for Trade and Investment.
Unlike Pappy Bush who claimed to be “out of the loop” during the Iran-Contra guns-for-drugs affair, Green was fully apprised of bank shenanigans and the Senate published emails which prove it.
Cheekily however, while underlings take the fall, Green told The Daily Telegraph, “I do not believe that I have a case to answer other than in the important sense that as chairman and chief executive I was responsible for what the company did. HSBC has expressed regret for the failures. I share that regret.”
The Telegraph noted that Green has not considered resigning from Cameron’s government, saying he was “very engaged” with his current plum post.
Ironically enough, the current Baron of Hurstpierpoint is an ordained priest in the Church of England and the author of an inspirational tome, Good Value: Reflections on Money, Morality and an Uncertain World. And no, you can’t make this stuff up!
The top spot is now occupied by Stuart Gulliver who, quicker than you can say “we’re sorry,” admonished employees to “do better” and expressed remorse over his firm’s “unacceptable behavior.” Never mind that before ascending the throne, Gulliver was director of HBUS, HSBC Latin American Holdings Ltd., and HSBC Bank Middle East Ltd., divisions that have raised more than an eyebrow or two amongst Subcommittee investigators.
Topping Bagley’s Kabuki-lite performance with her own rendition of clown car camp, Irene Dorner, HBUS’s President and CEO told the Senate: “We deeply regret and apologize for the fact that HSBC did not live up to the expectations of our regulators, our customers, our employees, and the general public. HSBC’s compliance history, as examined today, is unacceptable. … We’ve worked hard to foster a new culture that values and rewards effective compliance, and that starts at the top.”
Bathos aside, it was a polite way of saying “let’s move on” and get back to the business of lining our pockets; after all, it’s what we do best.
‘The past is never dead. It’s not even past’
Years before hijackers slammed passenger planes into the World Trade Center and the Pentagon killing nearly 3,000 people, secret state agencies began to exploit the fraternal links between Osama bin Laden’s Afghan-Arab database of disposable Western intelligence assets, also known as al Qaeda, and prominent financial institutions.
In his 1999 book, Dollars for Terror, journalist Richard LabÃ©viÃ¨re relates how a former CIA analyst explained: “The policy of guiding the evolution of Islam and helping them against our adversaries worked marvelously well in Afghanistan against the Red Army. The same doctrines can still be used to destabilize what remains of Russian power, and especially to counter the Chinese influence in Central Asia.”
Was a new Cold War dawning?
No. In fact, it was the same Cold War. Only this time it was tricked-out in seductive finery by denizens of Western think-tanks and on-the-make NGOs. In the age of spin and endless news cycles, they’d hit upon a splendid formula to pour the “old” imperialist wine into new bottles: “humanitarian intervention” and a “responsibility to protect.”
It was a brilliant script. In the blink of an eye our media-saavy masters could “enhance democracy” and “reform markets,” magically transforming publicly-owned resources into privately-held assets controlled by banks! That terrorist proxies would serve as walk-ons and help drive the final nail into the coffin of national sovereignty wasn’t considered proper conversation in polite company.
LabÃ©viÃ¨re wondered whether “the new forms of terrorism actually embody the highest stage of capitalism?” They did, and “the straw men of the bin Laden Organization’s subsidiaries [were] very well received by the business lawyers of Wall Street and the Bahamas, by the wealth managers of Geneva, Zurich and Lugano, and in the hushed salons of the City of London.”
Not so curiously perhaps, “the privatization of violence and the privatization of the economy has become paradigmatic.” In fact, “apart from any religious purpose,” LabÃ©viÃ¨re wrote, “the ‘Jihad’ is gaining ground as a profitable activity. It becomes liable to all the mafioso devolutions, and sinks into pure banditry. In many cases, Islamist ideology is used as a wonder worker to paper over banditry in all its forms.”
Bin Laden as a Mafia capo di tutti capi? It certainly was a novel reading of geopolitical machinations!
More to the point, if an “army marches on its stomach,” who then are the money men who put food in their bellies and kalashnikovs in their hands?
Bankrolled by Saudi and Gulf banks with a wink, a nod and logistical support from their old friends, the CIA and the Pentagon, today’s Green condottieri once again are on the march, wrecking havoc and sowing chaos, with particular attention paid to states targeted as official enemies by the Global Godfather. Just ask the Iraqis, Libyans and Syrians.
While the Senate report may have disclosed that HSBC turned a blind eye to terrorist financing among it correspondent banks, the Riyadh-based Al Rajhi Bank for one, Saudi Arabia’s largest privately-held financial institution, such arrangements hardly flourished in a vacuum.
With assets totaling $59 billion (Â£92.5bn), the Al Rajhi’s are amongst the wealthiest families in the Kingdom. Investigators found that after 9/11 “evidence began to emerge that Al Rajhi Bank and some of its owners had links to organizations associated with financing terrorism, including that one of the bank’s founders was an early financial benefactor of al Qaeda.”
While the Al Rajhi family deny any role in financing terrorism, they have declined “to address specific allegations made in American intelligence and law-enforcement records, citing client confidentiality,” The Wall Street Journal reported back in 2007.
Journalist Glenn R. Simpson averred that “a 2003 CIA report claims that a year after Sept. 11, with a spotlight on Islamic charities, Mr. Al Rajhi ordered Al Rajhi Bank’s board ‘to explore financial instruments that would allow the bank’s charitable contributions to avoid official Saudi scrutiny’.”
“A few weeks earlier,” the Journal disclosed, the Agency said that “Mr. Al Rajhi ‘transferred $1.1 billion to offshore accounts–using commodity swaps and two Lebanese banks–citing a concern that U.S. and Saudi authorities might freeze his assets.’ The report was titled ‘Al Rajhi Bank: Conduit for Extremist Finance’.”
Although U.S. law enforcement and secret state agencies “acknowledge it is possible that extremists use the bank’s far-flung branches and money-transfer services without bank officials’ knowledge,” the Journal noted that CIA analysts had concluded that “senior Al Rajhi family members have long supported Islamic extremists and probably know that terrorists use their bank.”
It goes without saying that one should always approach CIA reports with a healthy dose of skepticism, especially in light of the Agency’s well-documented history of employing cut-outs such as al Qaeda as terrorist cats’ paws.
Such reports however, lay a trail of bread crumbs that policy makers can either act upon or more likely, ignore. That senior Bush and Obama administration officials did nothing with this information, never mind the regulatory agencies charged to enforce anti-money laundering laws, is testament to the corrupt, bipartisan nature of American policy as a whole.
It also beggars belief that Lord Green or the bank’s compliance officers were unaware of CIA allegations or that Britain’s own foreign intelligence arm, MI6, hadn’t apprised top officials of the risks involved. In fact, as we’ll see below, HSBC’s own internal documents prove otherwise.
Osama’s ‘Golden Chain’
There were certainly plenty of red flags flying which should have alerted bank officials.
In March 2002, al Qaeda’s list of financial benefactors surfaced when computers were seized in Sarajevo at the Bosnian headquarters of the Benevolence International Foundation, “a Saudi based nonprofit organization which was also designated a terrorist organization by the Treasury Department.”
Osama bin Laden, who held a Bosnian passport issued by the breakaway government fronted by Western “liberal interventionist” darling Alija Izetbegović during NATO’s dismemberment of socialist Yugoslavia, was a supporter of the Nazi SS Handschar Division during World War II. Bin Laden referred to this group of financial angels as his “Golden Chain.”
Additional evidence also emerged in 2002 during Operation Green Quest, a Treasury Department effort to “disrupt terrorist financing in the United States.”
In March of that year, law enforcement officials raided the Herndon, Virginia offices of the SAAR Foundation “an Al Rajhi-related entity.” Indeed, the name “SAAR” was an acronym for the organization’s founder, Sulaiman Abdul Aziz Al Rajhi, the controlling partner of the Al Rajhi Bank.
Subcommittee investigators commented that “one of the 20 handwritten names in the Golden Chain document identifying al Qaeda’s early key financial benefactors is Sulaiman bin Abdul Aziz Al Rajhi, one of Al Rajhi Bank’s key founders and most senior officials.”
An affidavit supporting the search warrants “detailed numerous connections between the targeted entities and Al Rajhi family members and related ventures. The affidavit stated that over 100 active and defunct nonprofit and business ventures in Virginia were part of what it described as the ‘Safa Group,’ which the United States had reasonable cause to believe was ‘engaged in the money laundering tactic of ‘layering’ to hide from law enforcement authorities the trail of its support for terrorists.”
Green Quest investigators were particularly keen on unraveling links between the SAAR Foundation and the Swiss Al Taqwa Bank, incorporated in the Bahamas in 1988 for “tax purposes.”
Founded by Swiss Nazi sympathizer and convert to Islam, Albert Armand (Achmed) Huber, who professed admiration for both Adolph Hitler and Osama bin Laden, the bank was accused by U.S. officials in helping al Qaeda launder funds. Although the Treasury Department froze its assets in 2001, the investigation was shut down by the Bush administration before deeper linkages could be fully uncovered.
In 2011, a lawsuit was filed by insurance giant Lloyd’s of London against Saudi Arabia which sought to recover pay outs to victims of the 9/11 attacks. The suit noted “that two individuals who were former executives at Bank al Taqwa, Ibrahim Hassabella and Samir Salah, were also associated with the SAAR Foundation.”
At the time, The Independent reported that the legal claim suggested that defendants “‘knowingly’ provided resources, including funding, to al-Qa’ida in the years before the attack and encouraged anti-Western sentiment which increased support for the terror group.”
According to court briefs, “Absent the sponsorship of al-Qa’ida’s material sponsors and supporters, including the defendants named therein, al-Qa’ida would not have possessed the capacity to conceive, plan and execute the 11 September attacks. The success of al-Qa’ida’s agenda, including the 11 September attacks themselves, has been made possible by the lavish sponsorship al-Qa’ida has received from its material sponsors and supporters over more than a decade leading up to 11 September 2001.”
Senate investigators, citing Green Quest and Lloyd’s case files, noted that “Mr. Hassabella was a former secretary of al Taqwa Bank and a shareholder of SAAR Foundation Inc. Mr. Saleh was a former director and treasurer of the Bahamas branch of al Taqwa Bank, and president of the Piedmont Trading Corporation which was part of the SAAR network. The U.S. Treasury Department has stated: ‘The Al Taqwa group has long acted as financial advisers to al Qaeda, with offices in Switzerland, Liechtenstein, Italy and the Caribbean.’ Regarding Akida Bank, the lawsuit complaint alleged that Sulaiman bin Abdul Aziz Al Rajhi was ‘on the board of directors of Akida Bank in the Bahamas’ and that ‘Akida Bank was run by Youssef Nada, a noted terrorist financier’.”
The report went on to state that “HSBC was fully aware of the suspicions that Al Rajhi Bank and its owners were associated with terrorist financing, describing many of the alleged links in the Al Rajhi Bank client profile.”
As icing on the cake, a 2007 study published by the Congressional Research Service (CRS) also found that “Saudi individuals and other financiers associated with the Golden Chain enabled bin Laden and Al Qaeda to replace lost financial assets and establish a base in Afghanistan following their abrupt departure from Sudan in 1996.”
Assets I might add, that were used to bankroll the 9/11 attacks.
‘Keen to maintain the relationships’
HSBC’s dubious links to the Al Rajhi Bank didn’t end with information discovered in the “Golden Chain” files; it fact, they were the tip of the proverbial iceberg.
After 9/11, the FBI reported that three of the hijackers, Hani Hanjour, Nawaf Alhazmi and Abdulaziz Alomari cashed thousands of dollars in travelers checks and received wire transfers from an unnamed individual drawn on accounts at the Al Rajhi Bank.
As researcher Kevin Fenton pointed out in Disconnecting the Dots, links among most of the hijackers were discovered through their banking transactions. “In this context,” Fenton wrote, “it is worth noting that Global Objectives, a British banking compliance company, identified fifteen of the nineteen hijackers as high-risk individuals and established database profiles for them before the attacks. … The list of high-risk people maintained by Global Objectives was available to dozens of banks,” a list that presumably also included HSBC.
While there is no evidence that HSBC, or for that matter the Al Rajhi Bank, had prior knowledge of the 2001 atrocity, the gross indifference exhibited by these institutions through their violation of “know your client” (KYC) rules governing financial transactions reveal a callous disdain for elemental norms as they raced to inflate their balance sheets come hell or high water.
Privileged communications amongst senior staff revealed they were well aware of the issues and risks involved, yet did worse than nothing, they lobbied that HSBC continue their arrangements with the Al Rajhi Bank.
Suspicions were such that senior staff “classified Al Rajhi Bank as a ‘Special Category of Client’ (SCC), its highest risk designation.” This was done, Senate investigators noted, because the Kingdom was considered a “high risk country” and due to the fact Al Rajhi’s largest shareholder, Sulaiman bin Abdul Aziz Al Rajhi was considered “a Politically Exposed Person (PEP).”
Internal HSBC documents also revealed that in 2002, that is, after the 9/11 provocation, “the International Private Banking Department asked to transfer [several] accounts to HSBC’s Institutional Banking Department in Delaware which had superior ability to monitor account activity.”
In fact, transferring Al Rajhi accounts to the bank’s Delaware division would have just the opposite effect and bank officials knew it.
As journalist Nicholas Shaxson noted in his exposÃ© of offshore banking, Treasure Islands, “Delaware is the biggest state provider of offshore corporate secrecy.” Shaxson pointed out that Delaware’s Chancery Court has a “‘business judgement rule’ under which courts should not second-guess corporate managers,” thereby “granting corporate bosses extraordinary freedoms from bothersome stockholders, judicial review, and even public opinion.”
So much for any alleged “superior ability to monitor account activity”!
HBUS’s Joseph Harpster wrote an email, stating: “The most recent concern arose when three wire transfers for small amounts ($50k, $3k and $1.5k) were transferred through the account for names that closely resembled names, not exact matches, of the terrorists involved in the 9/11 World Trade Center attack. … The profile of the main account reflects a doubling of wire transfer volume since 9/01, a large number of travelers checks but with relatively low value and some check/cash deposits. According to the account officer, traffic increased because they have chosen to send us more business due to their relationship with Saudi British Bank and the added strength of HBC versus Republic. … Maintaining our business with this name is strongly supported by David Hodghinson of [Saudi British Bank] and Andre Dixon, Deputy Chairman of [HSBC Bank Middle East]. Niall Booker and Alba Khoury [of HBUS] also support.”
Aside from adverse publicity, the “low value” of the transactions seemed not to have troubled Harpster or his associates in the least. After all, the total “cost” of murdering 3,000 human beings were certainly small compared to the price of a vacation home in the Hamptons or a new Maserati.
Anxious there might be increased scrutiny from regulators (no worries there!), Harpster’s email was forwarded by Douglas Stolberg, the head of Commercial and Institutional Banking to Alexander Flockhart, then a senior executive in Retail and Commercial Banking at HBUS. Stolberg noted: “As we discussed previously, Compliance has raised some concerns regarding the ongoing maintenance of operating/clearing accounts for Al Rajhi group.” He forwarded recommendations on how to handle the account: “Retain [International Private Banking] as the relationship manager domicile for continuity purposes, and as we understand there is interest in further developing private banking business with family members. … Domicile the actual accounts with Delaware where HBUS’s most robust account screening capabilities reside.”
“Screening capabilities” which could be shielded from nosy regulators due to Delaware’s strict bank secrecy laws.
Stolberg went on to state: “[T]his has become a fairly high profile situation. Compliance’s concerns relate to the possibility that Al Rajhi’s account may have been used by terrorists. If true, this could potentially open HBUS up to public scrutiny and/or regulatory criticism. SABB [Saudi British Bank] are understandably keen to maintain the relationships. As this matter concerns primarily reputational and compliance risks, we felt it appropriate for SMC [Senior Management Committee] members to be briefed … so that they may opine on the acceptability of the plan. Please advise how you would prefer us to proceed.” (emphasis added)
According to Senate staff, “Mr. Harpster reported a week later that Mr. Flockhart had decided to transfer the accounts to HBUS in the Delaware office.”
But HSBC weren’t the only entities hoping to curry favor with the Kingdom. A 2009 Government Accountability Office (GAO) report went on to note that “certain performance targets set by the State Department had been dropped in 2009, such as the establishment of a Saudi Commission on Charities to oversee actions taken by Saudi charities abroad as well as certain regulations of cash couriers.”
Although GAO “recommended that the United States reinstate the dropped performance targets to prevent the flow of funds from Saudi Arabia ‘through mechanisms such as cash couriers, to terrorists and extremists outside Saudi Arabia,’ the State Department’s “most recent annual International Narcotics Control Strategy Report contains no information about Saudi Arabia’s anti-money laundering or terrorist financing efforts.”
One reason why the State Department’s report contains “no information” just might be the Obama administration’s policy of supporting Saudi-backed Salafi terrorists soon to come online in Libya and Syria, financed through “Saudi charities abroad” or more directly through “cash couriers.”
‘You’d better be making lots of money!’
The Senate disclosed that HSBC “provided Al Rajhi Bank with a wide range of banking services, including wire transfers, foreign exchange, trade financing, and asset management services.”
“In the United States,” investigators learned that “a key service was supplying Al Rajhi Bank with large amounts of physical U.S. dollars, through the HBUS U.S. Banknotes Department.”
“The physical delivery of U.S. dollars to Al Rajhi Bank was carried out primarily through the London branch of HBUS, often referred to internally as ‘London Banknotes’.”
Indeed, “HBUS records indicate that the London Banknotes office had been supplying U.S. dollars to Al Rajhi Bank for ’25+ years.’ In addition to the London branch, HBUS headquarters in New York opened a banknotes account for Al Rajhi Bank in January 2001. The U.S. dollars were physically delivered to Al Rajhi Bank in Saudi Arabia.”
“On one occasion in 2008,” Senate staff reported, the head of HSBC Global Banknotes Department told a colleague: ‘In case you don’t know, no other banknotes counterparty has received so much attention in the last 8 years than Alrajhi.’ Despite, in the words of the KYC client profile, a ‘multitude’ of allegations, HSBC chose to provide Al Rajhi bank with banking services on a global basis.”
Even though the Al Rajhi Bank “had not been indicted, designated a terrorist financier, or sanctioned,” HSBC’s Group Compliance section recommended that affiliates should sever their ties.
After that initial decision however, “HSBC affiliates disregarded the recommendation and continued to do business with the bank, while others terminated their relationships but protested HSBC’s decision and urged HSBC to reverse it.”
Complaints by lower level staff continued, disregarded by higher-ups, even though a U.S. indictment was issued in February 2005 for two individuals “accused among other matters, of cashing $130,000 in U.S. travelers cheques at Al Rajhi Bank in Saudi Arabia” and then smuggling the cash to CIA-backed terrorists in Chechnya.
Although internal bank documents showed that officials decided to cut their ties to the Saudi financial institution, they reversed themselves when pressure was brought to bear by Al Rajhi officials. Between 2006 and 2010, Al Rajhi received shipments totaling more than $1 billion in physical cash in the lucrative banknotes business from HSBC’s U.S. affiliate according to investigators. Officials at the Saudi bank “had threatened to pull all of its business from HSBC if the U.S. banknotes business were not restored.”
Senate staff reported that on January 4, 2005, “HBUS AML Compliance head Ms. Pesce sent an email to Daniel Jack, an HBUS AML Compliance Officer who often dealt with the London Banknotes office, instructing him to: ‘[p]lease communicate that Group Compliance will be recommending terminating the Al Rajhi relationship.’ Mr. Jack inquired as to when that recommendation would be made. She responded: ‘I expect to see an email from Susan Wright today. She tells me that HBME [HSBC Bank Middle East] does not agree with Compliance and will not be terminating the relationship from the Middle East, but she/David B[agley] recommend that in light of US scrutiny, climate, and interest by law enforcement, we in the US sever the relationship from here’.”
At the time, Susan Wright was “the Chief Money Laundering Control Officer for the entire HSBC Group. She reported to David Bagley, head of the HSBC Group’s overall Compliance Department.”
Senate investigators noted that the “documents do not explain why HSBC Middle East disagreed with the decision or why it was allowed to continue its relationship with Al Rajhi Bank, when HSBC’s Group Compliance had decided to sever the relationship between the bank and other HSBC affiliates due to terrorist financing concerns.”
It soon became clear however, that “HSBC Group Compliance began to narrow its scope.” Shortly thereafter a trader in the Banknotes department wrote, “for us is business as usual.” Alan Ketley, HBUS AML Compliance Officer commented on the decision not to include Al Rajhi Trading in their earlier decision to sever all ties: “Looks like you’re fine to continue dealing with Al Rajhi. You’d better be making lots of money!”
Meanwhile, “Al Rajhi Bank communicated the threat to ‘pull any new business with HSBC’ unless given a ‘satisfactory explanation’ why HSBC had stopped supplying it with U.S. dollars via its relationship managers,” the Senate disclosed.
In short order, it was business as usual.
Despite continuing allegations of terrorist financing swirling around Al Rajhi Bank, HBUS “continued to supply, through its London branch, hundreds of millions of U.S. dollars to Al Rajhi Bank in Saudi Arabia. In addition, at Al Rajhi Bank’s request, HBUS expanded the relationship in January 2009, by authorizing its Hong Kong branch to supply Al Rajhi Bank with non-U.S. currencies, including the Thai bat, Indian rupee, and Hong Kong dollar.” (emphasis added)
When concerns were raised internally once again, Christopher Lok, the head of HSBC’s Global Banknotes Department in New York fired back: “This is an on-going debate that will never go away. My stance remains the same, i.e. until it[']s proved we cannot simply rely on the Wall Street Journal['s] reports and unconfirmed allegations and ‘punish’ the client’.”
Needless to say, Hong Kong’s “arrangement” with Al Rajhi went forward.
Despite “troubling information” which should have led to HSBC’s quick exit from the banknotes market, the Senate reported that “HBUS continued to supply U.S. dollars to the bank, and even expanded its business, until 2010, when HSBC decided, on a global basis, to exit the U.S. banknotes business.”
• • •
In conclusion, one needn’t be a “conspiracy buff” to posit a link from HSBC to Al Rajhi to “cash couriers” operating across the Middle East in support of a multitude of U.S.-Saudi-backed “regime change” gambits in play today; policies which “worked marvelously well in Afghanistan against the Red Army.”
As investigative journalist Ed Vulliamy pointed out in The Observer, the issues involved here are wider than drug money laundering or terrorist finance. “It is about where banks, law enforcement officers and the regulators–and politics and society generally–want to draw the line between the criminal and supposed ‘legal’ economies.”
Commenting on the HSBC scandal, Robert Mazur, a former Customs Department deep-cover specialist and author of The Infiltrator, who penetrated MedellÃn cartel money laundering operations during the prosecution and collapse of BCCI in 1991, told The Observer that “the only thing that will make the banks properly vigilant to what is happening is when they hear the rattle of handcuffs in the boardroom.”
“The stark truth is,” Vulliamy wrote, “the notion of any dichotomy between the global criminal economy and the ‘legal’ one is fantasy. Worse, it is a lie. They are seamless, mutually interdependent–one and the same.”
Here's the conspiracy. Another bank that wants to eliminate its competition blew the whistle on HSBC to get HSBC out of the arena. Let's be frank, what multinational bank doesn't finance teror? whether they be bnp, rbs, credit aricole, barclays, boa, mitsubishi, deutsche, jpmorgan, citigroup, ing, lloyds, mizuho, santander, bpce, societe generale, unicredit, ubc, suitomo mitsui, wells fargo (also infamous for laundering drug money), commerzbank, hbos, credit suisse, intesa, rabobank, dexia, morgan stanley, bilbao, norinchukin, nordea, fortis, rbc, BFCM, danske, Landesbank Baden-Wuerttemberg, kfw, national australia bank, dz, commonwealth bank, westpac, hypo, td, or bayerische. So why go after HSBC? if they're all doing it. The answer is probably, with HSBC out of the picture, a bigger, and badder bank can take all the shares that HSBC used to have, just like Goldman Sachs benefited from the collapse of Lehman brothers. In fact, most industry insiders believe that Goldman Sachs was the one who sabatoged Lehman. So who's behind the HSBC sabatoge? Most people who have power in the west, know multinational banks fund teror, and simply don't care. If they did care, they'd either end up buried next to JFK, or suffer the fate of Dominique Strauss Khan.
Conspiracy theory number two. They're going to use this as a pretext to freeze wealthy people's accounts, in the name of fighting "teror". Same way that paypal freezes your account (while keeping all the money in it), for your "own security protection". As western countries such as germany, france, britain, canada, usa start to get poorer, there is no doubt that they will resort to tactics such as this to continue making money through illegitimate means. When legitimate governments gets poor, they spend less. When rogue states (u.s, eu) get poor, they spend more, while robbing people at home, and abroad, whether it's freezing accounts, seizing oil field, or foreclosures.
Last edited by doubleko on Thu Aug 02, 2012 1:20 am, edited 1 time in total.
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Yeah it's true, HSBC is in some deep shit now:
http://www.zerohedge.com/news/senate-th ... rorist-fin
Senate Throws The Book At HSBC Accusing It Of Massive "Money Laundering And Terrorist Financing", No Comment On NAR Money Laundering Yet
Submitted by Tyler Durden on 07/16/2012 18:30 -0400
Just because there is already an overflow of confidence in the financial system, here comes the Senate's Permanent Subcommittee On Investigations with a 340 page report detailing how HSBC "exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls." Of course, since HSBC is one of the world's largest banks, what it did was not in any way unique, and it is quite fair to say that every other bank has the same loose anti-money "laundering" provisions. What HSBC was likely most at fault for was not providing sufficient hush money to the appropriate powers in the highest US legislative administration. But at least tomorrow we will have yet another dog and pony show, accusing that HSBC did what the NAR does every single day. Because let's not forget that the National Association of Realtors lobbied for and received a waiver for anti-money laundering provision regulations: after all how else will US real estate remain at its current elevated levels if not for the drug, blood, and fraud money from various Russian, Chinese, and petrodollar kingpins, mafia bosses and otherwise rich people who need to launder their money in the US, in the process keeping Manhattan real estate in the stratosphere? But one can't possibly pursue the real truth if it just may impair the fair value of that backbone of honest, hard-working US society: still massively overpriced housing in a world in which those who need mortgages will never get them.
Here is what the NAR has to say on the topic, courtesy of Elanus Capital Management, with their commentary:
Briefly, as I am pushing my luck, I want to note something that I feel is important for all of us to consider. Namely, that we havenâ€™t learned a damn thing over the past few years.
In quick succession over the past two weeks Iâ€™ve read articles in both the New York Times and the Financial Times discussing the phenomenon of UHNW buying of real estate property in New York and London. The Financial Timesâ€™ article was particularly pathetic and read a bit like a Pets.com IPO note in 1999. In short, the gist of the article was that real estate in London was the best thing there is to a sure thing because Russians and others are dying to get their money out of their home country. First of all, there are myriad things that bother me about such an article, but the mere fact that these folks are the source of capital flight is surely a sign that their ability to maintain such flight is surely limited. And when Russian oligarchs stop buying 200-meter yachts and Â£100M flats, just who is going to step in to keep the bubble going?
That noted, hatâ€™s off to Amanda Staveley, not only can she organize SWF bailouts of British banks at ludicrous prices, she can defend the London real estate market as â€œa great British success story.â€
For whom? For fabulously wealthy central London property owners? Well, then three cheers for Tony, Gordon and David. Public policy is doing wonders for the worldâ€™s super-rich. I wonder, was there a class at Cambridge Economic policymaking in support of rapacious asset strippers? I thought public policy was about supporting economic growth that provided jobs and opportunity to the broadest possible segment of (usually domestic) society. Has anyone reading this been to the English Midlands or Wales lately? Are there signs that the sale of Gordon House is helping increase literacy, lower crime, improve infant mortality in Birmingham? Are jobs getting created in Leeds? Frankly, I wonder if the London elites have been watching a spot too much Downton Abbey.
Alright, so itâ€™s just a market like any other and I should accept that. And I do. But I think we should all remember, that every Ruble, Real, Renminbi and Rupee that goes into buying property abroad is a currency unit that is not getting invested in productive activity back home. Developing market elites are sending very large signals that we should be paying attention to.
In the late 1990â€™s Russiaâ€™s biggest export market was Cyprus. A decade later, Kazakhstanâ€™s second largest was Bermuda. Notice a pattern? Mind you, all of this going on while BRIC funds were raking it inâ€¦
Finally, many of you reading this will undoubtedly have spent time in an international bank and been forced to sit through countless hours of â€œknow your clientâ€ and AML training. Fascinating to note that the National Association of Realtors lobbied for and received a waiver from such regulation. Thatâ€™s right, realtors actually went to the U.S. government and said: we want to be able to help foreign business oligarchs and other nefarious business people launder money through the real estate markets of the United States â€“ and prevailed.
Hereâ€™s their official position:
"NAR supports continued efforts to combat money laundering and the financing of terrorism through the regulation of entities using a risk-based analysis. Any risk-based assessment would likely find very little risk of money laundering involving real estate agents or brokers. Regulations that would require real estate agents and brokers to adopt anti-money laundering programs may prove to be burdensome and unnecessary given the existing ML/TF regulations that already apply to United States financial institutions."
Hatâ€™s off to the NAR â€“ that is some serious doublespeak. My translation: Weâ€™ll support you as long as we donâ€™t have to support you.
But back to HSBC - here is more from the WSJ:
The findings will be aired Tuesday when senior HSBC officials are scheduled to testify before a Senate subcommittee looking into the matter. In a nearly 400-page report, the subcommittee detailed a regulatory culture at the bank where some officials allegedly engaged in risky behavior in pursuit of profits.
The report said that HSBC did little to clean up operations that should have raised concerns, including its Mexico bank. That bank had a branch in the Cayman Islands with no offices or staff but held 50,000 client accounts and $2.1 billion in 2008, the report said.
The report said that HSBC did little to clean up operations that should have raised concerns, including its Mexico bank. That bank had a branch in the Cayman Islands with no offices or staff but held 50,000 client accounts and $2.1 billion in 2008, the report said.
The Mexico operation, Senate investigators allege in the report, should have been the global bank's most worrisome because it continued doing business with money-changing businesses known as "casas de cambio." These businesses were cited by U.S. authorities to be fronts for drug-cartel money laundering, and HSBC conducted business with them years after other big banks cut them off.
HSBC Mexico's top anti-money laundering official, as he prepared to leave the bank, told an official from HSBC's London compliance office in 2008 that he believed there was "a culture [of] pursuing profits and targets at all costs" and that it "was only a matter of time before the bank faced criminal sanctions," Senate investigators found.
And from the Senate:
Global banking giant HSBC and its U.S. affiliate exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls, a Senate Permanent Subcommittee on Investigations probe has found.
â€œIn an age of international terrorism, drug violence in our streets and on our borders, and organized crime, stopping illicit money flows that support those atrocities is a national security imperative,â€ said Sen. Carl Levin, D-Mich., subcommittee Chairman. â€œHSBC used its U.S. bank as a gateway into the U.S. financial system for some HSBC affiliates around the world to provide U.S. dollar services to clients while playing fast and loose with U.S. banking rules. Due to poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions. The bankâ€™s federal bank regulator, the OCC, tolerated HSBCâ€™s weak AML system for years. If an international bank wonâ€™t police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the U.S. bank being used to aid and abet that illicit money.â€
The Subcommittee conducted a year-long investigation into HSBC and has detailed its findings in a 330-page report to be released at the hearing Tuesday, along with more than 100 documents, including bank records and internal emails. The hearing, which begins at 9:30 a.m., will include testimony from HSBC officials and federal regulators.
The Subcommittee investigation focused on HSBCâ€™s key U.S. affiliate, HSBC Bank USA, N.A., known as HBUS, which functions as the U.S. nexus for HSBCâ€™s worldwide network. HSBC has 7,200 offices in more than 80 countries and 2011 profits of $22 billion; HBUS has 470 branches across the United States with 4 million customers. HBUS provides accounts to 1,200 other banks including more than 80 HSBC affiliates. Called correspondent banking, HBUS provides these banks with U.S. dollar services, including services to move funds, exchange currencies, cash monetary instruments, and carry out other financial transactions. Correspondent banking can become a major conduit for illicit money flows unless U.S. laws to prevent money laundering are followed.
In 2010, HSBC was cited by its federal regulator, the Office of the Comptroller of the Currency (OCC), for multiple severe AML deficiencies, including a failure to monitor $60 trillion in wire transfer and account activity; a backlog of 17,000 unreviewed account alerts regarding potentially suspicious activity; and a failure to conduct AML due diligence before opening accounts for HSBC affiliates. Subcommittee investigators found that the OCC had failed to take a single enforcement action against the bank, formal or informal, over the previous six years, despite ample evidence of AML problems.
The Subcommittee investigation focused on five areas of abuse:
--Servicing High Risk Affiliates. HSBCâ€™s U.S. bank, HBUS, offered correspondent banking services to HSBC Bank Mexico, and treated it as a low risk client, despite its location in a country facing money laundering and drug trafficking challenges, high risk clients like casas de cambio, high risk products like U.S. dollar accounts in the Cayman Islands, a secrecy jurisdiction, and weak AML controls. The Mexican affiliate transported $7 billion in physical U.S. dollars to HBUS from 2007 to 2008, outstripping other Mexican banks, even one twice its size, raising red flags that the volume of dollars included proceeds from illegal drug sales in the United States.
--Circumventing OFAC Safeguards. Foreign HSBC banks actively circumvented U.S. safeguards at HUBS designed to block transactions involving terrorists, drug lords, and rogue regimes. In one case examined by the Subcommittee, two HSBC affiliates sent nearly 25,000 transactions involving $19.4 billion through their HBUS accounts over seven years without disclosing the transactionsâ€™ links to Iran.
--Disregarding Terrorist Financing Links. HBUS provided U.S. dollars and banking services to some banks in Saudi Arabia and Bangladesh despite links to terrorist financing.
--Clearing Suspicious Bulk Travelers Checks. In less than four years, HSBC cleared $290 million in obviously suspicious U.S. travelers cheques for a Japanese bank, benefiting Russians who claimed to be in the used car business.
--Offering Bearer Share Accounts. HSBC offered more than 2,000 accounts to bearer share corporations, despite the high risk of money laundering and illicit conduct that results since their ownership can be readily transferred without a trail.
The report recommends a number of changes at HSBCâ€™s U.S. bank, including higher scrutiny of HSBC affiliates for money-laundering risk, closing accounts of banks linked to terror financing, and steps to ensure the bank does not process transactions with prohibited entities such as terrorists, drug lords, and rogue regimes. It also recommends overhauling the AML controls on travelers cheques and eliminating bearer share accounts.
Full Senate report: See Above Link
"The object of life is not to be on the side of the majority but to escape finding oneself in the ranks of the insane." Marcus Aurelius, Roman Emperor and stoic philosopher, 121-180 A.D.
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