Gypsy Jan
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How Much Will Mexico Money Laundering Cost HSBC?
FORBES
How Much Will Mexico Money Laundering Cost HSBC?
"By some estimates, Mexican cartels may launder as much as US$25 billion a year in the U.S. Now major corporations such as HSBC are being called into
question for their role. (Image credit: AFP/Getty Images via @daylife)
Earlier this year, on February 27, 2012 HSBC Holdings Plc announced that it will likely face criminal or civil charges from an expanding U.S.
Department of Justice investigation into its alleged ties to suspicious money transactions. Investigators are looking into the banks' dealings in
Mexico.
Today, July 17, executives from HSBC, one of the world's largest banks, are expected to testify before a U.S. Senate Committee regarding questions
about how lax controls may have allowed money launderers to take advantage of HSBC's services.
HBC is now the latest company to see its reputation damaged by allegations of money laundering in Mexico. According to a recent Global Financial
Intetrity report "nearly $1 trillion in illicit capital left Mexico from 1970-2010, averaging about $50 billion a year this past decade.'
The U.S. State Department estimates that drug cartels launder between $8 billion and $25 billion from the US annually.
Mexico's government has made many high profile arrests of violent drug traffickers, but has been hesitant to take serious action against money
launderers and other white collar professionals who benefit from the illicit flows.
In the U.S., regulators are starting to pay more attention to the financial side of the operation. In total, HSBC is now subject to investigations
from the U.S. Justice Department, the district attorney's office in Manhattan, the U.S. Federal Reserve, and two separate departments of the U.S.
Treasury.
The Senate hearing is a follow up to a U.S. Senate Panel's special investigation into the bank's dealings in Mexico. In January, 2012, after the
investigation was made public, a representative for HSBC said told reporters that the bank will "support US efforts to strengthen anti-money
laundering defences and protect the integrity of the financial system" and promised to implement "rigorous new internal processes."
In a January, 2012 blog post, Shannon O'Neil, a Mexico expert from New York City's Council on Foreign Relations, a think tank, explained that "The
United States also has a role to play in helping Mexico combat money laundering. As the number one destination of illicit funds from Mexico, U.S.
banks could make it a lot harder to move money north by improving transparency and reporting more regularly on private deposits."
Soon thereafter, faced with increasing public scrutiny, HSBC appointed Stuart Levey, a former top U.S. Treasury Department official, as its chief
legal officer. Levey worked in the Treasury Department's anti terrorism financing operations until last year.
On February 27, 2012 the same day as it announced a separate investigation into its dealings in Iran, HSBC also announced that it would reshuffle its
board, bringing in independent experts with significant experience in finance.
HSBC announced that at its 2012 annual meeting of shareholders, Gwyn Morgan and Brian Williamson, two directors with no clear banking, financial, or
risk management expertise would be replaced by Joachim Faber, the former CEO of Allianz Global Investors and John Lipsky, the former First Deputy
Managing Director of the International Monetary Fund, two individuals with significant banking industry expertise. On March 1, Mr. Faber and Mr.
Lipsky will join HSBC's board and also the bank's Group Risk Committee, an entity that monitors a broad category of risks, receives reports on actual
performance and emerging issues, and reviews the efficacy of HSBC's risk management framework.
Gwyn Morgan and Brian Williamson will retire as non-executive Directors at HSBC's Annual General Meeting on May 25, 2012.
Previously the bank's Audit Committee did not include any banking industry veterans or risk management experts.
In the filing on February 27, 2012, HSBC underscored the potentially serious nature of the U.S. investigations, stating "there will be some form of
formal enforcement action, which may be criminal or civil in nature."
According to the BBC, HSBC collected $26 million in fees from certain accounts in Miami. The bank could now face hundreds of millions of dollars of
fines. After all, in 2010, Wachovia agreed to pay $160 million to settle a U.S. Justice Department probe that examined the bank's Mexican
transactions.
Prior to the Senate hearing, HSBC's CEO Stuart Gulliver released a statement saying "It is right that we will be held accountable and that we take
responsibility for fixing what went wrong."
He added, "As well as answering the subcommittee's questions, we will explain the significant changes we have already made to strengthen our
compliance and risk management infrastructure and culture."
As the U.S. turns more attention to the money flows connected to the drug trade, other companies may find their reputations called into question."
“Travel is fatal to prejudice, bigotry, and narrow mindedness.”
—Mark Twain
\"La vida es dura, el corazon es puro, y cantamos hasta la madrugada.” (Life is hard, the heart is pure and we sing until dawn.)
—Kirsty MacColl, Mambo de la Luna
\"Alea iacta est.\"
—Julius Caesar
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Ken Cooke
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I read this article last night, and wondered about the high-ranking Mexican official making his transactions out of that bank in Puebla. Hmmm...
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DavidE
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Mood: 'At home we demand facts and get them. In Mexico one subsists on rumor and never demands anything.' Charles Flandrau,
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As long as the crooks did not harm peer, businesses, or government, they will go unpunished.
A Lot To See And A Lot To Do
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MitchMan
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| Quote: | Originally posted by DavidE
As long as the crooks did not harm peer, businesses, or government, they will go unpunished. |
You've made a good point. In the world of finance, there has grown a culture of decriminalization of dirty deeds.
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thebajarunner
Ultra Nomad
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Location: Arizona....."Free at last from crumbling Cali
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Mood: muy amable
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Did I misunderstand the question?
or the answers??
HSBC is going to pay a ton in federal fines for this.
Probably up around $500m
And, that is after tax dollars, so the real economic bang is up around $800m.
They are also talking some criminal charges,
which either against the corp
or against officers,
can be ugly.
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