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article imageThe plight of money-laundering banks

By Steve Hayes     Jul 17, 2012 in Business
Europe's largest bank, HSBC, faces the prospect of a billion dollar fine, as a US Senate Committee finds it had an operating culture that allowed it to launder suspected drugs and terrorism money.
According to Sky News, Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations, said that due to lax controls, HSBC exposed the US to Mexican drug cartel money and other suspicious funds.
The Guardian points out that the Committee's report says that the US division of HSBC laundered drug cartel money from 2002 to 2009. The report highlights one operation in the Cayman Islands that is obviously highly suspect. The Mexican based business had no staff or premises, but shipped $7 billion in cash from Mexico to the US in 2007 and 2008.
The report also draws attention to the fact that HSBC circumvented US sanctions on Iran, processing transactions of almost $20 billion over a period of seven years.
As the Financial Times notes, the use of major banks to launder drugs cartel money has been a long running concern. In 2010 Wachovia Bank, a part of Wells Fargo, reached a settlement with the Justice Department of $160 million in order to avoid facing charges of laundering Mexican drug cartel money.
Such cases are likely to be only the most visible tip of a very large iceberg. According to the US State Department, drug money flows back and forth between Mexico and the US. It estimates between $19 billion and $39 billion flows back to Mexico each year. However, it is also estimated that some 85 percent of the illicit profits remain in the US.
The Senate committee report is also embarrassing for the British government, as the head of HSBC throughout the relevant period was Stephen Green. Mr Green left the bank in 2010 and was made a lord so as to enable him to take up the role of government minister. He is responsible for investment and trade.
More about Finance, Banking, War on drugs, Criminal drugs cartels, money la
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