HSBC’s head of group compliance resigned today following a scathing report into lax controls at the bank that exposed the US to billions of dollars worth of money laundering and terrorist financing.
David Bagley, who has been in the post since 2002, told the US Senate’s permanent subcommittee on investigation that it was the “appropriate time” for “someone new to serve as the head of group compliance”.
He added: “Despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators.”
Bagley also revealed that the bank is to close 20,000 accounts on the Cayman Islands as a result of the money laundering investigation.
Subcommittee chairman Carl Levin said HSBC’s compliance culture had been “pervasively polluted for a long time”.
He also criticised the federal agency supervising the bank’s US arm, saying it “tolerated” weak controls against money laundering.
The Senate report said that HSBC’s Mexican operations moved
$7 billion (£4.5bn) into the bank’s US operations between 2007 and 2008. According to the report, Mexican and US authorities warned HSBC that the amount of money could only have reached such a level if it was tied to illegal drugs.
In addition, two HSBC affiliates sent nearly 25,000 transactions involving $19.4bn over seven years without disclosing their links to Iran. Analysts believe HSBC could face a $1bn fine over the failings.
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