A US Senate report found that Mexican drug cartels were able to launder billions of dollars through HSBC bank due to weak internal controls and a lack of action by US regulators.
Senator Carl Levin said that through its US operations, London-based HSBC had “exposed the United States to Mexican drug money.”
The bank’s Mexican affiliate moved $7 billion to the US operation between 2007 and 2008, despite signs that the money could be coming from Mexican cartels, said the report. The Senate subcommittee accused executives of failing to take action on employees’ complaints and warnings, and said the bank had “actively circumvented US safeguards.”
The report also found that US regulators failed to act, despite evidence of the problems with HSBC's internal regulations. The US agency charged with overseeing HSBC’s US operation, the Office of the Comptroller of the Currency (OCC), “tolerated” the bank’s lax controls and "failed to take a single enforcement action" against HSBC for six years until 2010.
As Forbes pointed out, HSBC is not accused of participating in or knowingly allowing money laundering to occur, but failing to maintain the reporting standards and vigilance necessary to detect it.
InSight Crime Analysis
The HSBC investigation is one of a number inquiries into international banks’ roles in money laundering for drug cartels. Some reports estimate that as much as $85 billion in drug money is laundered through US banks from Mexico per year.
Last year, Wachovia bank (which has since been absorbed by Wells Fargo) was accused of failing to carry out proper oversight of $420 billion that passed through its accounts. Some of that money was discovered to belong to the Sinaloa Cartel, and was later used to buy planes to smuggle drugs. The bank paid a fine of only $160 million, less than 2 percent of its 2009 profits.
Last month, a high-profile horse breeding business in the US run by the brother of Zetas boss Miguel Angel Treviño, alias “Z-40,” was accused of being a money laundering front for the gang. According to FBI testimony, the scheme used Bank of America accounts to move Zetas money across the border to the US. Although the bank is not facing prosecution, the fact that Treviño’s brother was able to coordinate the operation without raising any red flags for Bank of America is a troubling indication of a lack of proper controls within the US financial system.