HSBC under investigation - HSBC receives grand jury subpoenas - questionable accounts

Source: Main Justice

HSBC USA Under Investigation for Money Laundering

By Christopher M. Matthews
August 3, 2010 3:05 pm

HSBC Bank USA disclosed Monday that it is under investigation by the U.S. Justice Department and federal banking regulators for possible violations of anti-money-laundering laws and other federal statutes and regulations.

In a filing with the Securities and Exchange Commission, the British bank said it had received grand jury subpoenas from the Justice Department and was also the “subject of ongoing examinations” by the Office of the Comptroller of the Currency and the Federal Reserve Bank of Chicago.

“These examinations and inquiries pertain to, among other matters, our Global Banknotes business and our foreign correspondent banking business, and our compliance with Bank Secrecy Act (“BSA”), Anti-Money Laundering (“AML”) and Office of Foreign Assets Control requirements,” the filing said.

The Bank Secrecy Act requires U.S financial institutions to assist the government in detecting and preventing money laundering, tax evasion, and other criminal activities. The Treasury Department’s Office of Foreign Assets Control administers and enforces economic and trade sanctions against targeted foreign countries and regimes.

The bank decided in June to shut down the banknotes business, which it said did not fit with its primary business.

In February, Sen. Carl Levin (D-Mich.) said he planned to refer HSBC to U.S. bank regulators in connection with questionable accounts it provided to senior government officials in Angola. Levin, who chairs the Permanent Subcommittee on Investigations, made his remarks after holding a hearing on the flow of corrupted foreign money into the United States.

According to Transparency International’s Corruption Index, Angola is one most corrupt countries in the world. Angolan leaders are widely suspected of laundering state funds out of the country.

A report issued by Levin’s committee found that in 2002, the then-governor of Angola’s central bank tried to move $50 million of state funds into a private U.S. account and that HSBC had been slow to flag the potentially tainted funds. The report said that despite the suspect transfers, HSBC continued to do business with the Angolan central bank and may have provided it with offshore accounts.

In June, Reuters reported that HSBC had cut ties with some Angolan banks.

French prosecutors launched a money-laundering investigation of HSBC in April, and Italy’s tax police are probing possible tax evasion in about 7,000 HSBC bank accounts. Monday’s disclosure was the first acknowledgment by HSBC that the bank’s U.S. operations are under investigation.

In its disclosure, HSBC said it had taken several initial steps to address the concerns of U.S. authorities by enhancing risk management and compliance procedures.

“HSBC USA is committed to maintaining compliant and effective [Bank Secrecy Act] and [anti-money laundering] policies and procedures, and efforts to strengthen related functions will continue,” HSBC said in its filing.