HSBC shares fall after money-laundering apology

Shares in global banking giant HSBC fell more than two percent in Hong Kong on Wednesday after a top executive resigned over the lender's failure to control money laundering and terrorist financing.

London-based HSBC apologised Tuesday for failing to apply anti-laundering rules as US lawmakers accused it of giving Iran, terrorists and drug dealers access to the US financial system.

Its shares listed on the Hong Kong stock exchange fell 2.36 percent to HK$66.35 in morning trade, while the Hang Seng index slipped 0.77 percent.

With the banking sector already under fire for manipulating interest rates and reckless trading, HSBC said more should have been done to prevent years of abuse amounting to tens of billions of dollars of illicit transactions.

"We deeply regret and apologize for the fact that HSBC did not live up to the expectations of our regulators, our customers, our employees, and the general public," HSBC Bank USA (HBUS) President Irene Dorner told a hearing of the Senate Homeland Security Subcommittee on Investigations.

"HSBC's compliance history, as examined today, is unacceptable."

Before reading his own testimony, David Bagley, the head of group compliance for London-based HSBC, stepped down from his post in the wake of the subcommittee's damning report on the bank's operations.

"I recognize that there have been some significant areas of failure," he said. "This clearly took far too long to resolve."

In its 330-page report, the Senate found the lender allowed affiliates in countries such as Mexico, Saudi Arabia and Bangladesh to move billions of dollars in suspect funds into the United States without adequate controls.

Lawmakers grilled HSBC executives and US Treasury officials for failing to guard against money laundering they said benefited Mexican drug lords and terrorist networks, and for their bypassing of US sanctions on Iran.

"It's pretty shocking stuff," subcommittee chairman Senator Carl Levin said.

Among the findings was the revelation that HSBC and its US affiliate concealed more than $16 billion (13 billion euros) in sensitive transactions to Iran, violating US transparency rules over a six-year period.

HSBC executives were aware of the "concealed Iranian transactions" -- which stripped all identifying Iranian information from documentation -- as early as 2001 but allowed thousands of transactions to continue until 2007.

A review of HSBC's use of so-called U-turn transactions, in which funds are sent into and then out of the United States through non-Iranian foreign banks, showed the bank conducted almost 25,000 US dollar transactions with Iran.

"The vast majority of the Iranian transactions, ranging from 75 to 90 percent over the years, were sent through HBUS and other US dollar accounts without disclosing any connection to Iran," according to the report.

The US prohibits doing business with nations it regards as foes such as Iran and North Korea, and its Office of Foreign Assets Control (OFAC) imposes tight filters to halt potentially prohibited transactions.

Levin said the bank and its affiliates willfully circumvented the OFAC filters.

The Democratic senator said senior HSBC officials in London "knew what was going on, but allowed the deceptive conduct to continue."

HSBC's Europe operations twice instituted internal deadlines to stop the practice of scrubbing Iranian details from the U-turns, according to the report.

"Both deadlines were ignored," Levin said.

Under the slogan "The World's Local Bank", the network that began life as the Hong Kong and Shanghai Banking Corporation provides US dollars to HSBC banks in many countries under a procedure known as "correspondent banking."

But its compliance failures clearly spun out of control.

The report said HSBC's Mexican affiliate "transported $7 billion in physical US dollars to HBUS from 2007 to 2008... raising red flags that the volume of dollars included proceeds from illegal drug sales in the United States."

And it said HBUS "provided US dollars and banking services to some banks in Saudi Arabia and Bangladesh despite links to terrorist financing."

Dorner said HSBC has "learned some very hard lessons" in recent years and as a result of the Senate probe, and assured the panel that "fundamental changes" have been made to address the problems.

But Republican Senator Tom Coburn pressed her about them, saying "the real thing you have to change is the culture."

Levin said he hoped the year-long probe will lead to greater reform in the international banking sector, but suggested HSBC would face penalties for their behavior.

"There's that nagging question of accountability that others are going to have to judge," Levin said.

Several banks have been fined huge sums for transactions involving Cuba, Iran, Libya, Myanmar and Sudan.

Last month ING Bank was fined $619 million for its role in processing $1.6 billion through the US financial system for Cuban and Iranian entities.

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • Pacquiao pleads for Indonesia to spare death row Filipina
    Pacquiao pleads for Indonesia to spare death row Filipina

    World boxing superstar Manny Pacquiao took time out Monday from final preparations for his $400 million megafight with Floyd Mayweather to plead for the life of a Filipina on death row in Indonesia. Pacquiao, a national hero in the Philippines, added his voice to a chorus of global opposition led by United Nations Secretary General Ban Ki-moon to the executions of a group of eight foreign drug convicts, including compatriot Mary Jane Veloso. The eight-division world champion, who will face …

  • Halt Indonesia drug executions until graft claims probed: Australia
    Halt Indonesia drug executions until graft claims probed: Australia

    Australia urged Indonesia Monday to delay the execution of two men for drug offences until a corruption probe into their case is complete, after a report that judges sought tens of thousands of dollars in bribes. "Bali Nine" drug traffickers Myuran Sukumaran and Andrew Chan could face the firing squad within days, along with others from Brazil, Nigeria, the Philippines and an Indonesian prisoner. The Indonesian attorney-general's office said the executions would take place this week but did …

  • FordPH Launches the All-New Mustang
    FordPH Launches the All-New Mustang

    Ford Philippines launched the all-new Mustang in a rock concert held at Bonifacio Global City, Taguig, last week .  The All-New Mustang is the sixth generation since Ford  launched the first model in April 17, 1964. “The all-new Mustang represents the very best of Ford and its arrival marks the latest chapter of the iconic muscle car’s rich legacy, crafted with a more contemporary look and feel.  With a history spanning more than 50 years, this iconic car is at the heart and soul of Ford and …

  • China maritime tensions dominate Southeast Asia summit
    China maritime tensions dominate Southeast Asia summit

    By Manuel Mogato and Praveen Menon KUALA LUMPUR (Reuters) - Southeast Asian leaders edged closer to open criticism of China's land reclamation in the disputed South China Sea at a regional summit on Monday, as the Philippines drew the ire of Beijing which called its objections to the work "unreasonable". The Association of Southeast Asian Nations (ASEAN) Summit in Kuala Lumpur, which was supposed to showcase the 10-member bloc's progress towards economic integration, was overshadowed by the …

  • The ‘All You Need’ 2015 Isuzu D-MAX launched
    The ‘All You Need’ 2015 Isuzu D-MAX launched

    Isuzu Philippines Corporation (IPC) just recently introduced the 2015 Isuzu D-MAX pick-up truck at the Clark International Raceway to show that their pick-up model can conquer any kind of terrain.The high-end LS variant and standard LT 4x4 is now equipped with a more powerful engine, the 4JK1-TC (Hi) 2.5-liter engine which with Common Rail Direct Injection and an intercooled Variable Geometry System (VGS) turbocharger. IPC also introduced a new standard ride variant, the LT-X 4x2 manual …

  • Limited Edition Honda CR-V and Jazz now available
    Limited Edition Honda CR-V and Jazz now available

    If you’ve always wanted to be part of an exclusive group of car owners, now might be the time for you to consider getting a Honda CR-V or Jazz.  Honda Cars Philippines Inc. (HCPI) just came out with their limited edition All New Jazz and New CR-V. …

  • ToyotaPH hit its highest monthly sales last March
    ToyotaPH hit its highest monthly sales last March

    Toyota Motors Philippines hit its highest monthly sales to date last March, registering 10,237 units sold.  This recent CAMPI report puts Toyota’s market share at 43.5% last month. …

  • VolkswagenPH launches Child Safety Initiative
    VolkswagenPH launches Child Safety Initiative

    Volkswagen Philippines just  launched the VW Child Safety Initiative (CSI) campaign which aims to support child safety on Philippine roads at the just concluded Manila International Auto Show (MIAS). The World Health Organization’s road safety facts show about 1.24 million die each year globally as a result of vehicle related accidents. Child restraint systems like child seats and booster seats also reduce risk for children by about 70% for infants and upto 80% for small children. This …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options