Uploaded by allmoderncons on 17 Feb 2012
Lord James of Blackheath, House of Lords February 16 2012
Breaking news Lord James of Blackheath has spoken in the House of Lords holding evidence of three transactions of 5 Trillion each and a transaction of 750,000 metric tonnes of gold and has called for an investigation.
I think there are three possible conclusions that may come from it. I think there may have been a massive piece of money laundering committed by a major government which ought to know better and that it has effectively undermined the integrity of the British bank the Royal Bank of Scotland, in doing so. The second alternative is that a major American department has an agency that has gone rogue on it because it has been wound up and has created a structure out of which they are seeking to get at least 50 billion Euros as a payoff. And the third possibility is that this is an extraordinarily elaborate fraud which has not been carried out but which has been prepared in order to provide a threat to one government or more if they don't pay them off. So there are three possibilities and this all needs a very urgent review.
My Lords, it starts in April and May of 2009, with the alleged transfer to the United Kingdom, to HSBC of a sum of 5 trillion dollars and seven days later, in comes another 5 trillion dollars to HSBC, and then 3 weeks later another 5 trillion. 5 trillion in each case. Sorry. A total of 15 trillion dollars is alleged to have been passed into the hands of HSBC for onward transit to the Royal Bank of Scotland and we need to look at where this came from and what the history of this money is. And I have been trying to sort out the sequence by which this money has been created and from where it has come from for a long time.
HSBC provided a conduit for "drug kingpins and rogue nations", according to a US Senate committee investigating money laundering claims at the bank.
Its report said suspicious funds from countries including Mexico, Iran and Syria had passed through the bank.
The president and chief executive of HSBC Bank USA, Irene Dorner, apologised to the committee for the behaviour which she said deeply regretted.
Earlier, HSBC's head of compliance, David Bagley, resigned at the hearing.
Ms Dorner apologised "for the fact that HSBC did not live up to the expectations of our regulators, our customers, our employees, and the general public".
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“Start Quote
Some of the things I found frankly took my breath away”
Paul Thurston HSBC executive
King criticises Barclays' board
Bernanke says Libor system flawed
She said she had worked hard to change the culture at the bank.
The bank also said it was in the process of closing 20,000 accounts in the Cayman Islands as a result of the investigation.
Dangerous environment
Senator Carl Levin said HSBC's lack of controls at its US and overseas units had been "a recipe for trouble".
Mr Levin is chairman of the Senate Permanent Subcommittee on Investigations, which looked into HSBC's activities.
Mr Levin said an audit had found that: "From 2001 to 2007, HSBC affiliates sent almost 25,000 transactions involving Iran worth over $19bn dollars through HBUS and other US accounts, while concealing any link with Iran in 85% of the transactions."
HSBC senior executives in London knew what was going on, he said, but allowed the "deceptive conduct" to continue. Key HBUS officials were also informed early on, he said.
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Analysis
image of Paul Adams Paul Adams BBC News, Washington
When it comes to HSBC's flawed operation in Mexico, where it bought a bank in 2002, the company's defence seems to be that it didn't know what it was getting into. Paul Thurston, who arrived there in 2007, said some of the things he discovered "took my breath away".
Sounding naive may work at a human level, but for an organisation that markets itself as "the world's local bank", it's fairly, well, breathtaking.
Faced with the report's catalogue of errors - failure to heed warnings that vast dollar transfers from Mexico to the US almost certainly involved drug money, or the fact that 41% of the bank's accounts in the Cayman Islands had no customer information attached - it was hardly surprising that HSBC's head of compliance, David Bagley, announced meekly that he was moving on.
The spotlight here was on HSBC, but this is a test case. The two Senators make it clear that other big banks need to take note.
US government rules prohibit financial transactions with Iran and certain other countries, the committee said the bank's actions in getting round these had in some cases assisted terrorism.
According to the Senate committee, HSBC accepted more than $15bn in cash from subsidiaries in Mexico, Russia and other countries at high risk of money laundering but failed to conduct any monitoring of these bulk cash transactions between mid-2006 and mid-2009.
The also report found that HSBC knew of lax anti-money laundering practices at its Mexican subsidiary HBMX, which had dated back to its purchase in 2002.
HBMX was warned, on at least two occasions, by Mexican authorities that drug money was probably being laundered through HBMX accounts.
The hearing comes at a time when the standing of banks is already at rock bottom, says BBC New York business correspondent, Michelle Fleury.
She says: "The scandal over the manipulation of the Libor inter-bank lending rate hasn't exactly inspired confidence and has also been under scrutiny in Congress on the same day. The idea though that one of the world's biggest banks would be facilitating violent crime threatens to cast an even darker shadow over banks and bankers."
'Painful and embarrassing'
One HSBC executive, Paul Thurston, who was head of retail banking and wealth management, said the bank had taken wrongdoing seriously, and had taken action on many occasions, including dismissing staff.
"Now is the appropriate time for someone new to head group compliance"
He told the hearing of the difficulties of working in Mexico, which, he said, was a dangerous environment where kidnapping of bank staff was widespread and employees came under pressure from criminals who would attempt to corrupt them.
Mr Thurston referred to substandard record-keeping and the difficulty of knowing who the bank's clients were. He said: "Some of the things I found frankly took my breath away."
Before the hearing began, HSBC said in a statement, that it expected to be held accountable for what went wrong.
"We will apologise, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong," HSBC said.
Senator Levin spoke of a "polluted" system that allowed black-market funds to move through the US banking system.
"In an age of international terrorism, drug violence in our streets and on our borders, and organised crime, stopping illicit money flows that support those atrocities is a national security imperative," said Mr Levin.
The report also concludes that the US bank regulator, the Office of the Comptroller of the Currency, failed to properly monitor HSBC.
Many of HSBC's breaches of US anti-money laundering relate to its use of bearer share accounts. Under the rules for these accounts, ownership of shares and the income they incur can be passed from person to person in secrecy.
HSBC's US subsidiary HBUS had opened more than 2,550 accounts for bearer share corporations.
These businesses are commonly set up in tax havens such as the British Virgin Islands.
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