In April 2003,the Federal Reserve Bank of New York and New York state bank regulators cracked the whip on HSBC USA,ordering it to do a better job of policing itself for suspicious money flows.
Staff in the banks anti-money laundering division,according to a person who worked there at the time,flew into a panic. The US unit of London-based HSBC Holdings Plc quickly rallied. It hired a tough federal prosecutor to oversee anti-money laundering efforts. It installed monitoring systems for operations that had grown unwieldy during the banks US expansion.
The aim,as HSBC said in an agreement with regulators at the time,was to ensure that the bank fully addresses all deficiencies in the banks anti-money laundering policies and procedures. Nearly a decade later,the effort has failed to satisfy law-enforcement officials.
The extent of that failure is laid out in confidential documents that originate from investigations of HSBCs US operations by two US Attorneys offices.
These documents allege that from 2005,the bank violated the Bank Secrecy Act and other anti-money laundering laws on a massive scale by not adequately reviewing hundreds of billions of dollars in transactions for any that might have links to drug trafficking,terrorist financing and other criminal activity.
The bank created an operation that was a systemically flawed sham paper-product designed solely to make it appear that the Bank has complied with the Bank Secrecy Act and is able to detect money laundering said prosecutors.