These are two of the findings in a 340-page study from the US Senate that accuses Britain’s biggest bank of a series of compliance lapses between 2004 and 2010.
HSBC, the only British bank with a branch network in America, failed to properly staff its compliance department and wrongly designated Mexico as a “low-risk” country.
The findings are a major embarrassment for HSBC, some of whose senior executives will appear before the Senate committee tomorrow to explain the failings.
In one of the more damaging accusations, the report says HSBC resumed providing banking services to a Saudi Arabian bank despite speculation it had links to financing terrorism.
In an emailed statement, HSBC said the Senate report had provided “important lessons for the whole industry in seeking to prevent illicit actors entering the global financial system”.
The bank said it is spending more money on compliance and has become more coordinated in policing high-risk transactions.
HSBC is also criticised by the committee for designating Mexico as “low-risk” despite the widespread use of the country’s banking system by drug cartels. The decision made it easier for money to be moved between HSBC’s affiliate bank in Mexico and its network in the US. Its Mexican bank should have been treated as a “high-risk correspondent client subject to enhanced due diligence and monitoring,” the report said.
The report also contained strong criticism of the Office of the Comptroller of the Currency, a top US bank regulator, saying the regulator failed to crack down on the bank despite multiple red flags, allowing money laundering issues “to accumulate into a massive problem”.
HSBC has warned investors that it could face a significant fine in the US, with some analysts speculating the penalty could reach $1bn.
“Accountability is essential and that is what has been missing here,” said Carl Levin, the chairman of the committee on permanent investigations. HSBC said last night that it had taken several steps to improve its compliance, including doubling its spend on compliance and enforcing standards globally.