The chief compliance officer of Britain’s HSBC says he is stepping down from that position after an investigation found that lax controls at the international bank allowed Mexican drug cartels to launder billions of dollars through its U.S. operation and other illicit transactions.
Mr. Bagley and other current and former executives of the bank apologized for lapses but said they weren’t fully aware of illicit transactions flowing through the bank.
Senators expressed skepticism that they didn’t know about problems that persisted for seven years.
A report by the panel, the Senate permanent subcommittee on investigations, also found that U.S. regulators knew the bank had a poor system to detect problems but failed to take action.
Mr. Bagley has been the head of compliance since 2002, during the period in which the Senate investigation found that HSBC’s lack of oversight allowed the bank to be used by drug traffickers and possible financiers of terrorist groups, and for other illicit purposes around the globe.
Mr. Bagley said he lacked full authority over the bank’s far-flung affiliates, which each had its own compliance officer. HSBC, with net income last year of $16.8 billion, operates in about 80 countries around the world.
He said he had told HSBC senior management “that now is the appropriate time — for me and for the bank — for someone new to serve as the head of group compliance.”
The executive who headed HSBC’s Mexican affiliate in 2007 and 2008 said he tried to clean up deficiencies he found in the operation.
The executives said the bank has made deep changes to its policies and corporate culture to prevent illicit use of the bank. London-based HSBC, which is Europe’s largest bank, changed its senior management last year.
Sen. Carl Levin, Michigan Democrat, the subcommittee’s chairman, challenged Mr. Thurston. “This is something that people knew was going on at that bank,” Mr. Levin said. “Why did people allow it to continue?”
Sen. Tom Coburn of Oklahoma, the panel’s senior Republican, said he found it hard to believe that HSBC executives didn’t know what was going on.View Entire Story
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