Money laundering probe: HSBC India staff under scanner too

Washington: HSBC's staff in India have come under the scanner for deficiencies in their role as "offshore reviewers" of the global banking giant's compliance to safety mechanism against money laundering and terrorist financing.

A probe by the US Senate's Permanent Subcommittee on Investigations found that HSBC's Anti-Money Laundering (AML) Compliance Department, which included employees in India, was highly inadequately staffed.

The investigations found that HSBC, with its headquarters in London, allowed affiliates in countries such as Mexico, Saudi Arabia and Bangladesh to move billions of dollars in suspect funds into the US without adequate controls.

[caption id="attachment_381775" align="alignleft" width="380"] More than one-third of the alerts already resolved by the Indian reviewers and others "had to be re-done" after an independent assessment by the OCC. Reuters[/caption]

Besides, HSBC in 2009 authorised its affiliate to supply Indian rupees to Saudi Arabia's Al Rajhi Bank, which, the report said, has links to financing terrorism.

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The report also said that Al Rajhi Bank handled IIRO's (International Islamic Relief Organisation) "charitable contributions intended to benefit suicide bombers by directing Al Igatha Journal advertisements ... in Somalia, Sri Lanka, India, and the Philippines."

It cited a lawsuit to say that charitable organisations such as the IIRO use banks like Al Rajhi Bank to "gather donations that fund terrorism and terrorist activities" under the guise of IIRO funds labeled and designated for purposes such as 'war and disaster' or 'sponsor a child'.

Besides, deficiencies were found in the quality of the work done by HSBC's "offshore reviewers in India", who were used for clearing a major backlog of suspected transaction alerts at the bank.

More than one-third of the alerts already resolved by the Indian reviewers and others "had to be re-done" after an independent assessment by the OCC (the US Office of the Comptroller of the Currency, which is the bank's primary federal regulator in the country).

The probe further found that an OCC visit to India in 2007 had revealed "Weak Monitoring Procedures" in the bank's internal control systems.

At a hearing before the Senate Subcommittee on the matter here yesterday, HSBC apologised for its mistakes and gave its "absolute commitment" to fix the problems.

The 340-page investigation report, which was released yesterday, found HSBC to have used its US bank (HSBC US Bank or HBUS) as a gateway into the US financial system to provide

US dollar services to clients while "playing fast and loose with US banking rules," said Senator Carl Levin, the Chairman of the subcommittee.

PTI