(Reuters) - Executives of HSBC Holdings Plc and its U.S. subsidiary are scheduled to testify Tuesday before a Senate panel about how the London-based banking behemoth, after years of run-ins with U.S. authorities over alleged anti-money laundering lapses, has cleaned up its act.
In anticipation of the hearing, HSBC Chief Executive Stuart Gulliver sent a message to employees earlier this week: "Between 2004 and 2010, our anti-money laundering controls should have been stronger and more effective, and we failed to spot and deal with unacceptable behavior," Gulliver wrote. "It is right that we are held accountable and that we take responsibility for fixing what went wrong."
Gulliver's memo implies that the bank's problems ended in 2010. But a Reuters investigation has found persistent and troubling lapses in the bank's anti-money laundering compliance since then.
Moreover, the problems arose in the very operation meant to show regulators that the bank could effectively monitor the trillions of dollars flowing annually through its offices in 80 countries and territories.
In a sprawling, low-rise building abutting pasture land in New Castle, Delaware, HSBC's anti-money laundering staff review customer transactions and so-called alerts generated when the bank's monitoring systems spot a suspicious transaction. It also housed the "look-back" at thousands of old transactions that the U.S. Comptroller of the Currency ordered in 2010, after citing the bank for multiple anti-money laundering failures.
Former employees in the New Castle office describe a febrile boiler-room environment overseen by managers uninterested in investigating transactions with possible links to drug trafficking, terrorist financing, Iran and other countries under U.S. sanctions, and other illegal activities. Instead, they say, the single-minded focus was on clearing out the paperwork as fast as possible.