Op-ed views and opinions expressed are solely those of the author.
How can a bank with no staff and no offices manage billions of dollars yet avoid serious repercussions for financing global terrorism? This question lies at the heart of the scandal surrounding HSBC, as detailed in a damning 2012 report by the U.S. Senate Permanent Subcommittee on Investigations, then chaired by Carl Levin.
The report revealed that HSBC – Hong Kong and Shanghai Bank – was deeply involved in “a wide array of money laundering, drug trafficking, and terrorist financing.” Between 2007 and 2008 alone, HSBC’s Mexican affiliate funneled an astonishing $7 billion into the U.S., a sum suspected to include “proceeds from illegal drug sales in the United States.”
Perhaps most shocking was the discovery of HSBC-Mexico’s Cayman Islands branch. In 2008, this branch reportedly handled 50,000 accounts and $2 billion, despite having no staff and no office. The bank also financed and serviced institutions in Saudi Arabia and Bangladesh linked to terrorist organizations. Furthermore, it cleared $290 million in “obviously suspicious traveler’s checks” for Russians, who were likely money launderers posing as used car dealers.
Despite these egregious violations, the U.S. Office of the Comptroller of the Currency took no enforcement action against HSBC. The bank’s failings included a complete failure to monitor $60 trillion in wire transfers and account activity, a backlog of 17,000 un-reviewed alerts for potentially suspicious activity, and a severe lack of due diligence regarding money laundering before opening accounts for its own affiliates.
The Levin Report specifically highlighted HSBC’s long-standing provision of banking facilities and currency transfers for the Al Rajhi Bank, Saudi Arabia’s largest private bank, which has been implicated in terrorist financing.
HSBC took over Edmund Safra’s client relationship with Al Rajhi in 2000. In 2002, in the aftermath of the 9/11 terror attacks, federal agents uncovered a handwritten list of 20 individuals identified as key financial contributors to al Qaeda. Osama bin Laden reportedly referred to this group as the “Golden Chain.” These Saudi individuals and other financiers enabled bin Laden and al Qaeda to replenish lost financial assets and establish a base in Afghanistan after their abrupt departure from Sudan in 1996.
Significantly, one of the 20 names on this “Golden Chain” document, identifying al Qaeda’s early key financial benefactors, was Sulaiman bin Abdul Aziz Al Rajhi, a co-founder and senior official of Al Rajhi Bank.
Al Rajhi Bank itself gained notoriety for providing banking services to several of the 9/11 hijackers, including Abdulaziz al Omari, who was aboard American Airlines Flight 11. A civil lawsuit detailed the bank’s involvement:
“[M]oney was funneled to the Hamburg, Germany, al Qaeda cell through the Al Rajhi Bank to businessmen Mahmoud Darkazanli and Abdul Fattah Zammar, who in turn provided the al Qaeda cell of September 11th hijackers with financial and logistical support. Through Al Rajhi Bank, September 11th hijacker Abdulaziz al Omari received funds into his Al Rajhi Bank Account Number …. Al Omari frequently utilized a credit card drawn on Al Rajhi Bank in the planning of the attacks. On September 7, 2001, four days before the 9/11 attacks, Al Omari received a wire transfer from Al Rajhi Bank, Buraidah Branch, Jeddah, Saudi Arabia.”
The Levin Report further established that HSBC actively overcame internal staff objections to its Al Rajhi operations. Eventually, HSBC’s Group Compliance department internally announced that all HSBC affiliates could conduct business with Al Rajhi Bank.
Senate investigators obtained internal HSBC documents explaining that Al Rajhi Bank “had a long-standing relationship (25+ years) with [HSBC’s] Banknotes-London until we closed the account in Feb-05 due to TF [Terrorist Financing] & reputational risk. With approval from AML [HSBC’s Anti-Money Laundering personnel] (A. Ketley), London re-opened the BN [Banknotes] account in Dec-06 . . . This client still has relationships with HSBC in the UK, UAE, France, Hong Kong, and Italy. …”
On July 17, 2012, the Senate subcommittee released its 340-page report on HSBC. Senator Levin commented, “If an international bank won’t police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the U.S. bank being used to aid and abet that illicit money.”
However, on December 11, 2012, U.S. authorities fined HSBC a mere $1.9 billion for its crimes. This sum represented less than 1/10th of the bank’s annual profit, less than 1/100th of its assets, and less than 1/50,000th of its annual cash flow.
The New York Times outlined the Obama administration’s rationale for not criminally indicting HSBC, despite the clear presentation of its blatant crimes by the Levin Senate investigative subcommittee. The concern was that “criminal charges could jeopardize one of the world’s largest banks and ultimately destabilize the global financial system.”
Just three days later, on December 14, 2012, President Barack Obama signed the Magnitsky Act into law. This law, named for Sergei Magnitsky, an auditor representing HSBC and Hermitage Capital Management, who died in Russian custody after being jailed on fraud and tax evasion charges, curiously portrayed HSBC and its Moscow unit as victims of Russian human rights violations.
During the debate within the Obama administration regarding HSBC’s penalty, Senator Levin criticized the Magnitsky Act legislation being pushed through Congress. Levin warned against the House-passed Magnitsky text, which, unlike a draft Senate version, specifically singled out Russia. He argued that if alleged human rights violators were to be denied U.S. visas, this policy should apply universally, regardless of their country of origin.
“Applying the sanctions contained in this bill solely to Russians, as the House version does, not only diminishes a universal value. Because it adds a political twist, it will stoke a nationalistic response in Russia.”
Despite Levin’s concerns, the Senate passed the House version on December 6, 2012. Obama signed it into law just three days after HSBC received a lenient fine for enabling international criminals and terrorists.
Despite all of this, HSBC remained conspicuously absent from the “Magnitsky” news cycle. The new Cold Warriors had successfully changed the subject.
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