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Actually, HSBC has openly admitted to knowingly and willfully taking active steps[#] to disable specific automated countermeasures put in place to prevent money

Actually, HSBC has openly admitted to knowingly and willfully taking active steps[#] to disable specific automated countermeasures put in place to prevent money laundering, as well as deliberately under-staffing departments responsible for AML compliance. There is little question as to their guilt or complicity. [#]: http://www.justice.gov/opa/documents/hsbc/dpa-attachment-a.pdf http://www.justice.gov/opa/documents/hsbc/dpa-attachment-a.p...

retube 13y ago
> to knowingly and willfully taking active steps[#] to disable specific automated countermeasures I can't see that anywhere in the link.
- xuhu 13y ago
  Here you go: "HSBC Bank USA knowingly set the thresholds in CAMP so that wire transfers by customers located in countries categorized as standard or medium risk, including foreign financial institutions with correspondent accounts, would not be subject to automated monitoring unless the customers were otherwise classified as high risk."
  - retube 13y ago
    Yes, so what? There is nothing in this wording that suggests that thresholds were set deliberately to facilitate money laundering. It's just a statement of where the threshold was set. Perhaps in retrospect it was too weak, but given the volumes of cash a bank like HSBC processes I'm sure they were trying to strike a balance between appropriate oversight and what's operationally feasible.
    - milkshakes 13y ago
      your argument might carry more credibility if the rest of the document did not go on to extensively document the backdrop against which this and similar decisions were made. in fact, that's the entire point of this document.
      - rayiner 13y ago
        There's nothing in the "backdrop" of the document that refutes retube's argument. All it does is suggest that HSBC wanted to avoid the cost and hassle of subjecting transactions in Mexico to a higher level of scrutiny than transactions in other countries. That's a weakness in a regulatory control, not a crime.
        justincormack 13y ago
        not dealing with the cost and hassle is a crime.
        milkshakes 13y ago
        I don't understand the point you are trying to make. The document outlines a pattern of decisions by high level HSBC executives -- ranging from individual transgressions such as simply falsifying or sanitizing otherwise illegal transactions, to more long-term choices, such as ignoring basically everyone else in the industry as you mentioned earlier, and systematically under-resourcing compliance departments -- that led the bank to appear to comply with AML laws and regulations when in reality it was flagrantly violating them. In fact, it is a crime to fail maintain an effective AML program if you are a bank, and HSBC does not dispute that they committed this crime. From the document, page 3: 7. The Department alleges, and HSBC Bank USA admits, that HSBC Bank USA’s conduct, as described herein, violated the BSA. Specifically, HSBC Bank USA violated Title 31, United States Code, Section 5318(h)(1), which makes it a crime to willfully fail to establish and maintain an effective AML program, and Title 31, United States Code, Section 5318(i)(1), which makes it a crime to willfully fail to establish due diligence for foreign correspondent accounts.
        csallen 13y ago
        Translated: "HSBC wanted to avoid the cost and hassle of complying with the law."
        mike_hearn 13y ago
        Which is correct behaviour and what governments all ask banks to do, believe it or not. It's called the "risk based approach" in the AML jargon. The problem with AML laws is that they are so vague, it's impossible to ever really be sure you're in compliance. They turn banks into a privatised police force. How much effort should they make? Governments won't tell. They just say "be sensible about it". Banks hate this, as would you in their position, they want clarity about what to do, but governments don't want to give them a list of boxes to tick because they feel it'd be too slow and inflexible to keep up with criminals. See the problem? Banks invest VAST sums in AML compliance. They develop automated software to spot suspicious transactions, they have massive internal compliance departments, they ID verify all their customers. It's a huge, huge drain (which is passed on to all of us, of course). But how much is enough? As far as the Justice Department is concerned, there can never be enough. Whilst criminals exist, it must mean failures of compliance by banks.
    - tbastos 13y ago
      You sure are very naïve. Just Google for: HSBC crime history
- milkshakes 13y ago
  then you're not looking hard enough... 14. HSBC Bank USA maintained correspondent accounts for a number of foreign financial institutions, including HSBC Group Affiliates, within its Payments and Cash Management (“PCM”) business. HSBC Bank USA was required under the BSA to conduct due diligence on all foreign financial institutions with correspondent accounts, including HSBC Group Affiliates. 15. Despite this requirement, from at least 2006 to 2010, HSBC Bank USA did not conduct due diligence on HSBC Group Affiliates for which it maintained correspondent accounts, including HSBC Mexico. The decision not to conduct due diligence was guided by a formal policy memorialized in HSBC Bank USA’s AML Procedures Manuals. ... 17. From 2006 to 2009, HSBC Bank USA knowingly set the thresholds in CAMP so that wire transfers by customers located in countries categorized as standard or medium risk, including foreign financial institutions with correspondent accounts, would not be subject to automated monitoring unless the customers were otherwise classified as high risk. During this period, HSBC Bank USA processed over 100 million wire transfers totaling over $300 trillion. Over two-thirds of these transactions involved customers in standard or medium risk countries. Therefore, in this four-year period alone, over $200 trillion in wire transfers were not reviewed in CAMP. 18. Between 2000 and 2009, HSBC Bank USA, and its executives and officers, were aware of numerous publicly available and industry-wide advisories about the money laundering risks inherent to Mexican financial institutions. These included: a. The U.S. State Department’s designation of Mexico as a “jurisdiction of primary concern” for money laundering as early as March 2000; b. The U.S. State Department’s International Narcotics Control Strategy Reports from as early as 2002 stating with regard to Mexico that “the illicit drug trade continues to be the principal source of funds laundered through the Mexican financial system. . . . The smuggling of bulk shipments of U.S. currency into Mexico and the movement of the cash back into the United States via couriers, armored vehicles, and wire transfers, remain favored methods for laundering drug proceeds. Mexico’s financial institutions are vulnerable to currency transactions involving international narcotics- trafficking proceeds that include significant amounts of U.S. currency or currency derived from illegal drug sales in the United States. . . . According to U.S. law enforcement officials, Mexico remains one of the most challenging money laundering jurisdictions for the United States.”; c. The April 2006 Financial Crimes Enforcement Network Advisory concerning bulk cash being smuggled into Mexico and deposited with Mexican financial institutions (discussed in paragraph 22 below); d. The federal money laundering investigations that became public in 2007-08, involving Casa de Cambio Puebla, a Mexican-based money services business that had accounts at HSBC Mexico, and Sigue, a U.S.-based money services business, that had accounts at HSBC Mexico; and e. The federal money laundering investigation into Wachovia for its failure to monitor wire transactions originating from the correspondent accounts of certain Mexican money services businesses, known as casas de cambio (“CDCs”), which became public in April 2008. All of these advisories or events were known to numerous HSBC Bank USA AML officers and business executives at or near the time they occurred. 19. Despite this evidence of the serious money laundering risks associated with doing business in Mexico, from at least 2006 to 2009, HSBC Bank USA rated Mexico as standard risk, its lowest AML risk category. As a result, wire transfers originating from Mexico, including transactions from HSBC Mexico, were generally not reviewed in the CAMP system. From 2006 until May 2009, when HSBC Bank USA raised Mexico’s risk rating to high, over 316,000 transactions worth over $670 billion from HSBC Mexico alone were excluded from monitoring in the CAMP system.
- dalke 13y ago
  Point 17: "From 2006 to 2009, HSBC Bank USA knowingly set the thresholds in CAMP so that wire transfers by customers located in countries categorized as standard or medium risk, including foreign financial institutions with correspondent accounts, would not be subject to automated monitoring unless the customers were otherwise classified as high risk." From point 16, CAMP is the "Customer Account Monitoring Program" automated system which monitors wire transfers. -> Therefore, HSBC Bank USA knowingly took "active steps to disable specific automated countermeasure." Point 19 "Despite this evidence of the serious money laundering risks associated with doing business in Mexico, from at least 2006 to 2009, HSBC Bank USA rated Mexico as standard risk, its lowest AML risk category. As a result, wire transfers originating from Mexico, including transactions from HSBC Mexico, were generally not reviewed in the CAMP system." (Point 18 establishes that "Between 2000 and 2009, HSBC Bank USA, and its executives and officers, were aware of numerous publicly available and industry-wide advisories about the money laundering risks inherent to Mexican financial institutions") -> Therefore, HSBC willfully disabled specific automated countermeasures. => Combine these two "therefore"s, and you'll see that milkshakes's statement is confirmed. Or look at points 64-66, which establishes that HSBC Bank plc bypassed the automated system which detects funds transfers involving a Sanctioned Entity. They would put a "cautionary note in their SWIFT payment messages" the the messages would "[fall] into what HSBC Europe termed a “repair queue” where HSBC Europe employees manually removed all references to the Sanctioned Entities." HSB know about this since 2000, and their compliance group spoke up about it in 2003. => So there were at least two automated systems where "specific automated countermeasures" were "knowingly and willfully" bypassed. These weren't all that hard to find - I looked for the word "automated".
  - factorizer 13y ago
    Yeah, @retube has a political agenda. Why even bother with those shills?
  - mike_hearn 13y ago
    Whether a country is "high risk" or not is not some well defined standard, it's an entirely subjective opinion. The US Government might have liked to consider Mexico high risk, but they aren't the ones who have to do all the investigative work on every transaction. If you look at the FATF-GATI (international AML org) recommendations, they have their own list of which countries are "high risk" (and Mexico has not been on it lately, as far as I recall). What the USG is saying here is they think HSBC should have been treating internal HSBC-to-HSBC transfers as high risk and reviewing them all. But this doesn't make much sense for a single company. The lack of it certainly cannot be equated to a deliberate "disabling" of controls. With respect to the repair queue, this is due to America's insane approach to sanctions - a transfer from country A to country B where there are no sanctions on B in A, that happens to get routed via a US bank, would have sanctions applied, despite that no laws were being violated by either party to the transaction. In order to work around this brain damage EU banks routinely edited ("repaired") wire transfers to avoid hitting the Great Firewall of America, safe in the knowledge that they were not violating any sanctions laws where they lived. Later, the US decided that jurisdiction was such a bothersome concept they decided that anyone who made a transfer to Iran, anywhere, regardless of local laws at the time, was guilty of money laundering. See also: Standard Charter. I don't think people here seem to realise the general backstory here. The US Government lies all the time. They routinely get innocent people to plead guilty without any kind of trial by threatening them with absurdly over-harsh penalties. The HSBC case is a classic example of this dynamic in action.

retube 13y ago

> to knowingly and willfully taking active steps[#] to disable specific automated countermeasures I can't see that anywhere in the link.

xuhu 13y ago
Here you go: "HSBC Bank USA knowingly set the thresholds in CAMP so that wire transfers by customers located in countries categorized as standard or medium risk, including foreign financial institutions with correspondent accounts, would not be subject to automated monitoring unless the customers were otherwise classified as high risk."
- retube 13y ago
  Yes, so what? There is nothing in this wording that suggests that thresholds were set deliberately to facilitate money laundering. It's just a statement of where the threshold was set. Perhaps in retrospect it was too weak, but given the volumes of cash a bank like HSBC processes I'm sure they were trying to strike a balance between appropriate oversight and what's operationally feasible.
  - milkshakes 13y ago
    your argument might carry more credibility if the rest of the document did not go on to extensively document the backdrop against which this and similar decisions were made. in fact, that's the entire point of this document.
    - rayiner 13y ago
      There's nothing in the "backdrop" of the document that refutes retube's argument. All it does is suggest that HSBC wanted to avoid the cost and hassle of subjecting transactions in Mexico to a higher level of scrutiny than transactions in other countries. That's a weakness in a regulatory control, not a crime.
      - justincormack 13y ago
        not dealing with the cost and hassle is a crime.
      - milkshakes 13y ago
        I don't understand the point you are trying to make. The document outlines a pattern of decisions by high level HSBC executives -- ranging from individual transgressions such as simply falsifying or sanitizing otherwise illegal transactions, to more long-term choices, such as ignoring basically everyone else in the industry as you mentioned earlier, and systematically under-resourcing compliance departments -- that led the bank to appear to comply with AML laws and regulations when in reality it was flagrantly violating them. In fact, it is a crime to fail maintain an effective AML program if you are a bank, and HSBC does not dispute that they committed this crime. From the document, page 3: 7. The Department alleges, and HSBC Bank USA admits, that HSBC Bank USA’s conduct, as described herein, violated the BSA. Specifically, HSBC Bank USA violated Title 31, United States Code, Section 5318(h)(1), which makes it a crime to willfully fail to establish and maintain an effective AML program, and Title 31, United States Code, Section 5318(i)(1), which makes it a crime to willfully fail to establish due diligence for foreign correspondent accounts.
      - csallen 13y ago
        Translated: "HSBC wanted to avoid the cost and hassle of complying with the law."
        mike_hearn 13y ago
        Which is correct behaviour and what governments all ask banks to do, believe it or not. It's called the "risk based approach" in the AML jargon. The problem with AML laws is that they are so vague, it's impossible to ever really be sure you're in compliance. They turn banks into a privatised police force. How much effort should they make? Governments won't tell. They just say "be sensible about it". Banks hate this, as would you in their position, they want clarity about what to do, but governments don't want to give them a list of boxes to tick because they feel it'd be too slow and inflexible to keep up with criminals. See the problem? Banks invest VAST sums in AML compliance. They develop automated software to spot suspicious transactions, they have massive internal compliance departments, they ID verify all their customers. It's a huge, huge drain (which is passed on to all of us, of course). But how much is enough? As far as the Justice Department is concerned, there can never be enough. Whilst criminals exist, it must mean failures of compliance by banks.
  - tbastos 13y ago
    You sure are very naïve. Just Google for: HSBC crime history
milkshakes 13y ago
then you're not looking hard enough... 14. HSBC Bank USA maintained correspondent accounts for a number of foreign financial institutions, including HSBC Group Affiliates, within its Payments and Cash Management (“PCM”) business. HSBC Bank USA was required under the BSA to conduct due diligence on all foreign financial institutions with correspondent accounts, including HSBC Group Affiliates. 15. Despite this requirement, from at least 2006 to 2010, HSBC Bank USA did not conduct due diligence on HSBC Group Affiliates for which it maintained correspondent accounts, including HSBC Mexico. The decision not to conduct due diligence was guided by a formal policy memorialized in HSBC Bank USA’s AML Procedures Manuals. ... 17. From 2006 to 2009, HSBC Bank USA knowingly set the thresholds in CAMP so that wire transfers by customers located in countries categorized as standard or medium risk, including foreign financial institutions with correspondent accounts, would not be subject to automated monitoring unless the customers were otherwise classified as high risk. During this period, HSBC Bank USA processed over 100 million wire transfers totaling over $300 trillion. Over two-thirds of these transactions involved customers in standard or medium risk countries. Therefore, in this four-year period alone, over $200 trillion in wire transfers were not reviewed in CAMP. 18. Between 2000 and 2009, HSBC Bank USA, and its executives and officers, were aware of numerous publicly available and industry-wide advisories about the money laundering risks inherent to Mexican financial institutions. These included: a. The U.S. State Department’s designation of Mexico as a “jurisdiction of primary concern” for money laundering as early as March 2000; b. The U.S. State Department’s International Narcotics Control Strategy Reports from as early as 2002 stating with regard to Mexico that “the illicit drug trade continues to be the principal source of funds laundered through the Mexican financial system. . . . The smuggling of bulk shipments of U.S. currency into Mexico and the movement of the cash back into the United States via couriers, armored vehicles, and wire transfers, remain favored methods for laundering drug proceeds. Mexico’s financial institutions are vulnerable to currency transactions involving international narcotics- trafficking proceeds that include significant amounts of U.S. currency or currency derived from illegal drug sales in the United States. . . . According to U.S. law enforcement officials, Mexico remains one of the most challenging money laundering jurisdictions for the United States.”; c. The April 2006 Financial Crimes Enforcement Network Advisory concerning bulk cash being smuggled into Mexico and deposited with Mexican financial institutions (discussed in paragraph 22 below); d. The federal money laundering investigations that became public in 2007-08, involving Casa de Cambio Puebla, a Mexican-based money services business that had accounts at HSBC Mexico, and Sigue, a U.S.-based money services business, that had accounts at HSBC Mexico; and e. The federal money laundering investigation into Wachovia for its failure to monitor wire transactions originating from the correspondent accounts of certain Mexican money services businesses, known as casas de cambio (“CDCs”), which became public in April 2008. All of these advisories or events were known to numerous HSBC Bank USA AML officers and business executives at or near the time they occurred. 19. Despite this evidence of the serious money laundering risks associated with doing business in Mexico, from at least 2006 to 2009, HSBC Bank USA rated Mexico as standard risk, its lowest AML risk category. As a result, wire transfers originating from Mexico, including transactions from HSBC Mexico, were generally not reviewed in the CAMP system. From 2006 until May 2009, when HSBC Bank USA raised Mexico’s risk rating to high, over 316,000 transactions worth over $670 billion from HSBC Mexico alone were excluded from monitoring in the CAMP system.
dalke 13y ago
Point 17: "From 2006 to 2009, HSBC Bank USA knowingly set the thresholds in CAMP so that wire transfers by customers located in countries categorized as standard or medium risk, including foreign financial institutions with correspondent accounts, would not be subject to automated monitoring unless the customers were otherwise classified as high risk." From point 16, CAMP is the "Customer Account Monitoring Program" automated system which monitors wire transfers. -> Therefore, HSBC Bank USA knowingly took "active steps to disable specific automated countermeasure." Point 19 "Despite this evidence of the serious money laundering risks associated with doing business in Mexico, from at least 2006 to 2009, HSBC Bank USA rated Mexico as standard risk, its lowest AML risk category. As a result, wire transfers originating from Mexico, including transactions from HSBC Mexico, were generally not reviewed in the CAMP system." (Point 18 establishes that "Between 2000 and 2009, HSBC Bank USA, and its executives and officers, were aware of numerous publicly available and industry-wide advisories about the money laundering risks inherent to Mexican financial institutions") -> Therefore, HSBC willfully disabled specific automated countermeasures. => Combine these two "therefore"s, and you'll see that milkshakes's statement is confirmed. Or look at points 64-66, which establishes that HSBC Bank plc bypassed the automated system which detects funds transfers involving a Sanctioned Entity. They would put a "cautionary note in their SWIFT payment messages" the the messages would "[fall] into what HSBC Europe termed a “repair queue” where HSBC Europe employees manually removed all references to the Sanctioned Entities." HSB know about this since 2000, and their compliance group spoke up about it in 2003. => So there were at least two automated systems where "specific automated countermeasures" were "knowingly and willfully" bypassed. These weren't all that hard to find - I looked for the word "automated".
- factorizer 13y ago
  Yeah, @retube has a political agenda. Why even bother with those shills?
- mike_hearn 13y ago
  Whether a country is "high risk" or not is not some well defined standard, it's an entirely subjective opinion. The US Government might have liked to consider Mexico high risk, but they aren't the ones who have to do all the investigative work on every transaction. If you look at the FATF-GATI (international AML org) recommendations, they have their own list of which countries are "high risk" (and Mexico has not been on it lately, as far as I recall). What the USG is saying here is they think HSBC should have been treating internal HSBC-to-HSBC transfers as high risk and reviewing them all. But this doesn't make much sense for a single company. The lack of it certainly cannot be equated to a deliberate "disabling" of controls. With respect to the repair queue, this is due to America's insane approach to sanctions - a transfer from country A to country B where there are no sanctions on B in A, that happens to get routed via a US bank, would have sanctions applied, despite that no laws were being violated by either party to the transaction. In order to work around this brain damage EU banks routinely edited ("repaired") wire transfers to avoid hitting the Great Firewall of America, safe in the knowledge that they were not violating any sanctions laws where they lived. Later, the US decided that jurisdiction was such a bothersome concept they decided that anyone who made a transfer to Iran, anywhere, regardless of local laws at the time, was guilty of money laundering. See also: Standard Charter. I don't think people here seem to realise the general backstory here. The US Government lies all the time. They routinely get innocent people to plead guilty without any kind of trial by threatening them with absurdly over-harsh penalties. The HSBC case is a classic example of this dynamic in action.