HSBC Fined $27.5m in Money Laundering Probe

July 26, 2012Bankingby EW News Desk Team

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Mexican regulators have slapped a $27.5 million fine on the local unit of HSBC for its lax controls that allowed Mexican drug money to pass through the bank. HSBC Mexico has acknowledged its failures in money-laundering regulation.

Mexico’s National Banking and Securities Commission (CNBV) levied the fine against HSBC Mexico for its “non-compliance with anti-money laundering systems and controls” as well as its late reporting of 1,729 unusual transactions, failing to report 39 unusual transactions, and 21 administrative failures.  

The CNBV said that it is the biggest fine ever imposed on a bank and constitutes over 50 percent of the 2011 annual profit of HSBC’s Mexican subsidiary.

The fine comes a week after the US Senate slammed what it calls a "pervasively polluted" bank culture that provided a conduit for “drug kingpins and rogue nations."

It is alleged that between 2007 and 2008, HSBC’s Mexican operations moved $7 billion into the bank’s US operations.

Related News: HSBC Accused of Money Laundering for Drug Cartels and Terrorist Groups

However, the Mexican fine is separate from any settlement that the bank might reach with the US authorities.

The Financial Times reports that “HSBC now faces the possibility of fines approaching $1 billion following separate probes by the US justice department, Treasury department and the Manhattan district attorney that are said to have found similar lapses as those detailed by the Senate permanent subcommittee on investigations.”

ING had agreed in June to pay a record $619 million in fines to settle similar claims.

According to Reuters, “problems at Europe’s biggest bank have been known for nearly a decade, but the Senate probe detailed just how sweeping the problems have been."

In a statement, the bank said:

HSBC Mexico apologises for its failure strictly to comply with banking regulations, and acknowledges that in the past, it has sometimes failed to meet the standards that regulators and customers expect.

HSBC is one of Mexico's top five banks, with more than 1,400 branches and 6 million customers. It has operated there since the 1970s. In 2000, HSBC bulked up after buying Republic National Bank and did so again in 2002 with a controlling stake in Grupo Financiero Bital.