HSBC - The Banking Choice for Cartels and Money Launderers

By Narcomappingmx

 

 

 

 

 

 

Between 2006 and 2010, the Mexico arm of global banking giant Hongkong and Shanghai Banking Corporation Limited (HSBC) laundered $881 million USD for the Sinaloa Cartel in Mexico and the Norte del Valle Cartel in Colombia. HSBC was known by narcotraffickers as the preferred money laundering engine due to their intentionally compromised safety measures and weak internal controls. Despite knowledge that many of their clients were depositing cash related to the trafficking of illicit substances, HSBC turned a blind eye, providing the financial support cartels used to murder thousands. 

 

The laundering process was simple: cartel operators in the United States would smuggle proceeds from drug dealing into Mexico across the Mexico-US border. Once in Mexico, they would head to HSBC branches and deposit the cash. Once mixed in with legal deposits, it was impossible to tell where it had come from. HSBC then completed the money laundering cycle by transporting hundreds of millions of dollars of “clean” US cash back to the United States by armoured car. This uptick in armoured car cash transport into the US was noted by Department of Justice investigators. 

 

Additionally, despite serious and clear money laundering risk, HSBC chose to categorize Mexico as “standard”, the lowest risk category, which allowed them to dodge anti-money laundering laws. This allowed $670 million USD of wire transfers to escape the monitoring they should have been subjected to.

 

 

HSBC facilitated cartel operations by exercising extremely weak internal controls and disregarding anti-money laundering laws. Large banks generate automated alerts when a client makes a suspicious transaction. According to US law, banks have a responsibility to investigate these alerts to ensure that all transactions in their system are legal. However, HSBC intentionally ignored these alerts, allowing flagged accounts to deposit hundreds of thousands of dollars every day without any oversight. HSBC Mexico claimed they allowed four alerts before shutting an account down. When HSBC corporate in London heard this, they were shocked and ordered that the threshold be reduced to two alerts. HSBC Mexico agreed, but never actually employed these changes, allowing many accounts to go far above this threshold, with one even reaching 16 alerts.

 

HSBC Mexico’s anti-money laundering unit frequently disregarded and disobeyed warnings from HSBC headquarters or law enforcement entities. In one instance, with the bank account of alleged synthetic drugs trafficker and money launderer Zhenli Ye Gon, HSBC corporate noted suspicious account activity as early as 2003, and ordered his account to be closed. HSBC Mexico kept the account open. Later on in 2007, when Mexican Federal agents raided his Mexico City mansion on drug trafficking charges, they found a stash of automatic firearms and $205 million USD in cash.

 

DEA investigators found that Sinaloa Cartel operators used HSBC accounts to transfer money used to buy 13 airplanes in 2003 which were likely used to traffic narcotics from South America. Despite this knowledge, HSBC took months to deactivate these Sinaloa Cartel affiliated accounts.

 

In 2012, HSBC entered a deferred prosecution agreement and was fined $1.9 billion USD by the United States Justice Department for violating the Bank Secrecy Act (BSA) by failing to enact proper client identification and failing to uphold an internal anti-money laundering system. Additionally, they violated the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) by processing wire transfers for nations and organizations that were sanctioned by the US Department of Treasury. Some of these entities included Iran, Cuba, and shell companies linked to Middle Eastern terror groups. 

 

At the conclusion of the investigation, HSBC did not suffer much. The final cost was a fine of $1.9 billion, and loss of jobs for several HSBC employees. No one went to prison for facilitating the financial operations of a major organized crime group. Many regard this a great failure by law enforcement, a reminder that some banks are “too big to jail.”

“The abundance of failures and irregularities found made the Mexican financial authorities arrive to the conclusion that HSBC was a “vehicle of crime for the placement, hiding, laundering, and distribution of illicit proceeds”

  • Mexican Investigative journalism agency Quintolab

“A significant amount of the physical dollars which HSBC Mexico exported to the United States come from Culiacan, home of the Sinaloa Cartel, according to the Department of Justice. They placed the number at 100 million USD transported by HSBC out of the state of Sinaloa.”

  • Mexican Investigative journalism agency Quintolab