Nor has it been fined for allowing terrorist financing or drug trafficking. What HSBC has been fined for is something which in the eyes of the bureaucracy is worse: and in the eyes of pretty much everyone else less bad. HSBC has been fined for not running the bureaucratic system necessary to ensure that there is no money laundering, terrorist financing etc.
“In an age of international terrorism, drug violence in our streets and on our borders, and organized crime, stopping illicit money flows that support those atrocities is a national security imperative,” said Sen. Carl Levin, D-Mich., subcommittee Chairman. “HSBC used its U.S. bank as a gateway into the U.S. financial system for some HSBC affiliates around the world to provide U.S. dollar services to clients while playing fast and loose with U.S. banking rules. Due to poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions. The bank’s federal bank regulator, the OCC, tolerated HSBC’s weak AML system for years. 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.” The important word out of Senator Levin’s mouth there is “exposed”.
HSBC did not have sufficiently robust internal audit and verification systems to be able to prove that the transactions it was undertaking were not money laundering, terrorist financing or aiding the financing of the drugs trade. This is, and I’m sure you will agree, rather different from actually allowing or doing any of those things.
Those things may even have happened as well: but that isn’t why HSBC has been fined. Their paperwork was inadequate: that is why they were fined.