HSBC Continued to Move Money for Criminals While Being Monitored
By: Daniel Velasquez
BuzzFeed News released multiple stories based on files that were made public from the Financial Crimes Enforcement Network (FinCEN), a Bureau of the United States Department of Treasury. The files entail how some of the world's largest and most powerful banks moved large sums of money for terrorist, drug cartels and Russian oligarchs. The files consisted of over 2,100 Suspicious Activity Reports (SARs) from 1999-2017, involved over 170 countries and territories and flagged over two trillion dollars in transactions.
Hongkong and Shanghai Banking Corporation (HSBC) might sound familiar to many as they were previously involved in a money laundering scandal in 2012. The HSBC, laundered over $880 million for the drug cartels including drug kingpins like Joaquin “El Chapo” Guzman and did business in Sudan and Myanmar, countries that are off limits. They were fined $1.9 billion and had to submit to an independent monitor for five years. HSBC promised to clean up their act, but the FinCEN’s thousands of documents proved they continued to profit from and move money for suspected criminals, despite their own employees raising red flags. One of the bigger scandals was one involving Phil Ming Xu and his company WCM777, who was running a Ponzi scheme affecting Asian and Latino communities.
HSBC moved over $21 million for HSBC whose associates used investors' money to purchase golf courses, a luxurious home, diamonds and mining rights in Sierra Leone. The FinCEN files revealed HSBC was not only aware of allegations of Xu running a Ponzi scheme, but also reported their awareness of the Ponzi scheme in SARs filed to FinCEN. In the month of Nov. 2013 and Jan. 2014, regulators from Massachusetts, California and Colorado all announced they planned to shut down WMC777 from operating in their respective states. HSBC’s Hong Kong branch continued moving money for them and the following month their U.S. staff filed another SAR flagging a transaction of 15.4 million.
The U.S. government did not intervene and HSBC continued to profit off the transactions, rather than bringing any business with WCM777 to a halt. On March 18 2014, the U.S. Securities and Exchange Commission (SEC) shut down the Ponzi Scheme freezing its assets. Despite the SEC taking action, HSBC Hong Kong allowed WCM777 to withdraw seven million from accounts that were supposed to be frozen. This happened after promising to clean up their act and while being monitored. Xu blamed lower level employees and investors for not understanding their investments and the company’s products. A class action complaint was filed and the court appointed a receiver to collect funds for victims of the Ponzi scheme. HSBC Hong Kong was outside jurisdiction of U.S. courts and the receiver appointed told the courts it would be too expensive to trace the funds. Neither the bank or Xu were held accountable.
After reports were made public, Senators Bernie Sanders and Elizabeth Warren made statements denouncing this type of activity. Warren called for reform to end deferred prosecution agreements for banks and have banks and their executives face real consequences for their crimes. Sanders called for the creation of a new unit separate from FinCEN to investigate suspected financial crimes.
BuzzFeed recently uploaded multiple stories on their website, going into detail of each bank implicated and released a five part series podcast covering the investigation.