Mexico fines HSBC for lax money-laundering controls

Thursday, 26 July 2012 01:45 - - {{hitsCtrl.values.hits}}

LONDON (Reuters): HSBC has been fined $27.5 million in Mexico for lax controls in its anti-money laundering systems, a week after being slammed for allowing clients to shift funds from dangerous and secretive countries in a scathing U.S. Senate report.

The fine by Mexico’s National Banking and Securities Commission (CNBV) was due to “non-compliance with anti-money laundering systems and controls” and related to late reporting of 1,729 unusual transactions, failing to report 39 unusual transactions, and 21 administrative failures.

It is separate to any settlement the bank might reach with the U.S. Department of Justice.

That could run to as much as $1 billion, analysts have estimated, based on a record $619 million fine that ING agreed in June to pay to settle similar claims.

A U.S. Senate panel last week alleged HSBC acted as a financier to clients routing funds from the world’s most dangerous places, including Mexico, Iran and Syria, doing regular business in areas tied to drug cartels, terrorist funding and tax cheats. The report slammed a “pervasively polluted” culture at the bank and said between 2007 and 2008 HSBC’s Mexican operations moved $7 billion into the bank’s U.S. operations.

HSBC ignored risks in doing business in countries like Mexico, where drug trafficking is rife, the report 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,” the bank said in a statement.

It said it had taken action to address the failures and said Mexico remained a priority market.

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

The 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.

The fine comes at a troubled time for Britain’s banks, after rival Barclays was last month fined $453 million by U.S. and UK regulators for manipulating interest rates. More banks around the world are expected to be fined as part of the probe into Libor.