According to a US Senate committee investigating drugs and terrorist financing, HSBC opened more then 2,000 bearer share corporate accounts over the past decade.
The committee also alleged that HSBC, in some cases, weakened the application compliance standards to grant its wealthy clients secrecy.
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At its peak, HSBC’s Miami office alone had about 1,670 bearer share accounts holding an estimated $2.6bn in assets, which generated annual revenues of $26m for the bank.
Bearer shares are shares in a corporation which assign ownership to whoever has physical possession. The shares can be readily transferred without a trail and with no need of registration to any authority making them a prime vehicle for money laundering.
In a written statement, HSBC said: "We recognise that our controls could and should have been stronger and more effective in order to spot and deal with unacceptable behaviour."
Reports suggest US regulators could fine HSBC up to $1bn for the lax anti-money laundering controls.
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By GlobalDataThe US Senate committee report quoted one example where HSBC compliance guidelines were bypassed to allow a wealthy Peruvian businessman to open two bearer share accounts without registering his name.
In a reported exchange of emails in 2007 between Jaime Carvallo, a Miami bank executive, and HSBC head of private banking Americas, Marlon Young, Carvallo wrote:
"This is too important a family in Peru for us not to want to do business with,
and one that has taken a lot of my time and effort to convince to start a relationship with
us."
In 2010 two Miami Beach hotel developers were sentenced to ten years in jail and a $17m fine, after having used a HSBC bearer share account to help hide $150m in assets and $49m in income.
Source: Private Banker International
