HSBC Private Bank’s US business offered
high-risk bearer share accounts to wealthy clients without
providing accurate controls despite regulator’s concerns the
accounts were open to abuse for money laundering.

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.

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.”

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Reports suggest US regulators could fine HSBC
up to $1bn for the lax anti-money laundering controls.

The 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.

For a more detailed analysis of HSBC private
bank involvement in the money laundering scandal click here.

 

http://www.vrl-financial-news.com/wealth-management/private-banker-intl/issues/pbi-2012/pbi-285/hsbc-launches-rmb-services.aspx