08-05-2012, 06:59 PM
HOW LONDON BECAME THE MONEY LAUNDERING CAPITAL OF THE WORLD
Rowan Bosworth-Davies
http://www.ianfraser.org/how-london-beca...the-world/
Speaking on the Marr Show on BBC One on March 23rd, the former Daily Telegraph editor and historian Max Hastings said a “senior central banker” recently told him that London is now considered to be the “money-laundering capital of the world”.
Hastings was discussing the shooting of a Russian banker in London. The remark was all the more pertinent since Russia is now said to be controlled by a ‘gangster culture’ and because of the large number of Russian oligarchs and other business people who now live and work in the UK. A lot of these people carry criminal baggage, but the authorities seem entirely comfortable with the idea they should reinforce London’s position as the world’s “funny” money hub.
How did this state of affairs come about when, on paper at least, the UK has some of the strictest anti-money laundering legislation in the world?
The answer, I believe, lies in the fact that our many laws and regulations have never been effectively enforced by financial regulators, and banks and other financial institutions know they can get away with paying lip service to the rules.
Only this year has the Financial Services Authority managed to bring a money laundering charge against a UK-based financier, and he is a very small fish indeed. In an insider trading case against Richard Anthony Joseph, the FSA added two money laundering charges. It charged him with eight counts of insider dealing and two counts of money laundering.
The charges follow Joseph’s arrest in May 2010. The interest in the case is not in the insider dealing per se but in the addition of charges of money laundering. Although the FSA has had the power to prosecute this offence for some time, it has rarely, if ever, used it.
There is a world of difference between having rules which are meant to be obeyed, and doing everything within one’s power to avoid providing any meaningful form of compliance with the rules. The purpose of the regulations is to make it as difficult as possible for people who have acquired their money illicitly, anywhere in the world, to find a safe haven in the international banking system.
So there are rules and regulations which impose a burden on banks and financial institutions requiring them to ensure that before they accept money from a client, that they have a clear picture of its provenance, that they know as much as possible about their clients, their businesses, the sources of their funds, and if they have held high political office, to make sufficient enquiries to ensure that the monies being deposited are not in fact the proceeds of international aid payments which have been stolen from the country’s Treasury.
These rules are routinely flouted by the financial institutions.
They will say that they have large compliance departments, with many staff dedicated to ensuring that such situations do not arise, and in many senses, they are telling the truth. The problem is that they are not telling the whole truth. In 2011, The Financial Services Authority conducted an investigation into London banks and found that three-quarters of them were not doing enough to verify the sources of some customers’ wealth. The probe shed some light on a system that is failing to stop the flow of corrupt money, a problem that continues to have disastrous consequences for millions of people. Predictably, the regulator did not name the banks that had ignored the rules, nor gave any indication they would do so.
Predictably, the FSA also failed to take any public action against any of these institutions for this egregious flouting of the rules. They could have brought prosecutions against them for failing to implement the relevant regulations, but they did not do so. This is typical of the regulatory response to flagrant wrong-doing in our banking sector, and it is looked upon by the banks and their employees as a sign of immense weakness, which they feel able to exploit at every opportunity.
The compliance regime is undermined by the calibre and quality of people employed by the banks to implement the anti-money laundering regulations. Repeatedly, in discussions with recruitment consultants I am told that the kind of person being sought to fill a particular role is a ‘low-level’ employee with minimal length of service. They are looking for someone with a couple of years’ experience who might be capable of filling a new position, but they don’t want to pay any real money for anyone with any skills, real experience, or more importantly, the sense of independent knowledge to be able to stand up to the commercial people and say, ‘you can’t do that’!
You only have to look at the salary levels paid to compliance officers and then compare them to the salaries paid to traders and business getters, to see the huge discrepancies in functional importance the banks place on compliance. At a Group Compliance Director level, you may be seeing six figure salaries, but these are rare. The vast number of employees in this function are being paid peanuts compared to the business side of the organisation.
Another problem with the British mentality towards compliance is the over-emphasis on ‘process’ as compared with ‘effective enforcement’. The compliance function is awash with processes and procedures, they have manuals full of them, but all they are doing is seeking to demonstrate to any regulator that, if asked, they complied with the process.
But any process that is not rigorously tested and then analysed by a skilled and experienced person will be worthless. I once did a pre-Arrow review for a major global bank of their anti-money-laundering function. They had processes and procedures written down in manuals, provided at vast expense by the consultancy arm of one of the ‘Big Four’ accountancy firms. When I tested how the staff were applying these processes, I found a huge lacuna in their areas of knowledge. To make matters worse, they had no-one with any ‘grey hair’ sitting in the middle of the web, holding all the ends of the processes, in order to ensure that they were being effectively implemented.
If we have a regulatory agency that repeatedly refuses to enforce the anti-money laundering regulations, and is sufficiently inept to accept that the level of compliance being provided by the banks and other financial institutions can be performed using a ‘tick box’ mentality, it provides a key part of the answer as to why London is now the money laundering capital of the world.
This is typical of the British attitude towards any kind of financial regulation. It is as if governments of whichever persuasion, have swallowed the canard that if they are seen to be heavy-handed towards the banks, then this will in some way deprive the UK of some hidden special advantage.
So, we have regulations which only get enforced at the margins, and which the major players ignore at whim. Yes, from time to time the regulators do seek to fine the banks for the worst examples of their egregious behaviour, but fining a bank is nothing more than an HP commitment as far as the bank is concerned. All it does is dilute their profitability, harming the shareholders not the executive perpetrators, which is reflected in even less tax being paid on their profits. If they are not named and shamed, as is routinely the case, then there is no reputational risk attached to the penalty either, and no stigma is applied.
As with so many other areas of financial wrong-doing, it seems the banks have seen off the regulators yet again, and the only loser would appear to be the UK financial services’ arena which is now, apparently, the venue of choice for every international crook’s dirty money. We must prepare ourselves to witness more Russian-style assassination attempts on our streets, as the organised criminals who deposit their money with the even better organised criminals in the banking sector, continue to see London as the money laundry of choice.
This article was written by Rowan Bosworth-Davies and first posted on his blog on March 26th 2012. It is reused with permission. Since then, it has emerged that HSBC faces a $1 billion penalty in the United States for weak anti money laundering controls by the US government. At a hearing in Washington this Tuesday, the US Senate Permanent Subcommittee on Investigations is poised to deliver a blistering attack on the London-headquartered bank’s anti-money laundering systems and controls, highlighting its role in transactions tied to Iran, terrorist financing and drug cartels. In a Reuters Special Report published July 13th 2012, Carrick Mollenkamp and Brett Wolf have detailed how the bank’s Delaware-based anti-money laundering hub pays lip-service to tackling the problem of money laundering.
HSBC & TERRORIST FINANCE
July 30, 2012
Tom Burghardt
http://www.blacklistednews.com/Black_Dossier:_HSBC_&%3B_Terrorist_Finance_/20768/0/0/0/Y/M.html
http://www.hsgac.senate.gov/subcommittee...se-history
It's tough being the world's second largest bank.
HSBC, the London-based British multinational banking and financial services giant operates in 85 countries with 7,200 offices worldwide with assets totaling more than $2.6 trillion (£4.06tn).
They're also caught-up in serial scandals: the Libor interest rate-fixing scam, serious charges of drug money laundering as well as suspicions that bank officers "palled around" with terrorist financiers.
Founded in 1865 when the British Crown seized Hong Kong as a colony in the aftermath of the First Opium War, British merchants (today we'd call them drug lords) needed a bank to handle the brisk trade in the illicit substance and launched the Hongkong and Shanghai Banking Company Limited. Rebranded "HSBC" in 1991, the bank expanded at breakneck speed in the heady days after The Wall fell.
While some might call them a success story, exemplars of financial wizardry in tough economic times, more appropriately perhaps, we might borrow a term from Mafia lore to describe their preeminent position in the capitalist pantheon of corrupt institutions: juiced.
'Sorry, now Go Away'
Today, the "War on Drugs" rivals the "War on Terror" for top spot on the global hypocrisy index.
Moral equivalencies abound. After all, when American secret state agencies manage drug flows or direct terrorist proxies to attack official enemies it's not quite the same as battling terror or crime.
Pounding home that point, a new report by the Senate Permanent Subcommittee on Investigations accused HSBC of exposing "the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls."
That 335-page report, "U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History," (large pdf file available here) was issued after a year-long Senate investigation zeroed-in on the bank's U.S. affiliate, HSBC Bank USA, N.A., better known as HBUS.
Drilling down, we learned that amongst the "services" offered by HSBC subsidiaries and correspondent banks were sweet deals with financial entities with terrorist ties; the transportation of billions of dollars in cash by plane and armored car through their London Banknotes division; the clearing of sequentially-numbered travelers checks through dodgy Cayman Islands accounts for Mexican drug lords and Russian mafiosi.
From richly-appointed suites at Canary Wharf, London, the bank's "smartest guys in the room" handed some of the most violent gangsters on earth the financial wherewithal to organize their respective industries: global crime.
A case in point. In 2008 alone the Senate revealed that the bank's Cayman Islands branch handled some 50,000 client accounts (all without benefit of offices or staff on Grand Cayman, mind you), yet still managed to ship some $7 billion (£10.9bn) in cash from Mexico into the U.S. Now that's creative accounting!
Playing fast and loose with U.S. banking rules, Subcommittee Chairman Carl Levin (D-MI) said that by exploiting the bank's "poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions."
Describing a "compliance culture" that was "pervasively polluted for a long time," Levin said it "will take more than words for the bank to change course."
Yet weasel words and butt-covering were all that were proffered to the American people even before Senate hearings began. Bank spokesman Robert Sherman said in an emailed statement that HSBC "will acknowledge that, in the past, we have sometimes failed to meet the standards that regulators and customers expect. We will apologize, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong."
Right on cue, chief compliance officer David Bagley dramatically fell on his sword during those hearings and resigned on camera. It was quite a performance even by Washington's tawdry standards.
Appearing contrite, Bagley told the panel: "Despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators. ... I recommended to the group that now is the appropriate time for me and for the bank, for someone new to serve as the head of group compliance."
While there's no word yet just how big Bagley's golden parachute will be, it's a sure bet he won't spend a day in jail, nor for that matter will Lord Stephen Green, HSBC's former Chairman and Chief Executive Officer.
Between 2003-2010, Green tilled the helm after serial stints directing The Bank of Bermuda Ltd., HSBC Mexico, SA, HSBC Private Banking Holdings (Suisse) SA and HSBC North American Holdings Inc.; units which feature prominently in the scandal. Sensing perhaps that the jig was up, last year he joined David Cameron's Conservative government as Minister of State for Trade and Investment.
Unlike Pappy Bush who claimed to be "out of the loop" during the Iran-Contra guns-for-drugs affair, Green was fully apprised of bank shenanigans and the Senate published emails which prove it.
Cheekily however, while underlings take the fall, Green told The Daily Telegraph, "I do not believe that I have a case to answer other than in the important sense that as chairman and chief executive I was responsible for what the company did. HSBC has expressed regret for the failures. I share that regret."
The Telegraph noted that Green has not considered resigning from Cameron's government, saying he was "very engaged" with his current plum post.
Ironically enough, the current Baron of Hurstpierpoint is an ordained priest in the Church of England and the author of an inspirational tome, Good Value: Reflections on Money, Morality and an Uncertain World. And no, you can't make this stuff up!
The top spot is now occupied by Stuart Gulliver who, quicker than you can say "we're sorry," admonished employees to "do better" and expressed remorse over his firm's "unacceptable behavior." Never mind that before ascending the throne, Gulliver was director of HBUS, HSBC Latin American Holdings Ltd., and HSBC Bank Middle East Ltd., divisions that have raised more than an eyebrow or two amongst Subcommittee investigators.
Topping Bagley's Kabuki-lite performance with her own rendition of clown car camp, Irene Dorner, HBUS's President and CEO told the Senate: "We deeply regret and apologize for the fact that HSBC did not live up to the expectations of our regulators, our customers, our employees, and the general public. HSBC's compliance history, as examined today, is unacceptable. ... We've worked hard to foster a new culture that values and rewards effective compliance, and that starts at the top."
Bathos aside, it was a polite way of saying "let's move on" and get back to the business of lining our pockets; after all, it's what we do best.
'The past is never dead. It's not even past'
Years before hijackers slammed passenger planes into the World Trade Center and the Pentagon killing nearly 3,000 people, secret state agencies began to exploit the fraternal links between Osama bin Laden's Afghan-Arab database of disposable Western intelligence assets, also known as al Qaeda, and prominent financial institutions.
In his 1999 book, Dollars for Terror, journalist Richard Labévière relates how a former CIA analyst explained: "The policy of guiding the evolution of Islam and helping them against our adversaries worked marvelously well in Afghanistan against the Red Army. The same doctrines can still be used to destabilize what remains of Russian power, and especially to counter the Chinese influence in Central Asia."
Was a new Cold War dawning?
No. In fact, it was the same Cold War. Only this time it was tricked-out in seductive finery by denizens of Western think-tanks and on-the-make NGOs. In the age of spin and endless news cycles, they'd hit upon a splendid formula to pour the "old" imperialist wine into new bottles: "humanitarian intervention" and a "responsibility to protect."
It was a brilliant script. In the blink of an eye our media-saavy masters could "enhance democracy" and "reform markets," magically transforming publicly-owned resources into privately-held assets controlled by banks! That terrorist proxies would serve as walk-ons and help drive the final nail into the coffin of national sovereignty wasn't considered proper conversation in polite company.
Labévière wondered whether "the new forms of terrorism actually embody the highest stage of capitalism?" They did, and "the straw men of the bin Laden Organization's subsidiaries [were] very well received by the business lawyers of Wall Street and the Bahamas, by the wealth managers of Geneva, Zurich and Lugano, and in the hushed salons of the City of London."
Not so curiously perhaps, "the privatization of violence and the privatization of the economy has become paradigmatic." In fact, "apart from any religious purpose," Labévière wrote, "the 'Jihad' is gaining ground as a profitable activity. It becomes liable to all the mafioso devolutions, and sinks into pure banditry. In many cases, Islamist ideology is used as a wonder worker to paper over banditry in all its forms."
Bin Laden as a Mafia capo di tutti capi? It certainly was a novel reading of geopolitical machinations!
More to the point, if an "army marches on its stomach," who then are the money men who put food in their bellies and kalashnikovs in their hands?
Bankrolled by Saudi and Gulf banks with a wink, a nod and logistical support from their old friends, the CIA and the Pentagon, today's Green condottieri once again are on the march, wrecking havoc and sowing chaos, with particular attention paid to states targeted as official enemies by the Global Godfather. Just ask the Iraqis, Libyans and Syrians.
While the Senate report may have disclosed that HSBC turned a blind eye to terrorist financing among it correspondent banks, the Riyadh-based Al Rajhi Bank for one, Saudi Arabia's largest privately-held financial institution, such arrangements hardly flourished in a vacuum.
With assets totaling $59 billion (£92.5bn), the Al Rajhi's are amongst the wealthiest families in the Kingdom. Investigators found that after 9/11 "evidence began to emerge that Al Rajhi Bank and some of its owners had links to organizations associated with financing terrorism, including that one of the bank's founders was an early financial benefactor of al Qaeda."
While the Al Rajhi family deny any role in financing terrorism, they have declined "to address specific allegations made in American intelligence and law-enforcement records, citing client confidentiality," The Wall Street Journal reported back in 2007.
Journalist Glenn R. Simpson averred that "a 2003 CIA report claims that a year after Sept. 11, with a spotlight on Islamic charities, Mr. Al Rajhi ordered Al Rajhi Bank's board 'to explore financial instruments that would allow the bank's charitable contributions to avoid official Saudi scrutiny'."
"A few weeks earlier," the Journal disclosed, the Agency said that "Mr. Al Rajhi 'transferred $1.1 billion to offshore accounts--using commodity swaps and two Lebanese banks--citing a concern that U.S. and Saudi authorities might freeze his assets.' The report was titled 'Al Rajhi Bank: Conduit for Extremist Finance'."
Although U.S. law enforcement and secret state agencies "acknowledge it is possible that extremists use the bank's far-flung branches and money-transfer services without bank officials' knowledge," the Journal noted that CIA analysts had concluded that "senior Al Rajhi family members have long supported Islamic extremists and probably know that terrorists use their bank."
It goes without saying that one should always approach CIA reports with a healthy dose of skepticism, especially in light of the Agency's well-documented history of employing cut-outs such as al Qaeda as terrorist cats' paws.
Such reports however, lay a trail of bread crumbs that policy makers can either act upon or more likely, ignore. That senior Bush and Obama administration officials did nothing with this information, never mind the regulatory agencies charged to enforce anti-money laundering laws, is testament to the corrupt, bipartisan nature of American policy as a whole.
It also beggars belief that Lord Green or the bank's compliance officers were unaware of CIA allegations or that Britain's own foreign intelligence arm, MI6, hadn't apprised top officials of the risks involved. In fact, as we'll see below, HSBC's own internal documents prove otherwise.
Osama's 'Golden Chain'
There were certainly plenty of red flags flying which should have alerted bank officials.
In March 2002, al Qaeda's list of financial benefactors surfaced when computers were seized in Sarajevo at the Bosnian headquarters of the Benevolence International Foundation, "a Saudi based nonprofit organization which was also designated a terrorist organization by the Treasury Department."
Osama bin Laden, who held a Bosnian passport issued by the breakaway government fronted by Western "liberal interventionist" darling Alija Izetbegovi? during NATO's dismemberment of socialist Yugoslavia, was a supporter of the Nazi SS Handschar Division during World War II. Bin Laden referred to this group of financial angels as his "Golden Chain."
Additional evidence also emerged in 2002 during Operation Green Quest, a Treasury Department effort to "disrupt terrorist financing in the United States."
In March of that year, law enforcement officials raided the Herndon, Virginia offices of the SAAR Foundation "an Al Rajhi-related entity." Indeed, the name "SAAR" was an acronym for the organization's founder, Sulaiman Abdul Aziz Al Rajhi, the controlling partner of the Al Rajhi Bank.
Subcommittee investigators commented that "one of the 20 handwritten names in the Golden Chain document identifying al Qaeda's early key financial benefactors is Sulaiman bin Abdul Aziz Al Rajhi, one of Al Rajhi Bank's key founders and most senior officials."
An affidavit supporting the search warrants "detailed numerous connections between the targeted entities and Al Rajhi family members and related ventures. The affidavit stated that over 100 active and defunct nonprofit and business ventures in Virginia were part of what it described as the 'Safa Group,' which the United States had reasonable cause to believe was 'engaged in the money laundering tactic of 'layering' to hide from law enforcement authorities the trail of its support for terrorists."
Green Quest investigators were particularly keen on unraveling links between the SAAR Foundation and the Swiss Al Taqwa Bank, incorporated in the Bahamas in 1988 for "tax purposes."
Founded by Swiss Nazi sympathizer and convert to Islam, Albert Armand (Achmed) Huber, who professed admiration for both Adolph Hitler and Osama bin Laden, the bank was accused by U.S. officials in helping al Qaeda launder funds. Although the Treasury Department froze its assets in 2001, the investigation was shut down by the Bush administration before deeper linkages could be fully uncovered.
In 2011, a lawsuit was filed by insurance giant Lloyd's of London against Saudi Arabia which sought to recover pay outs to victims of the 9/11 attacks. The suit noted "that two individuals who were former executives at Bank al Taqwa, Ibrahim Hassabella and Samir Salah, were also associated with the SAAR Foundation."
At the time, The Independent reported that the legal claim suggested that defendants "'knowingly' provided resources, including funding, to al-Qa'ida in the years before the attack and encouraged anti-Western sentiment which increased support for the terror group."
According to court briefs, "Absent the sponsorship of al-Qa'ida's material sponsors and supporters, including the defendants named therein, al-Qa'ida would not have possessed the capacity to conceive, plan and execute the 11 September attacks. The success of al-Qa'ida's agenda, including the 11 September attacks themselves, has been made possible by the lavish sponsorship al-Qa'ida has received from its material sponsors and supporters over more than a decade leading up to 11 September 2001."
Senate investigators, citing Green Quest and Lloyd's case files, noted that "Mr. Hassabella was a former secretary of al Taqwa Bank and a shareholder of SAAR Foundation Inc. Mr. Saleh was a former director and treasurer of the Bahamas branch of al Taqwa Bank, and president of the Piedmont Trading Corporation which was part of the SAAR network. The U.S. Treasury Department has stated: 'The Al Taqwa group has long acted as financial advisers to al Qaeda, with offices in Switzerland, Liechtenstein, Italy and the Caribbean.' Regarding Akida Bank, the lawsuit complaint alleged that Sulaiman bin Abdul Aziz Al Rajhi was 'on the board of directors of Akida Bank in the Bahamas' and that 'Akida Bank was run by Youssef Nada, a noted terrorist financier'."
The report went on to state that "HSBC was fully aware of the suspicions that Al Rajhi Bank and its owners were associated with terrorist financing, describing many of the alleged links in the Al Rajhi Bank client profile."
As icing on the cake, a 2007 study published by the Congressional Research Service (CRS) also found that "Saudi individuals and other financiers associated with the Golden Chain enabled bin Laden and Al Qaeda to replace lost financial assets and establish a base in Afghanistan following their abrupt departure from Sudan in 1996."
Assets I might add, that were used to bankroll the 9/11 attacks.
'Keen to maintain the relationships'
HSBC's dubious links to the Al Rajhi Bank didn't end with information discovered in the "Golden Chain" files; it fact, they were the tip of the proverbial iceberg.
After 9/11, the FBI reported that three of the hijackers, Hani Hanjour, Nawaf Alhazmi and Abdulaziz Alomari cashed thousands of dollars in travelers checks and received wire transfers from an unnamed individual drawn on accounts at the Al Rajhi Bank.
As researcher Kevin Fenton pointed out in Disconnecting the Dots, links among most of the hijackers were discovered through their banking transactions. "In this context," Fenton wrote, "it is worth noting that Global Objectives, a British banking compliance company, identified fifteen of the nineteen hijackers as high-risk individuals and established database profiles for them before the attacks. ... The list of high-risk people maintained by Global Objectives was available to dozens of banks," a list that presumably also included HSBC.
While there is no evidence that HSBC, or for that matter the Al Rajhi Bank, had prior knowledge of the 2001 atrocity, the gross indifference exhibited by these institutions through their violation of "know your client" (KYC) rules governing financial transactions reveal a callous disdain for elemental norms as they raced to inflate their balance sheets come hell or high water.
Privileged communications amongst senior staff revealed they were well aware of the issues and risks involved, yet did worse than nothing, they lobbied that HSBC continue their arrangements with the Al Rajhi Bank.
Suspicions were such that senior staff "classified Al Rajhi Bank as a 'Special Category of Client' (SCC), its highest risk designation." This was done, Senate investigators noted, because the Kingdom was considered a "high risk country" and due to the fact Al Rajhi's largest shareholder, Sulaiman bin Abdul Aziz Al Rajhi was considered "a Politically Exposed Person (PEP)."
Internal HSBC documents also revealed that in 2002, that is, after the 9/11 provocation, "the International Private Banking Department asked to transfer [several] accounts to HSBC's Institutional Banking Department in Delaware which had superior ability to monitor account activity."
In fact, transferring Al Rajhi accounts to the bank's Delaware division would have just the opposite effect and bank officials knew it.
As journalist Nicholas Shaxson noted in his exposé of offshore banking, Treasure Islands, "Delaware is the biggest state provider of offshore corporate secrecy." Shaxson pointed out that Delaware's Chancery Court has a "'business judgement rule' under which courts should not second-guess corporate managers," thereby "granting corporate bosses extraordinary freedoms from bothersome stockholders, judicial review, and even public opinion."
So much for any alleged "superior ability to monitor account activity"!
HBUS's Joseph Harpster wrote an email, stating: "The most recent concern arose when three wire transfers for small amounts ($50k, $3k and $1.5k) were transferred through the account for names that closely resembled names, not exact matches, of the terrorists involved in the 9/11 World Trade Center attack. ... The profile of the main account reflects a doubling of wire transfer volume since 9/01, a large number of travelers checks but with relatively low value and some check/cash deposits. According to the account officer, traffic increased because they have chosen to send us more business due to their relationship with Saudi British Bank and the added strength of HBC versus Republic. ... Maintaining our business with this name is strongly supported by David Hodghinson of [Saudi British Bank] and Andre Dixon, Deputy Chairman of [HSBC Bank Middle East]. Niall Booker and Alba Khoury [of HBUS] also support."
Aside from adverse publicity, the "low value" of the transactions seemed not to have troubled Harpster or his associates in the least. After all, the total "cost" of murdering 3,000 human beings were certainly small compared to the price of a vacation home in the Hamptons or a new Maserati.
Anxious there might be increased scrutiny from regulators (no worries there!), Harpster's email was forwarded by Douglas Stolberg, the head of Commercial and Institutional Banking to Alexander Flockhart, then a senior executive in Retail and Commercial Banking at HBUS. Stolberg noted: "As we discussed previously, Compliance has raised some concerns regarding the ongoing maintenance of operating/clearing accounts for Al Rajhi group." He forwarded recommendations on how to handle the account: "Retain [International Private Banking] as the relationship manager domicile for continuity purposes, and as we understand there is interest in further developing private banking business with family members. ... Domicile the actual accounts with Delaware where HBUS's most robust account screening capabilities reside."
"Screening capabilities" which could be shielded from nosy regulators due to Delaware's strict bank secrecy laws.
Stolberg went on to state: "[T]his has become a fairly high profile situation. Compliance’s concerns relate to the possibility that Al Rajhi's account may have been used by terrorists. If true, this could potentially open HBUS up to public scrutiny and/or regulatory criticism. SABB [Saudi British Bank] are understandably keen to maintain the relationships. As this matter concerns primarily reputational and compliance risks, we felt it appropriate for SMC [Senior Management Committee] members to be briefed ... so that they may opine on the acceptability of the plan. Please advise how you would prefer us to proceed." (emphasis added)
According to Senate staff, "Mr. Harpster reported a week later that Mr. Flockhart had decided to transfer the accounts to HBUS in the Delaware office."
But HSBC weren't the only entities hoping to curry favor with the Kingdom. A 2009 Government Accountability Office (GAO) report went on to note that "certain performance targets set by the State Department had been dropped in 2009, such as the establishment of a Saudi Commission on Charities to oversee actions taken by Saudi charities abroad as well as certain regulations of cash couriers."
Although GAO "recommended that the United States reinstate the dropped performance targets to prevent the flow of funds from Saudi Arabia 'through mechanisms such as cash couriers, to terrorists and extremists outside Saudi Arabia,' the State Department's "most recent annual International Narcotics Control Strategy Report contains no information about Saudi Arabia's anti-money laundering or terrorist financing efforts."
One reason why the State Department's report contains "no information" just might be the Obama administration's policy of supporting Saudi-backed Salafi terrorists soon to come online in Libya and Syria, financed through "Saudi charities abroad" or more directly through "cash couriers."
'You'd better be making lots of money!'
The Senate disclosed that HSBC "provided Al Rajhi Bank with a wide range of banking services, including wire transfers, foreign exchange, trade financing, and asset management services."
"In the United States," investigators learned that "a key service was supplying Al Rajhi Bank with large amounts of physical U.S. dollars, through the HBUS U.S. Banknotes Department."
"The physical delivery of U.S. dollars to Al Rajhi Bank was carried out primarily through the London branch of HBUS, often referred to internally as 'London Banknotes'."
Indeed, "HBUS records indicate that the London Banknotes office had been supplying U.S. dollars to Al Rajhi Bank for '25+ years.' In addition to the London branch, HBUS headquarters in New York opened a banknotes account for Al Rajhi Bank in January 2001. The U.S. dollars were physically delivered to Al Rajhi Bank in Saudi Arabia."
"On one occasion in 2008," Senate staff reported, the head of HSBC Global Banknotes Department told a colleague: 'In case you don't know, no other banknotes counterparty has received so much attention in the last 8 years than Alrajhi.' Despite, in the words of the KYC client profile, a 'multitude' of allegations, HSBC chose to provide Al Rajhi bank with banking services on a global basis."
Even though the Al Rajhi Bank "had not been indicted, designated a terrorist financier, or sanctioned," HSBC's Group Compliance section recommended that affiliates should sever their ties.
After that initial decision however, "HSBC affiliates disregarded the recommendation and continued to do business with the bank, while others terminated their relationships but protested HSBC's decision and urged HSBC to reverse it."
Complaints by lower level staff continued, disregarded by higher-ups, even though a U.S. indictment was issued in February 2005 for two individuals "accused among other matters, of cashing $130,000 in U.S. travelers cheques at Al Rajhi Bank in Saudi Arabia" and then smuggling the cash to CIA-backed terrorists in Chechnya.
Although internal bank documents showed that officials decided to cut their ties to the Saudi financial institution, they reversed themselves when pressure was brought to bear by Al Rajhi officials. Between 2006 and 2010, Al Rajhi received shipments totaling more than $1 billion in physical cash in the lucrative banknotes business from HSBC's U.S. affiliate according to investigators. Officials at the Saudi bank "had threatened to pull all of its business from HSBC if the U.S. banknotes business were not restored."
Senate staff reported that on January 4, 2005, "HBUS AML Compliance head Ms. Pesce sent an email to Daniel Jack, an HBUS AML Compliance Officer who often dealt with the London Banknotes office, instructing him to: '[p]lease communicate that Group Compliance will be recommending terminating the Al Rajhi relationship.' Mr. Jack inquired as to when that recommendation would be made. She responded: 'I expect to see an email from Susan Wright today. She tells me that HBME [HSBC Bank Middle East] does not agree with Compliance and will not be terminating the relationship from the Middle East, but she/David B[agley] recommend that in light of US scrutiny, climate, and interest by law enforcement, we in the US sever the relationship from here'."
At the time, Susan Wright was "the Chief Money Laundering Control Officer for the entire HSBC Group. She reported to David Bagley, head of the HSBC Group's overall Compliance Department."
Senate investigators noted that the "documents do not explain why HSBC Middle East disagreed with the decision or why it was allowed to continue its relationship with Al Rajhi Bank, when HSBC's Group Compliance had decided to sever the relationship between the bank and other HSBC affiliates due to terrorist financing concerns."
It soon became clear however, that "HSBC Group Compliance began to narrow its scope." Shortly thereafter a trader in the Banknotes department wrote, "for us is business as usual." Alan Ketley, HBUS AML Compliance Officer commented on the decision not to include Al Rajhi Trading in their earlier decision to sever all ties: "Looks like you're fine to continue dealing with Al Rajhi. You'd better be making lots of money!"
Meanwhile, "Al Rajhi Bank communicated the threat to 'pull any new business with HSBC' unless given a 'satisfactory explanation' why HSBC had stopped supplying it with U.S. dollars via its relationship managers," the Senate disclosed.
In short order, it was business as usual.
Despite continuing allegations of terrorist financing swirling around Al Rajhi Bank, HBUS "continued to supply, through its London branch, hundreds of millions of U.S. dollars to Al Rajhi Bank in Saudi Arabia. In addition, at Al Rajhi Bank's request, HBUS expanded the relationship in January 2009, by authorizing its Hong Kong branch to supply Al Rajhi Bank with non-U.S. currencies, including the Thai bat, Indian rupee, and Hong Kong dollar." (emphasis added)
When concerns were raised internally once again, Christopher Lok, the head of HSBC's Global Banknotes Department in New York fired back: "This is an on-going debate that will never go away. My stance remains the same, i.e. until it[']s proved we cannot simply rely on the Wall Street Journal['s] reports and unconfirmed allegations and 'punish’ the client'."
Needless to say, Hong Kong's "arrangement" with Al Rajhi went forward.
Despite "troubling information" which should have led to HSBC's quick exit from the banknotes market, the Senate reported that "HBUS continued to supply U.S. dollars to the bank, and even expanded its business, until 2010, when HSBC decided, on a global basis, to exit the U.S. banknotes business."
In conclusion, one needn't be a "conspiracy buff" to posit a link from HSBC to Al Rajhi to "cash couriers" operating across the Middle East in support of a multitude of U.S.-Saudi-backed "regime change" gambits in play today; policies which "worked marvelously well in Afghanistan against the Red Army."
As investigative journalist Ed Vulliamy pointed out in The Observer, the issues involved here are wider than drug money laundering or terrorist finance. "It is about where banks, law enforcement officers and the regulators--and politics and society generally--want to draw the line between the criminal and supposed 'legal' economies."
Commenting on the HSBC scandal, Robert Mazur, a former Customs Department deep-cover specialist and author of The Infiltrator, who penetrated Medellín cartel money laundering operations during the prosecution and collapse of BCCI in 1991, told The Observer that "the only thing that will make the banks properly vigilant to what is happening is when they hear the rattle of handcuffs in the boardroom."
"The stark truth is," Vulliamy wrote, "the notion of any dichotomy between the global criminal economy and the 'legal' one is fantasy. Worse, it is a lie. They are seamless, mutually interdependent--one and the same."
Rowan Bosworth-Davies
http://www.ianfraser.org/how-london-beca...the-world/
Speaking on the Marr Show on BBC One on March 23rd, the former Daily Telegraph editor and historian Max Hastings said a “senior central banker” recently told him that London is now considered to be the “money-laundering capital of the world”.
Hastings was discussing the shooting of a Russian banker in London. The remark was all the more pertinent since Russia is now said to be controlled by a ‘gangster culture’ and because of the large number of Russian oligarchs and other business people who now live and work in the UK. A lot of these people carry criminal baggage, but the authorities seem entirely comfortable with the idea they should reinforce London’s position as the world’s “funny” money hub.
How did this state of affairs come about when, on paper at least, the UK has some of the strictest anti-money laundering legislation in the world?
The answer, I believe, lies in the fact that our many laws and regulations have never been effectively enforced by financial regulators, and banks and other financial institutions know they can get away with paying lip service to the rules.
Only this year has the Financial Services Authority managed to bring a money laundering charge against a UK-based financier, and he is a very small fish indeed. In an insider trading case against Richard Anthony Joseph, the FSA added two money laundering charges. It charged him with eight counts of insider dealing and two counts of money laundering.
The charges follow Joseph’s arrest in May 2010. The interest in the case is not in the insider dealing per se but in the addition of charges of money laundering. Although the FSA has had the power to prosecute this offence for some time, it has rarely, if ever, used it.
There is a world of difference between having rules which are meant to be obeyed, and doing everything within one’s power to avoid providing any meaningful form of compliance with the rules. The purpose of the regulations is to make it as difficult as possible for people who have acquired their money illicitly, anywhere in the world, to find a safe haven in the international banking system.
So there are rules and regulations which impose a burden on banks and financial institutions requiring them to ensure that before they accept money from a client, that they have a clear picture of its provenance, that they know as much as possible about their clients, their businesses, the sources of their funds, and if they have held high political office, to make sufficient enquiries to ensure that the monies being deposited are not in fact the proceeds of international aid payments which have been stolen from the country’s Treasury.
These rules are routinely flouted by the financial institutions.
They will say that they have large compliance departments, with many staff dedicated to ensuring that such situations do not arise, and in many senses, they are telling the truth. The problem is that they are not telling the whole truth. In 2011, The Financial Services Authority conducted an investigation into London banks and found that three-quarters of them were not doing enough to verify the sources of some customers’ wealth. The probe shed some light on a system that is failing to stop the flow of corrupt money, a problem that continues to have disastrous consequences for millions of people. Predictably, the regulator did not name the banks that had ignored the rules, nor gave any indication they would do so.
Predictably, the FSA also failed to take any public action against any of these institutions for this egregious flouting of the rules. They could have brought prosecutions against them for failing to implement the relevant regulations, but they did not do so. This is typical of the regulatory response to flagrant wrong-doing in our banking sector, and it is looked upon by the banks and their employees as a sign of immense weakness, which they feel able to exploit at every opportunity.
The compliance regime is undermined by the calibre and quality of people employed by the banks to implement the anti-money laundering regulations. Repeatedly, in discussions with recruitment consultants I am told that the kind of person being sought to fill a particular role is a ‘low-level’ employee with minimal length of service. They are looking for someone with a couple of years’ experience who might be capable of filling a new position, but they don’t want to pay any real money for anyone with any skills, real experience, or more importantly, the sense of independent knowledge to be able to stand up to the commercial people and say, ‘you can’t do that’!
You only have to look at the salary levels paid to compliance officers and then compare them to the salaries paid to traders and business getters, to see the huge discrepancies in functional importance the banks place on compliance. At a Group Compliance Director level, you may be seeing six figure salaries, but these are rare. The vast number of employees in this function are being paid peanuts compared to the business side of the organisation.
Another problem with the British mentality towards compliance is the over-emphasis on ‘process’ as compared with ‘effective enforcement’. The compliance function is awash with processes and procedures, they have manuals full of them, but all they are doing is seeking to demonstrate to any regulator that, if asked, they complied with the process.
But any process that is not rigorously tested and then analysed by a skilled and experienced person will be worthless. I once did a pre-Arrow review for a major global bank of their anti-money-laundering function. They had processes and procedures written down in manuals, provided at vast expense by the consultancy arm of one of the ‘Big Four’ accountancy firms. When I tested how the staff were applying these processes, I found a huge lacuna in their areas of knowledge. To make matters worse, they had no-one with any ‘grey hair’ sitting in the middle of the web, holding all the ends of the processes, in order to ensure that they were being effectively implemented.
If we have a regulatory agency that repeatedly refuses to enforce the anti-money laundering regulations, and is sufficiently inept to accept that the level of compliance being provided by the banks and other financial institutions can be performed using a ‘tick box’ mentality, it provides a key part of the answer as to why London is now the money laundering capital of the world.
This is typical of the British attitude towards any kind of financial regulation. It is as if governments of whichever persuasion, have swallowed the canard that if they are seen to be heavy-handed towards the banks, then this will in some way deprive the UK of some hidden special advantage.
So, we have regulations which only get enforced at the margins, and which the major players ignore at whim. Yes, from time to time the regulators do seek to fine the banks for the worst examples of their egregious behaviour, but fining a bank is nothing more than an HP commitment as far as the bank is concerned. All it does is dilute their profitability, harming the shareholders not the executive perpetrators, which is reflected in even less tax being paid on their profits. If they are not named and shamed, as is routinely the case, then there is no reputational risk attached to the penalty either, and no stigma is applied.
As with so many other areas of financial wrong-doing, it seems the banks have seen off the regulators yet again, and the only loser would appear to be the UK financial services’ arena which is now, apparently, the venue of choice for every international crook’s dirty money. We must prepare ourselves to witness more Russian-style assassination attempts on our streets, as the organised criminals who deposit their money with the even better organised criminals in the banking sector, continue to see London as the money laundry of choice.
This article was written by Rowan Bosworth-Davies and first posted on his blog on March 26th 2012. It is reused with permission. Since then, it has emerged that HSBC faces a $1 billion penalty in the United States for weak anti money laundering controls by the US government. At a hearing in Washington this Tuesday, the US Senate Permanent Subcommittee on Investigations is poised to deliver a blistering attack on the London-headquartered bank’s anti-money laundering systems and controls, highlighting its role in transactions tied to Iran, terrorist financing and drug cartels. In a Reuters Special Report published July 13th 2012, Carrick Mollenkamp and Brett Wolf have detailed how the bank’s Delaware-based anti-money laundering hub pays lip-service to tackling the problem of money laundering.
HSBC & TERRORIST FINANCE
July 30, 2012
Tom Burghardt
http://www.blacklistednews.com/Black_Dossier:_HSBC_&%3B_Terrorist_Finance_/20768/0/0/0/Y/M.html
http://www.hsgac.senate.gov/subcommittee...se-history
It's tough being the world's second largest bank.
HSBC, the London-based British multinational banking and financial services giant operates in 85 countries with 7,200 offices worldwide with assets totaling more than $2.6 trillion (£4.06tn).
They're also caught-up in serial scandals: the Libor interest rate-fixing scam, serious charges of drug money laundering as well as suspicions that bank officers "palled around" with terrorist financiers.
Founded in 1865 when the British Crown seized Hong Kong as a colony in the aftermath of the First Opium War, British merchants (today we'd call them drug lords) needed a bank to handle the brisk trade in the illicit substance and launched the Hongkong and Shanghai Banking Company Limited. Rebranded "HSBC" in 1991, the bank expanded at breakneck speed in the heady days after The Wall fell.
While some might call them a success story, exemplars of financial wizardry in tough economic times, more appropriately perhaps, we might borrow a term from Mafia lore to describe their preeminent position in the capitalist pantheon of corrupt institutions: juiced.
'Sorry, now Go Away'
Today, the "War on Drugs" rivals the "War on Terror" for top spot on the global hypocrisy index.
Moral equivalencies abound. After all, when American secret state agencies manage drug flows or direct terrorist proxies to attack official enemies it's not quite the same as battling terror or crime.
Pounding home that point, a new report by the Senate Permanent Subcommittee on Investigations accused HSBC of exposing "the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls."
That 335-page report, "U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History," (large pdf file available here) was issued after a year-long Senate investigation zeroed-in on the bank's U.S. affiliate, HSBC Bank USA, N.A., better known as HBUS.
Drilling down, we learned that amongst the "services" offered by HSBC subsidiaries and correspondent banks were sweet deals with financial entities with terrorist ties; the transportation of billions of dollars in cash by plane and armored car through their London Banknotes division; the clearing of sequentially-numbered travelers checks through dodgy Cayman Islands accounts for Mexican drug lords and Russian mafiosi.
From richly-appointed suites at Canary Wharf, London, the bank's "smartest guys in the room" handed some of the most violent gangsters on earth the financial wherewithal to organize their respective industries: global crime.
A case in point. In 2008 alone the Senate revealed that the bank's Cayman Islands branch handled some 50,000 client accounts (all without benefit of offices or staff on Grand Cayman, mind you), yet still managed to ship some $7 billion (£10.9bn) in cash from Mexico into the U.S. Now that's creative accounting!
Playing fast and loose with U.S. banking rules, Subcommittee Chairman Carl Levin (D-MI) said that by exploiting the bank's "poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions."
Describing a "compliance culture" that was "pervasively polluted for a long time," Levin said it "will take more than words for the bank to change course."
Yet weasel words and butt-covering were all that were proffered to the American people even before Senate hearings began. Bank spokesman Robert Sherman said in an emailed statement that HSBC "will acknowledge that, in the past, we have sometimes failed to meet the standards that regulators and customers expect. We will apologize, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong."
Right on cue, chief compliance officer David Bagley dramatically fell on his sword during those hearings and resigned on camera. It was quite a performance even by Washington's tawdry standards.
Appearing contrite, Bagley told the panel: "Despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators. ... I recommended to the group that now is the appropriate time for me and for the bank, for someone new to serve as the head of group compliance."
While there's no word yet just how big Bagley's golden parachute will be, it's a sure bet he won't spend a day in jail, nor for that matter will Lord Stephen Green, HSBC's former Chairman and Chief Executive Officer.
Between 2003-2010, Green tilled the helm after serial stints directing The Bank of Bermuda Ltd., HSBC Mexico, SA, HSBC Private Banking Holdings (Suisse) SA and HSBC North American Holdings Inc.; units which feature prominently in the scandal. Sensing perhaps that the jig was up, last year he joined David Cameron's Conservative government as Minister of State for Trade and Investment.
Unlike Pappy Bush who claimed to be "out of the loop" during the Iran-Contra guns-for-drugs affair, Green was fully apprised of bank shenanigans and the Senate published emails which prove it.
Cheekily however, while underlings take the fall, Green told The Daily Telegraph, "I do not believe that I have a case to answer other than in the important sense that as chairman and chief executive I was responsible for what the company did. HSBC has expressed regret for the failures. I share that regret."
The Telegraph noted that Green has not considered resigning from Cameron's government, saying he was "very engaged" with his current plum post.
Ironically enough, the current Baron of Hurstpierpoint is an ordained priest in the Church of England and the author of an inspirational tome, Good Value: Reflections on Money, Morality and an Uncertain World. And no, you can't make this stuff up!
The top spot is now occupied by Stuart Gulliver who, quicker than you can say "we're sorry," admonished employees to "do better" and expressed remorse over his firm's "unacceptable behavior." Never mind that before ascending the throne, Gulliver was director of HBUS, HSBC Latin American Holdings Ltd., and HSBC Bank Middle East Ltd., divisions that have raised more than an eyebrow or two amongst Subcommittee investigators.
Topping Bagley's Kabuki-lite performance with her own rendition of clown car camp, Irene Dorner, HBUS's President and CEO told the Senate: "We deeply regret and apologize for the fact that HSBC did not live up to the expectations of our regulators, our customers, our employees, and the general public. HSBC's compliance history, as examined today, is unacceptable. ... We've worked hard to foster a new culture that values and rewards effective compliance, and that starts at the top."
Bathos aside, it was a polite way of saying "let's move on" and get back to the business of lining our pockets; after all, it's what we do best.
'The past is never dead. It's not even past'
Years before hijackers slammed passenger planes into the World Trade Center and the Pentagon killing nearly 3,000 people, secret state agencies began to exploit the fraternal links between Osama bin Laden's Afghan-Arab database of disposable Western intelligence assets, also known as al Qaeda, and prominent financial institutions.
In his 1999 book, Dollars for Terror, journalist Richard Labévière relates how a former CIA analyst explained: "The policy of guiding the evolution of Islam and helping them against our adversaries worked marvelously well in Afghanistan against the Red Army. The same doctrines can still be used to destabilize what remains of Russian power, and especially to counter the Chinese influence in Central Asia."
Was a new Cold War dawning?
No. In fact, it was the same Cold War. Only this time it was tricked-out in seductive finery by denizens of Western think-tanks and on-the-make NGOs. In the age of spin and endless news cycles, they'd hit upon a splendid formula to pour the "old" imperialist wine into new bottles: "humanitarian intervention" and a "responsibility to protect."
It was a brilliant script. In the blink of an eye our media-saavy masters could "enhance democracy" and "reform markets," magically transforming publicly-owned resources into privately-held assets controlled by banks! That terrorist proxies would serve as walk-ons and help drive the final nail into the coffin of national sovereignty wasn't considered proper conversation in polite company.
Labévière wondered whether "the new forms of terrorism actually embody the highest stage of capitalism?" They did, and "the straw men of the bin Laden Organization's subsidiaries [were] very well received by the business lawyers of Wall Street and the Bahamas, by the wealth managers of Geneva, Zurich and Lugano, and in the hushed salons of the City of London."
Not so curiously perhaps, "the privatization of violence and the privatization of the economy has become paradigmatic." In fact, "apart from any religious purpose," Labévière wrote, "the 'Jihad' is gaining ground as a profitable activity. It becomes liable to all the mafioso devolutions, and sinks into pure banditry. In many cases, Islamist ideology is used as a wonder worker to paper over banditry in all its forms."
Bin Laden as a Mafia capo di tutti capi? It certainly was a novel reading of geopolitical machinations!
More to the point, if an "army marches on its stomach," who then are the money men who put food in their bellies and kalashnikovs in their hands?
Bankrolled by Saudi and Gulf banks with a wink, a nod and logistical support from their old friends, the CIA and the Pentagon, today's Green condottieri once again are on the march, wrecking havoc and sowing chaos, with particular attention paid to states targeted as official enemies by the Global Godfather. Just ask the Iraqis, Libyans and Syrians.
While the Senate report may have disclosed that HSBC turned a blind eye to terrorist financing among it correspondent banks, the Riyadh-based Al Rajhi Bank for one, Saudi Arabia's largest privately-held financial institution, such arrangements hardly flourished in a vacuum.
With assets totaling $59 billion (£92.5bn), the Al Rajhi's are amongst the wealthiest families in the Kingdom. Investigators found that after 9/11 "evidence began to emerge that Al Rajhi Bank and some of its owners had links to organizations associated with financing terrorism, including that one of the bank's founders was an early financial benefactor of al Qaeda."
While the Al Rajhi family deny any role in financing terrorism, they have declined "to address specific allegations made in American intelligence and law-enforcement records, citing client confidentiality," The Wall Street Journal reported back in 2007.
Journalist Glenn R. Simpson averred that "a 2003 CIA report claims that a year after Sept. 11, with a spotlight on Islamic charities, Mr. Al Rajhi ordered Al Rajhi Bank's board 'to explore financial instruments that would allow the bank's charitable contributions to avoid official Saudi scrutiny'."
"A few weeks earlier," the Journal disclosed, the Agency said that "Mr. Al Rajhi 'transferred $1.1 billion to offshore accounts--using commodity swaps and two Lebanese banks--citing a concern that U.S. and Saudi authorities might freeze his assets.' The report was titled 'Al Rajhi Bank: Conduit for Extremist Finance'."
Although U.S. law enforcement and secret state agencies "acknowledge it is possible that extremists use the bank's far-flung branches and money-transfer services without bank officials' knowledge," the Journal noted that CIA analysts had concluded that "senior Al Rajhi family members have long supported Islamic extremists and probably know that terrorists use their bank."
It goes without saying that one should always approach CIA reports with a healthy dose of skepticism, especially in light of the Agency's well-documented history of employing cut-outs such as al Qaeda as terrorist cats' paws.
Such reports however, lay a trail of bread crumbs that policy makers can either act upon or more likely, ignore. That senior Bush and Obama administration officials did nothing with this information, never mind the regulatory agencies charged to enforce anti-money laundering laws, is testament to the corrupt, bipartisan nature of American policy as a whole.
It also beggars belief that Lord Green or the bank's compliance officers were unaware of CIA allegations or that Britain's own foreign intelligence arm, MI6, hadn't apprised top officials of the risks involved. In fact, as we'll see below, HSBC's own internal documents prove otherwise.
Osama's 'Golden Chain'
There were certainly plenty of red flags flying which should have alerted bank officials.
In March 2002, al Qaeda's list of financial benefactors surfaced when computers were seized in Sarajevo at the Bosnian headquarters of the Benevolence International Foundation, "a Saudi based nonprofit organization which was also designated a terrorist organization by the Treasury Department."
Osama bin Laden, who held a Bosnian passport issued by the breakaway government fronted by Western "liberal interventionist" darling Alija Izetbegovi? during NATO's dismemberment of socialist Yugoslavia, was a supporter of the Nazi SS Handschar Division during World War II. Bin Laden referred to this group of financial angels as his "Golden Chain."
Additional evidence also emerged in 2002 during Operation Green Quest, a Treasury Department effort to "disrupt terrorist financing in the United States."
In March of that year, law enforcement officials raided the Herndon, Virginia offices of the SAAR Foundation "an Al Rajhi-related entity." Indeed, the name "SAAR" was an acronym for the organization's founder, Sulaiman Abdul Aziz Al Rajhi, the controlling partner of the Al Rajhi Bank.
Subcommittee investigators commented that "one of the 20 handwritten names in the Golden Chain document identifying al Qaeda's early key financial benefactors is Sulaiman bin Abdul Aziz Al Rajhi, one of Al Rajhi Bank's key founders and most senior officials."
An affidavit supporting the search warrants "detailed numerous connections between the targeted entities and Al Rajhi family members and related ventures. The affidavit stated that over 100 active and defunct nonprofit and business ventures in Virginia were part of what it described as the 'Safa Group,' which the United States had reasonable cause to believe was 'engaged in the money laundering tactic of 'layering' to hide from law enforcement authorities the trail of its support for terrorists."
Green Quest investigators were particularly keen on unraveling links between the SAAR Foundation and the Swiss Al Taqwa Bank, incorporated in the Bahamas in 1988 for "tax purposes."
Founded by Swiss Nazi sympathizer and convert to Islam, Albert Armand (Achmed) Huber, who professed admiration for both Adolph Hitler and Osama bin Laden, the bank was accused by U.S. officials in helping al Qaeda launder funds. Although the Treasury Department froze its assets in 2001, the investigation was shut down by the Bush administration before deeper linkages could be fully uncovered.
In 2011, a lawsuit was filed by insurance giant Lloyd's of London against Saudi Arabia which sought to recover pay outs to victims of the 9/11 attacks. The suit noted "that two individuals who were former executives at Bank al Taqwa, Ibrahim Hassabella and Samir Salah, were also associated with the SAAR Foundation."
At the time, The Independent reported that the legal claim suggested that defendants "'knowingly' provided resources, including funding, to al-Qa'ida in the years before the attack and encouraged anti-Western sentiment which increased support for the terror group."
According to court briefs, "Absent the sponsorship of al-Qa'ida's material sponsors and supporters, including the defendants named therein, al-Qa'ida would not have possessed the capacity to conceive, plan and execute the 11 September attacks. The success of al-Qa'ida's agenda, including the 11 September attacks themselves, has been made possible by the lavish sponsorship al-Qa'ida has received from its material sponsors and supporters over more than a decade leading up to 11 September 2001."
Senate investigators, citing Green Quest and Lloyd's case files, noted that "Mr. Hassabella was a former secretary of al Taqwa Bank and a shareholder of SAAR Foundation Inc. Mr. Saleh was a former director and treasurer of the Bahamas branch of al Taqwa Bank, and president of the Piedmont Trading Corporation which was part of the SAAR network. The U.S. Treasury Department has stated: 'The Al Taqwa group has long acted as financial advisers to al Qaeda, with offices in Switzerland, Liechtenstein, Italy and the Caribbean.' Regarding Akida Bank, the lawsuit complaint alleged that Sulaiman bin Abdul Aziz Al Rajhi was 'on the board of directors of Akida Bank in the Bahamas' and that 'Akida Bank was run by Youssef Nada, a noted terrorist financier'."
The report went on to state that "HSBC was fully aware of the suspicions that Al Rajhi Bank and its owners were associated with terrorist financing, describing many of the alleged links in the Al Rajhi Bank client profile."
As icing on the cake, a 2007 study published by the Congressional Research Service (CRS) also found that "Saudi individuals and other financiers associated with the Golden Chain enabled bin Laden and Al Qaeda to replace lost financial assets and establish a base in Afghanistan following their abrupt departure from Sudan in 1996."
Assets I might add, that were used to bankroll the 9/11 attacks.
'Keen to maintain the relationships'
HSBC's dubious links to the Al Rajhi Bank didn't end with information discovered in the "Golden Chain" files; it fact, they were the tip of the proverbial iceberg.
After 9/11, the FBI reported that three of the hijackers, Hani Hanjour, Nawaf Alhazmi and Abdulaziz Alomari cashed thousands of dollars in travelers checks and received wire transfers from an unnamed individual drawn on accounts at the Al Rajhi Bank.
As researcher Kevin Fenton pointed out in Disconnecting the Dots, links among most of the hijackers were discovered through their banking transactions. "In this context," Fenton wrote, "it is worth noting that Global Objectives, a British banking compliance company, identified fifteen of the nineteen hijackers as high-risk individuals and established database profiles for them before the attacks. ... The list of high-risk people maintained by Global Objectives was available to dozens of banks," a list that presumably also included HSBC.
While there is no evidence that HSBC, or for that matter the Al Rajhi Bank, had prior knowledge of the 2001 atrocity, the gross indifference exhibited by these institutions through their violation of "know your client" (KYC) rules governing financial transactions reveal a callous disdain for elemental norms as they raced to inflate their balance sheets come hell or high water.
Privileged communications amongst senior staff revealed they were well aware of the issues and risks involved, yet did worse than nothing, they lobbied that HSBC continue their arrangements with the Al Rajhi Bank.
Suspicions were such that senior staff "classified Al Rajhi Bank as a 'Special Category of Client' (SCC), its highest risk designation." This was done, Senate investigators noted, because the Kingdom was considered a "high risk country" and due to the fact Al Rajhi's largest shareholder, Sulaiman bin Abdul Aziz Al Rajhi was considered "a Politically Exposed Person (PEP)."
Internal HSBC documents also revealed that in 2002, that is, after the 9/11 provocation, "the International Private Banking Department asked to transfer [several] accounts to HSBC's Institutional Banking Department in Delaware which had superior ability to monitor account activity."
In fact, transferring Al Rajhi accounts to the bank's Delaware division would have just the opposite effect and bank officials knew it.
As journalist Nicholas Shaxson noted in his exposé of offshore banking, Treasure Islands, "Delaware is the biggest state provider of offshore corporate secrecy." Shaxson pointed out that Delaware's Chancery Court has a "'business judgement rule' under which courts should not second-guess corporate managers," thereby "granting corporate bosses extraordinary freedoms from bothersome stockholders, judicial review, and even public opinion."
So much for any alleged "superior ability to monitor account activity"!
HBUS's Joseph Harpster wrote an email, stating: "The most recent concern arose when three wire transfers for small amounts ($50k, $3k and $1.5k) were transferred through the account for names that closely resembled names, not exact matches, of the terrorists involved in the 9/11 World Trade Center attack. ... The profile of the main account reflects a doubling of wire transfer volume since 9/01, a large number of travelers checks but with relatively low value and some check/cash deposits. According to the account officer, traffic increased because they have chosen to send us more business due to their relationship with Saudi British Bank and the added strength of HBC versus Republic. ... Maintaining our business with this name is strongly supported by David Hodghinson of [Saudi British Bank] and Andre Dixon, Deputy Chairman of [HSBC Bank Middle East]. Niall Booker and Alba Khoury [of HBUS] also support."
Aside from adverse publicity, the "low value" of the transactions seemed not to have troubled Harpster or his associates in the least. After all, the total "cost" of murdering 3,000 human beings were certainly small compared to the price of a vacation home in the Hamptons or a new Maserati.
Anxious there might be increased scrutiny from regulators (no worries there!), Harpster's email was forwarded by Douglas Stolberg, the head of Commercial and Institutional Banking to Alexander Flockhart, then a senior executive in Retail and Commercial Banking at HBUS. Stolberg noted: "As we discussed previously, Compliance has raised some concerns regarding the ongoing maintenance of operating/clearing accounts for Al Rajhi group." He forwarded recommendations on how to handle the account: "Retain [International Private Banking] as the relationship manager domicile for continuity purposes, and as we understand there is interest in further developing private banking business with family members. ... Domicile the actual accounts with Delaware where HBUS's most robust account screening capabilities reside."
"Screening capabilities" which could be shielded from nosy regulators due to Delaware's strict bank secrecy laws.
Stolberg went on to state: "[T]his has become a fairly high profile situation. Compliance’s concerns relate to the possibility that Al Rajhi's account may have been used by terrorists. If true, this could potentially open HBUS up to public scrutiny and/or regulatory criticism. SABB [Saudi British Bank] are understandably keen to maintain the relationships. As this matter concerns primarily reputational and compliance risks, we felt it appropriate for SMC [Senior Management Committee] members to be briefed ... so that they may opine on the acceptability of the plan. Please advise how you would prefer us to proceed." (emphasis added)
According to Senate staff, "Mr. Harpster reported a week later that Mr. Flockhart had decided to transfer the accounts to HBUS in the Delaware office."
But HSBC weren't the only entities hoping to curry favor with the Kingdom. A 2009 Government Accountability Office (GAO) report went on to note that "certain performance targets set by the State Department had been dropped in 2009, such as the establishment of a Saudi Commission on Charities to oversee actions taken by Saudi charities abroad as well as certain regulations of cash couriers."
Although GAO "recommended that the United States reinstate the dropped performance targets to prevent the flow of funds from Saudi Arabia 'through mechanisms such as cash couriers, to terrorists and extremists outside Saudi Arabia,' the State Department's "most recent annual International Narcotics Control Strategy Report contains no information about Saudi Arabia's anti-money laundering or terrorist financing efforts."
One reason why the State Department's report contains "no information" just might be the Obama administration's policy of supporting Saudi-backed Salafi terrorists soon to come online in Libya and Syria, financed through "Saudi charities abroad" or more directly through "cash couriers."
'You'd better be making lots of money!'
The Senate disclosed that HSBC "provided Al Rajhi Bank with a wide range of banking services, including wire transfers, foreign exchange, trade financing, and asset management services."
"In the United States," investigators learned that "a key service was supplying Al Rajhi Bank with large amounts of physical U.S. dollars, through the HBUS U.S. Banknotes Department."
"The physical delivery of U.S. dollars to Al Rajhi Bank was carried out primarily through the London branch of HBUS, often referred to internally as 'London Banknotes'."
Indeed, "HBUS records indicate that the London Banknotes office had been supplying U.S. dollars to Al Rajhi Bank for '25+ years.' In addition to the London branch, HBUS headquarters in New York opened a banknotes account for Al Rajhi Bank in January 2001. The U.S. dollars were physically delivered to Al Rajhi Bank in Saudi Arabia."
"On one occasion in 2008," Senate staff reported, the head of HSBC Global Banknotes Department told a colleague: 'In case you don't know, no other banknotes counterparty has received so much attention in the last 8 years than Alrajhi.' Despite, in the words of the KYC client profile, a 'multitude' of allegations, HSBC chose to provide Al Rajhi bank with banking services on a global basis."
Even though the Al Rajhi Bank "had not been indicted, designated a terrorist financier, or sanctioned," HSBC's Group Compliance section recommended that affiliates should sever their ties.
After that initial decision however, "HSBC affiliates disregarded the recommendation and continued to do business with the bank, while others terminated their relationships but protested HSBC's decision and urged HSBC to reverse it."
Complaints by lower level staff continued, disregarded by higher-ups, even though a U.S. indictment was issued in February 2005 for two individuals "accused among other matters, of cashing $130,000 in U.S. travelers cheques at Al Rajhi Bank in Saudi Arabia" and then smuggling the cash to CIA-backed terrorists in Chechnya.
Although internal bank documents showed that officials decided to cut their ties to the Saudi financial institution, they reversed themselves when pressure was brought to bear by Al Rajhi officials. Between 2006 and 2010, Al Rajhi received shipments totaling more than $1 billion in physical cash in the lucrative banknotes business from HSBC's U.S. affiliate according to investigators. Officials at the Saudi bank "had threatened to pull all of its business from HSBC if the U.S. banknotes business were not restored."
Senate staff reported that on January 4, 2005, "HBUS AML Compliance head Ms. Pesce sent an email to Daniel Jack, an HBUS AML Compliance Officer who often dealt with the London Banknotes office, instructing him to: '[p]lease communicate that Group Compliance will be recommending terminating the Al Rajhi relationship.' Mr. Jack inquired as to when that recommendation would be made. She responded: 'I expect to see an email from Susan Wright today. She tells me that HBME [HSBC Bank Middle East] does not agree with Compliance and will not be terminating the relationship from the Middle East, but she/David B[agley] recommend that in light of US scrutiny, climate, and interest by law enforcement, we in the US sever the relationship from here'."
At the time, Susan Wright was "the Chief Money Laundering Control Officer for the entire HSBC Group. She reported to David Bagley, head of the HSBC Group's overall Compliance Department."
Senate investigators noted that the "documents do not explain why HSBC Middle East disagreed with the decision or why it was allowed to continue its relationship with Al Rajhi Bank, when HSBC's Group Compliance had decided to sever the relationship between the bank and other HSBC affiliates due to terrorist financing concerns."
It soon became clear however, that "HSBC Group Compliance began to narrow its scope." Shortly thereafter a trader in the Banknotes department wrote, "for us is business as usual." Alan Ketley, HBUS AML Compliance Officer commented on the decision not to include Al Rajhi Trading in their earlier decision to sever all ties: "Looks like you're fine to continue dealing with Al Rajhi. You'd better be making lots of money!"
Meanwhile, "Al Rajhi Bank communicated the threat to 'pull any new business with HSBC' unless given a 'satisfactory explanation' why HSBC had stopped supplying it with U.S. dollars via its relationship managers," the Senate disclosed.
In short order, it was business as usual.
Despite continuing allegations of terrorist financing swirling around Al Rajhi Bank, HBUS "continued to supply, through its London branch, hundreds of millions of U.S. dollars to Al Rajhi Bank in Saudi Arabia. In addition, at Al Rajhi Bank's request, HBUS expanded the relationship in January 2009, by authorizing its Hong Kong branch to supply Al Rajhi Bank with non-U.S. currencies, including the Thai bat, Indian rupee, and Hong Kong dollar." (emphasis added)
When concerns were raised internally once again, Christopher Lok, the head of HSBC's Global Banknotes Department in New York fired back: "This is an on-going debate that will never go away. My stance remains the same, i.e. until it[']s proved we cannot simply rely on the Wall Street Journal['s] reports and unconfirmed allegations and 'punish’ the client'."
Needless to say, Hong Kong's "arrangement" with Al Rajhi went forward.
Despite "troubling information" which should have led to HSBC's quick exit from the banknotes market, the Senate reported that "HBUS continued to supply U.S. dollars to the bank, and even expanded its business, until 2010, when HSBC decided, on a global basis, to exit the U.S. banknotes business."
In conclusion, one needn't be a "conspiracy buff" to posit a link from HSBC to Al Rajhi to "cash couriers" operating across the Middle East in support of a multitude of U.S.-Saudi-backed "regime change" gambits in play today; policies which "worked marvelously well in Afghanistan against the Red Army."
As investigative journalist Ed Vulliamy pointed out in The Observer, the issues involved here are wider than drug money laundering or terrorist finance. "It is about where banks, law enforcement officers and the regulators--and politics and society generally--want to draw the line between the criminal and supposed 'legal' economies."
Commenting on the HSBC scandal, Robert Mazur, a former Customs Department deep-cover specialist and author of The Infiltrator, who penetrated Medellín cartel money laundering operations during the prosecution and collapse of BCCI in 1991, told The Observer that "the only thing that will make the banks properly vigilant to what is happening is when they hear the rattle of handcuffs in the boardroom."
"The stark truth is," Vulliamy wrote, "the notion of any dichotomy between the global criminal economy and the 'legal' one is fantasy. Worse, it is a lie. They are seamless, mutually interdependent--one and the same."