On 19th November, Lord Myners, a Labour Peer who had previously tabled a Parliamentary Question,(PQ), received his answer from Lord Sassoon, Commercial Secretary for H.M.Treasury.
Lord Myners had enquired if "...Her Majesty's Government could be asked whether the Financial Services Authority is examining money laundering by HSBC in Mexico..."
His answer, to be found in Hansard source (Citation: HL Deb, 19th November 2012, c303w was given by Lord Sassoon, who replied;
"...The Financial Services Authority is the regulator for financial institutions in the UK. HSBC's operations in Mexico are not incorporated or authorised in the UK and are, therefore, not under the FSA's supervisory jurisdiction. However, the FSA maintains regular dialogue with the other regulatory authorities in relation to their investigations into the HSBC Group..."
Well, yes and no! You see, inside this apparently benign statement hides a heap of half-truths and lies, and which tries to do more to get the FSA out of a difficult spot, than to tell the truth to the British public.
Back in July 2012, it was announced that "...Mexican regulators have imposed a fine of $27.5m (£17.7m) on banking giant HSBC for its failure to comply with money-laundering regulations.
The fine comes a week after HSBC's chief compliance officer resigned over allegations that the bank ignored warnings that Mexican drug money was being allowed to pass through the bank.
Mexico's National Banking and Securities Commission (CNBV) said it had imposed the fine against HSBC due to its "non-compliance with anti-money laundering systems and controls".
HSBC Mexico issued a statement acknowledging that it failed to report 39 suspicious transactions and had been late in reporting 1,729 others.
"...HSBC Mexico recognises it failed to strictly comply with banking regulations, and with the standards that regulators and clients expect of our institution..." it said.
A week after the fining, a United States Senate committee found that HSBC had provided a conduit for "drug kingpins and rogue nations".
HSBC's head of compliance, David Bagley, resigned at the Senate committee hearing. Speaking at the US Senate Permanent Sub-committee on Investigations, David Bagley, Head of Group Compliance, HSBC Holdings plc, said:
"...As I have thought about the structural transformation of the bank's compliance function, 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. I have agreed to work with the bank's senior management towards an orderly transition of this important role..."
There is something about all this that doesn't make any sense!
Lord Sassoon said in the House of Lords that "... HSBC's operations in Mexico are not incorporated or authorised in the UK and are, therefore, not under the FSA's supervisory jurisdiction..."
So, why is the Group Head of Group Compliance of the Holdings Company, based in the UK, falling on his sword. According to Lord Sassoon's statement, it was nothing to do with him.
The only answer must be that HSBC Mexico must still have been somehow directly tied into HSBC UK, for David Bagley to feel it necessary to resign.
But if it is tied into the UK, then wouldn't that give the FSA a jurisdiction?
You might very well think so, but remember, this is the fantasy world of smoke and mirrors which is inhabited by the New Centurions of the FSA, who have been getting a whole load of shit recently, and who don't like the criticism. It might be a bit unpleasant if it were to be found that they should have been exercising a far greater degree of regulatory control over HSBC and their dodgy overseas holdings, because some irritating member of the House of Lords might ask what the fuck they were doing while HSBC was laundering money for the Mexican cartels?
No, far better to get some tame civil servant to cobble together the usual weasel worded answer to a (PQ), seeking to obfuscate and avoid telling the truth.
Hence we got the answer as reported.
However, what the answer failed to identify and report was the small fact that HSBC Mexico, while it may not be incorporated in the UK, is a wholly-owned subsidiary of a UK registered HSBC entity.
A quick study of HSBC Mexico's accounts reveals the following;
HSBC México, S. A. (the Bank or HSBC) is a subsidiary of Grupo Financiero HSBC, S. A. de C. V. (the Group), who owns 99.99% of its capital stock. HSBC Latin America Holdings (UK) Limited (HSBC LAH) currently owns 99.99% of the Group’s capital stock.
Whoops, neat little trick that, set up some dodgy little Mexican operation, but then tie it back into Head Office through a series of reversed inter-related company holdings.
ddress at 8 Canada Square, London, E14 5HQ, and on 5th April 2012, a gentleman called Sandy Flockhart retired as an Executive Director of HSBC Holdings plc, with effect from 30 April 2012, after a career spanning 37 years. He will be retained on the Board as a non-executive Director in order for the Board to retain access to his extensive international experience. Sandy will also retain his positions as Chairman of HSBC Bank plc, the Group's principal UK and European subsidiary, as Chairman of HSBC Latin America Holdings (UK) Limited and as a Director of HSBC Bank Middle East Ltd.
Now, call me old fashioned, but a UK registered company that has as its Chief Executive a man who is still chairman of HSBC Bank plc, and which has its address in Canada Square, and which owns a Mexican bank 99.99%, might just possibly be thought to be subject to FSA oversight, and moral suasion!
In any event, any British bank or British-owned bank which operates abroad, is subject, regulatorily, to both UK regulatory oversight as well as local supervision.
However, none of this is superceded by the fact that UK law on money laundering possesses a major extraterritorial implication. It is defined under Section 340, sub section11 of Part 7 of the Proceeds of Crime Act 2002 as follows;
(11) Money laundering is an act which—
(a)constitutes an offence under section 327, 328 or 329,
(b)constitutes an attempt, conspiracy or incitement to commit an offence specified in paragraph (a),
(c)constitutes aiding, abetting, counselling or procuring the commission of an offence specified in paragraph (a), or
(d)would constitute an offence specified in paragraph (a), (b) or (c) if done in the United Kingdom.
Sub paragraph (d) means that it does not matter where in the world a predicate offence including money laundering took place, if it passes through a UK bank or institution anywhere in the world, it will be treated for prosecution purposes as if it had taken place in the United Kingdom.
So where HSBC Mexico laundered money in Mexico, it still gives the UK Government a jurisdiction in the UK to deal with HSBC for the actions of its wholly-owned subsidiary. In any event, it must be certain that much of that dirty money passed through
This is such a simple concept, it is hard to understand why it is denied, and it is clear that the FSA does have as much jurisdiction as it wants to exercise, if it wanted to accept the responsibility. However, the FSA is in a state of serial denial when it comes to the question of their exercising their powers to prosecute for breaches of the Money Laundering Regulations or for money laundering per se.
This it is why it is that Lord Sassoon stands up in the House of Lords and utters these ridiculous and misleading words which I hope will come back to haunt him in the future.
It is bullshit such as this that means that the ordinary people of Britain are being misled about the true state of serious criminality being committed by our banks.
HSBC's actions in Mexico were deliberate criminal money laundering. HSBC freely and dishonestly entered into a criminal consipracy to move vast sums of drug money for Mexican king-pins. They did this because they knew that on a balance of probabilities, they would probably get away with it, and they took the chance that they wouldn't get caught.
They were caught and fined by the Mexican authorities. That does not and should not mean that they are not subject to UK supervisory oversight, and that they should not be forced to come to judgement in this country and take the consequences of their actions.
To seek to explain away the unwillingness and the inability of a regulator which has no moral courage for this fight, despite all the evidence to support their ability to take action, by saying that because the front organisation was not a UK registered institution, despite the fact that it was wholly-owned by a UK institution, is to plumb the depths of perfidy.
It is lies like these which must make the state of British Banking organised criminality an electoral issue, so that the British tax payers may know exactly how much banking crime is being covered up in their name!