The US Senate is investigating HSBC over money laundering as the country moves to stamp out secret bank transactions, a report says.

HSBC is being probed by US lawmakers in a money-laundering inquiry, forming another stage in how the US is attempting to stamp out secret transactions by the banking system, Reuters reported, citing unnamed sources and a company filing.

The inquiry being conducted by the Senate Permanent Subcommittee on Investigations could produce a report and congressional hearing later this spring, the news service said.

The
UK/Hong Kong-listed banking giant, which also has a large private
banking operation, later issued a lengthy statement about the issue and
the efforts it says it is taking.

"We support US efforts to strengthen anti-money
laundering (AML) defenses and protect the integrity of the financial system
through our rigorous new internal processes and through our close working
partnership with regulators and law enforcement. As stated in filings, we have ongoing discussions with
officials (including the PSI) on a number of regulatory and compliance
matters.  The nature of these discussions
is confidential; in all cases we are cooperating," it said.

"With regards to the consent orders, we acknowledged we fell
short of our own expectations and are working with our regulators to
address
and resolve the issues raised. We have taken a number of steps:
Investments in people, systems and third-party expertise; new AML
monitoring system in place that improves
detection capabilities; new AML Compliance Helpline and new Suspicious
Transaction reporting mechanism to support employees; new Know Your
Customer program with risk ratings for
onboarding, remediation; new enhanced AML training for all US employees
to
deepen skills /expertise; significant expansion of AML-focused staff;
actions to reduce risk across US portfolio of financial
services; proactively exited non-strategic, high-risk global Bank
Notes business in 2010 (HSBC decision, not a regulator request) and
ended a number of correspondent banking relationships
(again, HSBC decision)," HSBC said. 

Scrutiny
 

US officials are scrutinising how global banks have processed and allegedly concealed financial transactions for countries which allegedly support terrorism, corrupt foreign officials, drug gangs and criminals. The report said that since 2008, European and US banks have signed deferred prosecution agreements and paid more than $1.2 billion in penalties for alleged violations of anti-money laundering regulations.

"We have ongoing discussions with officials" including the Senate panel "on a number of regulatory and compliance matters. The nature of these discussions is confidential; in all cases, we are cooperating,” a HSBC spokesperson was quoted as saying.

This is not the only regulatory issue to have affected HSBC. In July last year, HSBC’s private bank said it will no longer provide offshore banking services to US clients, a move following that of Switzerland’s UBS, Julius Baer and other banks amid a US crackdown on offshore tax evasion.

Legal move

In its report, the newswire pointed out that earlier in January, HSBC named former top US Treasury Department official Stuart Levey as chief legal officer, which the report said is “a sign of how the bank is hiring outside experts in money laundering”.

In 2003 and 2010, the report said that two US bank regulators raised serious concerns about the bank's anti-money laundering systems.

In securities filings, the bank has disclosed increasing inquiries. In 2010, the bank disclosed that it had received grand jury subpoenas and was being investigated by the Justice Department in money-laundering inquiries. It subsequently said the District Attorney's office in Manhattan was investigating.

Then in November, HSBC said additional inquiries were being pursued by the Senate panel and the US Securities and Exchange Commission, according to an SEC filing by HSBC USA.