After reported IEDs near the border, could US banks again unwittingly be responsible for funding terrorist organizations?

This week, we learned that the Mexican military reportedly seized ten improvised explosive devices (IEDs) at the US-Mexico border. That led US Customs and Border Protection to issue a safety alert warning agents to be mindful of possible attempts to smuggle such devices into the US. Law Enforcement Today reported on this startling development. 

That led us to go back some thirteen years to a scandal involving HSBC, a bank that touts itself as being “tailored for global citizens” who can “seamlessly manage [your] worldwide finances.” 

Forbes Magazine reported at that time that HSBC, through “lax anti-money laundering policies,” permitted foreign terrorists’ and drug cartels’ blood money to enter the United States while gaining access to the liquidity of the U.S. dollar, according to a Senate report. Those foreign assets included Mexican drug money, Iranian terrorist money, and Russian money of suspicious origin. 

The report was released on July 16, 2012, by the Permanent Committee on Investigations after a year-long investigation. The subcommittee discovered HSBC violated a number of rules that exposed the US financial system to “a wide array of money laundering, drug trafficking, and terrorist financing.”

The report noted HSBC’s Mexican affiliate funneled $7 billion into the US between 2007 and 2008, which possibly included “proceeds from illegal drug sales in the United States.” 

In a statement at the time, HSBC acknowledged that “in the past, we have sometimes failed to meet the standards that regulators and customers expect,” Forbes reported. They said they would “improve their oversight and compliance with the law” while also being “committed to fixing what is wrong” and “taking the opportunity to learn from previous mistakes.” 

The subcommittee report said HSBC actively broke rules designed to “block transactions involving terrorists, drug lords, and rogue regimes.” For example, in one case, “two HSBC affiliates sent nearly 25,000 transactions involving $19.4 billion through their HBUS [HSBC’s US affiliate] accounts over seven years without disclosing the transactions’ links to Iran.” 

HSBC was also found to have provided financing using US dollars and services to banks in Saudi Arabia and Bangladesh that were tied to terrorist organizations. Realize this took place less than ten years after the September 11, 2001, terrorist attacks, which were closely tied to Saudi Arabian nationals. HSBC also cleared nearly $300 million in “obviously suspicious traveler's cheques” to the benefit of Russian citizens “who claimed to be in the used car business.” 

The Senate report also faulted the Office of the Comptroller of the Currency (OCC), which failed to initiate any enforcement action against HSBC despite numerous violations. Among those violations was failure to monitor $60 trillion in wire transfer and account activity, 17,000 unreviewed account alerts regarding suspicious banking activity, and inability to conduct anti-money laundering due diligence before opening accounts for HSBC affiliates, Forbes wrote. 

The late Sen. Carl Levin (D-Mich.) slammed HSBC and the OCC: 

“Due to poor AML [anti-money laundering] controls, HBUS exposed the United States to Mexican drug money, suspicious traveler's cheques, bearer share corporations, and rogue jurisdictions. The bank’s federal bank regulator, the OCC, tolerated HSBC’s weak AML system for years. If an international bank won’t police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the U.S. bank being used to aid and abet that illicit money.” 

According to Investopedia, HSBC laundered over $881 million for Mexico’s Sinaloa and Colombia’s Norte del Valle drug cartels. As a result of the Senate investigation, HSBC was hit with a $1.9 billion fine and $665 million in civil penalties, Reuters reported. 

HSBC was among a slew of financial institutions caught up in processing illegal transactions for criminal enterprises and sanctioned governments, Investopedia reported. Among those sanctioned governments were Cuba, Iran, Sudan, and Syria. Institutions included Credit Suisse, Barclays, ING, Deutsche Bank, and others. 

In light of the IED revelations, it isn’t too much of a stretch to believe that drug cartels and foreign terrorist organizations continue to launder their money through the world’s largest financial institutions. This article isn’t an attempt to draw a line from HSBC or any of the other institutions mentioned to the discovery of IEDs at the southern border. It is intended to show the institutions that are supposed to be protecting us from criminal and terrorist enterprises are vulnerable to being used as a conduit to finance their operations. 

It’s happened before…did it happen again?