Hsbc Fined for Money Laundering in Mexico

Despite issues with other banks in recent years, HSBC has remained largely trouble-free – until recently. The British bank, which has branches in around 80 countries worldwide, has been found guilty of allowing money laundering by terrorists, drug lords and other criminal groups to take place through its overseas branches.  The main infraction involved Mexico, a country deemed high risk for money laundering by most financial institutions. The US arm of HSBC, on the other hand, deemed the country low risk, allowing criminals to take advantage of its lax rules. Mexico is well known to have a number of issues with money laundering and drug trafficking.

According to Mexican law enforcement agencies, a drug lord was recorded as saying that the HSBC branch in Mexico was one of the best places in the country to launder money. Since the issue was brought to light earlier this year, HSBC has been putting safeguards in place to ensure that its links with money laundering are severed. However, those safeguards didn’t happen in time to prevent the US Justice Department from slapping a massive fine on HSBC. As a result, the bank has agreed to forfeit $1.256 billion, as well as another $665 million in civil penalties – a total of $1.9 billion in all. 

HSBC Chief Executive Stuart Gulliver has apologised publicly for the oversight and has explained that a more specialist staff has been taken on with the aim of avoiding this situation from happening again in the future. As he said:

“Over the past two years, under new leadership, we have been putting concrete steps to put right what went wrong and to participate actively with government authorities in bringing to light and addressing these issues.”

Although Mexico has proved to be the primary reason for the fine, the US Justice Department also charged HSBC with sanctions violations because of doing business with customers in sanctioned countries, including Iran, Burma, Cuba and Libya. Moreover, HSBC isn’t the only bank that has caught the US regulator’s attention. So far, no banks have actually been indicted – criminal charges have been set aside in preference of warnings to change procedures and paying fines. However, after the record fine HSBC has faced, other multinational banks have been given a clear warning that they have obligations to set money laundering procedures firmly in place and stick to them.

In the grand scale of things, $1.9 billion is just a drop in the ocean for a huge multinational bank like HSBC. Bearing in mind the seriousness with which the world’s financial institutions regard money laundering and illegal gains from drug trafficking, HSBC is fortunate to have got off with just a fine. If it fails to stick to safeguards currently in place, a future infraction could lead to far more serious repercussions – and they would be much deserved.