Washington: Apologising to the US lawmakers for its "mistakes" in tackling terror funding and money laundering related risks, global banking giant HSBC on Tuesday said it is committed to fixing the lapses with the bank's risk management system.

Ahead of its deposition before the US Senate Permanent Subcommittee on Investigations, which has accused HSBC of exposing the US financial system to various money laundering, terrorist financing and drug trafficking risks from abroad over the years, the bank said it has already taken some concrete steps in this regard.

"With a new senior leadership team and a new strategy in place since last year, HSBC has already taken concrete steps to augment the framework to address these issues including significant changes to strengthen compliance, risk management and culture," the bank said in a statement.

HBO was scheduled to appear before the Senate Subcommittee later on Tuesday.

"HSBC takes compliance with the law, wherever it operates, very seriously. We will acknowledge that, in the past, we have sometimes failed to meet the standards that regulators and customers expect.

"We will apologise, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong.

The bank said that the steps already undertaken by it to augment its systems include creation of a new global structure, which makes HSBC easier to manage and control with four global businesses and ten global functions, allowing a coordinated and consistent approach, including compliance and risk.

In addition, HSBC said it would apply a consistent approach in knowing your customer (KYC) regulations and the bank would introduce a global risk filter which would standardise the way it performs its business in "high risk" countries.

"We have learned a great deal working with the Subcommittee on this case history and also working with US regulatory authorities, and recognise that our controls could and should have been stronger and more effective in order to spot and deal with unacceptable behaviour," HSBC said.

The bank said successful implementation of these steps would make a significant difference to the overall integrity of the global financial system.

"Success in detecting and preventing illicit actors' access to the global financial system calls for constant vigilance and HSBC will continue to work in close cooperation with all governments to achieve this. This is integral to the execution of HSBC's strategy and to our core values," the UK-based bank said.

The US Senate's Permanent Sub-committee on Investigations last night released a summary report of its probe after a year-long probe into the affairs of the global banking major.

Reacting to the report from the Senate Sub-Committee, HSBC said in a statement that it would apologise for failing to meet regulatory and customer standards in the past.

The bank said it recognises that its "controls could and should have been stronger and more effective in order to spot and deal with unacceptable behavior."

For decades, HSBC has been one of the most active global banks in the Middle East, Asia, and Africa, despite being aware of the terrorist financing risks in those regions, the panel report said.

"After the 9/11 terrorist attack in 2001, evidence began to emerge that Al Rajhi Bank and some of its owners had links to financing organisations associated with terrorism, including evidence that the bank's key founder was an early financial benefactor of al Qaeda.

"In 2005, HSBC announced internally that its affiliates should sever ties with Al Rajhi Bank, but then reversed itself four months later, leaving the decision up to each affiliate. HSBC Middle East, among other HSBC affiliates, continued to do business with the bank," it added.

The report also said that HSBC sent nearly 25,000 transactions involving USD 19.4 billion through their HBUS accounts over seven years without disclosing the transactions' links to Iran.

In less than four years, HSBC cleared USD 290 million in suspicious US travellers cheques for a Japanese bank, benefiting Russians who claimed to be in used car business.

The report revealed that HSBC offered more than 2,000 accounts to bearer in the name of bearer "share corporations", which allows secrecy by assigning ownership to the person with physical possession of the shares.

In 2010, HSBC was cited by its federal regulator, the Office of the Comptroller of the Currency (OCC), for multiple severe Anti-Money Laundering (AML) deficiencies.

These deficiencies include a failure to monitor USD 60 trillion in wire transfer and account activity; a backlog of 17,000 unreviewed account alerts regarding potentially suspicious activity; and a failure to conduct AML due diligence before opening accounts for HSBC affiliates.

Subcommittee investigators found that the OCC had failed to take a single enforcement action against the bank, formal or informal, over the previous six years, despite ample evidence of AML problems.

The report recommended a number of changes at HSBC’s US bank, including higher scrutiny of HSBC affiliates for money-laundering risk, closing accounts of banks linked to terror financing, and steps to ensure the bank does not process transactions with prohibited entities such as terrorists, drug lords, and rogue regimes.

It also recommended overhauling the AML controls on travelers cheques and eliminating bearer share accounts.


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