Earlier this week, a Senate investigative committee released a scathing 330 page report (click here for the link to the full PDF) describing HSBC’s laundering of money for Mexican drug lords, Iran, the Taliban and other assorted malefactors.
Inquiring minds may ask, “How did this happen?”
The answer, as the recent Economist describes, is quite simple:
The [Senate] report describes a constant struggle for resources by a compliance department vainly attempting to monitor a vast and expanding number of transactions and regulations in the face of efforts by executives to tamp down costs.
One employee who pushed hard for more resources to address festering problems was apparently sacked because of her efforts. Another, cited in 2009 by the bank’s primary regulator, the Office of the Comptroller of the Currency (OCC), as being unqualified, was promoted.
As with so many other aspects of our current financial mess, regulators were aware of a multiplicity of problems, yet did nothing.
HSBC’s compliance problems were hardly an internal secret. They were flagged numerous times by regulators, but the bank received only the mildest of sanctions in exchange for promises to do better. Senators Levin and Tom Coburn, the two senior members of the committee, slammed the OCC for serving as an ineffectual industry “lapdog”.
Lapdogs and yes-men rewarded; honest employees punished. The story of our financial times.
Oh, by the way, “we’re sorry and won’t let it happen again.”