Private citizens sue HSBC over AML/CTF Compliance failures
HSBC’s past banking services for various Mexican drug cartels are well documented, and the fines reached nearly $2 billion. Four years after settling on those fines, HSBC remains in the spotlight for those AML lapses—and the spotlight just leaped from regulatory compliance to allegations related to accountability for cartel murders.
Two weeks ago, several U.S. families filed suit against HSBC based on its role in laundering money on behalf of drug cartels and by extension its alleged contribution to cartel violence perpetrated upon victims.
According to The Guardian, the filing documents in Zapata et al. v. HSBC Holdings (2016) assert that HSBC “knowingly provided continuous and systematic material support to the cartels and their acts of terrorism by laundering billions of dollars for them. As a proximate result of HSBC’s material support to the Mexican drug cartels, numerous lives, including those of the Plaintiffs, have been destroyed.” The court filing also includes graphic details of murders committed by the drug cartels who used HSBC banking services to launder their profits.
Forbes magazine further detailed the 103-page complaint, noting that plaintiffs allege that HSBC employees in Mexico operated in “a culture of recklessness and corruption” and that employees “routinely accepted deposits of hundreds of thousands, sometimes millions, of U.S. dollars from individuals with no identifiable source of income, delivered in multiple boxes specially designed to fit the precise dimensions of the teller windows.” Plaintiffs argue further that these banking services provided material support for the various criminal activities of the cartels, activities that included torture and murder of numerous victims.
According to the Guardian, the lawsuit asserts that cartel actions equate to terrorism, and therefore plaintiffs may invoke their right under the U.S. Anti-Terrorism Act to hold liable any organizations or businesses such as HSBC that provide material support for terror. Others have tried without success to identify drug cartels as terrorists, so that argument does not yet have a precedent.
However, efforts by private citizens to hold financial institutions liable for violence committed by money launderers and terrorists whose accounts they service appear to be gaining momentum. Arab Bank was sued successfully for its provision of banking services to terrorists, and the families of U.S. soldiers recently filed suits against banks alleged to have provided banking services that supported terrorist activities.
News of this new lawsuit against HSBC broke shortly after a New York judge ordered the British bank to release its monitoring report related to its 2012 Deferred Prosecution Agreement (DPA). The Wall Street Journal reported today about the unlikely Pennsylvania couple taking on the banking behemoth over its internal controls.
Both the bank and the Justice Department are appealing the judge’s ruling, but the Journal report asserts that the order may already be affecting HSBC’s AML conversation in that it acknowledged last week that the U.S. government’s AML monitor as a part of the DPA continues to have concerns about the bank’s “pace of progress” related to AML controls and the presence of new concerns about more recent questionable transactions.
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