Leaked report references services to known terrorists
HSBC is finding itself in the glare of the AML/CFT Compliance spotlight once again. According to The Times of London, the British banking giant “has failed to take action over customers with links to terrorism, according to a leaked report that names 13 Britons associated with jihadists in Syria as users of the bank.”
The not-yet-published report, by U.S. lawyer Michael Cherkasky, is a part of the U.S. Department of Justice’s monitoring program for HSBC. The monitoring program is part of a Deferred Prosecution Agreement (DPA) entered into by HSBC as a consequence of its providing extensive banking services to drug cartels and terrorist financiers, a scandal that culminated with the DPA in 2012.
Central to the DPA was that HSBC greatly improve its internal controls relative to AML and CFT Compliance and that it be monitored by a Department of Justice representative for five years. Past monitoring reports have criticized the slow progress on improvement of internal controls.
In Cherkasky’s last yearly report, filed in January of 2016, he noted that the Compliance culture of the institution had improved significantly but that significant deficiencies in Compliance technology and KYC processes remained.
According to the Times, this most recent Cherkasky report notes that while the bank is making progress related to internal controls, weaknesses remain. Details of the banking services provided to the 13 Britons is not yet clear, and neither are details of what HSBC knew about the accounts or when they knew it. The Times also notes that on occasion financial institutions will agree to maintain accounts for newly discovered terrorists as requested by law enforcement so that surveillance of activities may occur.
Cherkasky’s final version of this newest annual report is due to be delivered to the U.S. Department of Justice and its U.K. counterparts in January. In the event that the conditions of a DPA are not met by the end of the agreement period, the Justice Department retains the right to resume its case and file a criminal indictment.
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