U.S. bank regulator promises better enforcement following scathing congressional report into HSBC AML failures
By Brett Wolf
WASHINGTON, July 18 (Thomson Reuters Accelus) – After widespread anti-money laundering (AML) failures at HSBC that continued for years due to lax regulatory oversight, a U.S. bank regulator has vowed to take a broader view of institutions’ compliance programs during examinations.
“The agency was much too slow in responding and addressing what are significant weaknesses or violations at this institution. Going forward, I would hope that we would be much more nimble and take into account the entire picture,” Thomas Curry, who took over as Comptroller of the Currency less than four months ago, said on Tuesday during a hearing by the Senate Permanent Subcommittee on Investigations.The hearing came a day after the subcommittee released a 400-plus-page report detailing how the U.S. arm of the giant British bank acted as a financier to high-risk clients around the world while failing to address AML weaknesses in its correspondent banking and banknotes operations as well as other units. During testimony by current and former officials at HSBC, Senator Carl Levin, who chairs the panel, expressed doubts that the bank would be able to successfully revamp its AML regime in the light of broken promises made by the bank when it was first targeted by regulators in 2003.
But both Levin and ranking member Senator Tom Coburn saved some of their harshest criticism for the Office of the Comptroller of the Currency, an arm of the U.S. Treasury. The OCC took over as HSBC’s primary regulator in 2004. Two years later, it lifted an enforcement action that the Federal Reserve Bank of New York and state banking regulators in New York had levied against in the bank in 2003, requiring it to address purported Bank Secrecy Act (BSA) compliance failures. Levin wanted to know why the enforcement action was lifted despite the OCC’s identification of dozens of so-called “matters requiring attention” suggesting continued AML lapses at the bank in 2005 and 2006.
“I just don’t understand it,” Levin said.
He also wanted to know why he OCC did not take action sooner after spotting continuing AML compliance failures at the bank. Coburn added that an OCC examiner had twice recommended enforcement action against HSBC, but to no avail.
Levin said: “This is not a case where OCC examiners failed to do their jobs. The higher-ups were overly passive, waiting until the problem grew into a very huge one before taking any action.”
In October 2010, prompted by the law-enforcement probes, the OCC finally did take action.
“This is pretty feeble enforcement,” Levin said.
Plan for improvements
Curry said that, in future, AML deficiencies would be “fully considered in a safety and soundness context” rather than as a matter of consumer protection. He added that the OCC was revising the operation of its Large Bank BSA Review Team “to enhance our ability to bring different perspectives to bear and react on a more timely basis to circumstances where a bank has multiple instances of matters requiring attention” or apparent AML failures.
Curry said the OCC would also seek to provide more flexibility in citing BSA violations and vowed to identify steps that can be taken during examinations to obtain a “holistic” view of a bank’s AML compliance regime “more promptly.” Finally, Curry said that the OCC would review its training, staffing, recruitment, policies, and interagency coordination, to improve its BSA supervision program.
“That’s our initial response to the report’s findings. My hope is that we will have additional recommendations after we look at this matter further,” Curry said.
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