COLOMBIA: Financial experts take close look at probe into HSBC operations in Mexico

Record ID: 587354

  • Title: COLOMBIA: Financial experts take close look at probe into HSBC operations in Mexico
  • Date: 27th July 2012
  • Summary: CARTAGENA, COLOMBIA (JULY 26, 2012) (REUTERS) GENERAL VIEW OF CONFERENCE CONFERENCE SIGN GENERAL VIEW OF CONFERENCE
  • Embargoed: 11th August 2012 13:00
  • Keywords:
  • Location: Colombia
  • Country: Colombia
  • Topics: Economy
  • Reuters ID: LVACKSWGZJ2FR4ZYCKDGOBGSU8X9
  • Story Text: Financial experts took a close look at a Mexican probe into local HSBC operations owned by Europe's biggest bank HSBC Holdings Plc at the 12th Pan-American Congress on Money Laundering and Financing of Terrorism in Cartagena on Thursday (July 26).
    The Mexican probe concluded on the same day with a $27.5 million fine being levied against HSBC Holdings over lax controls against money laundering.
    The fine from Mexico's National Banking and Securities Commission (CNBV) came a week after a scathing U.S. Senate report slammed HSBC for letting clients shift funds from dangerous and secretive countries.
    Last week, a U.S. Senate panel alleged that HSBC acted as a financier to clients routing funds from the world's most dangerous places, including Mexico, Iran and Syria, doing regular business in areas tied to drug cartels, terrorist funding and tax cheats.
    The director of Colombia's Department of Revenues and Customs, Juan Ricardo Ortega, said he is concerned Colombian banks with operations in Central America could face the same fate as HSBC.
    "The Colombian banks are facing an important risk due to their business incursion in Central America. The purchasing of financial institutions in Central America are the actual risk. That's what happened to HSBC in Mexico. HSBC is a reputable bank that abides by the highest standard in the financial sector, but when they purchased a Mexican bank and they were not able to instill in those new employees the principles and the culture of the central bank to the new purchased bank, the clash of two different institutional cultures creates a risk. If this risk is not dealt wisely these acquired banks can represent an important risk, a considerable risk to also Colombian banks," Ortega said.
    The CNBV censured HSBC for non-compliance with anti-money laundering systems and controls as well as its late reporting of 1,729 unusual transactions, failing to report 39 unusual transactions, and 21 administrative failures.
    The Financial Superintendent Gerardo Hernandez Correa said measures are in place to detect laundering activities and avoid these kinds of problems.
    "What the superintendent's office does is to gradually detect financial entities that run into problems within their money laundry risk management models regarding certain business activities. We then enforce these entities to implement in a timely fashion these new risk assessment models," Hernandez Correa said.
    The U.S. Senate report slammed a "pervasively polluted" culture at the bank and said between 2007 and 2008, HSBC's Mexican operations moved $7 billion into the bank's U.S. operations.
    Financial consultant Juan Pablo Rodriguez said training and complying with regulations is another way banks can protect themselves.
    "To prevent these risks, therefore to prevent what happened in Mexico in Colombia regarding the this financial entity (referring to HSBC), what has to be done is to implement and reinforce a training model in conjunction with the culture of the central bank as well as that of the patrons of these new acquired financial entities," Rodriguez said.
    The fine adopted by Mexico's National Banking and Securities Commission was the biggest-ever handed out to a bank.
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