After Money Laundering Probe, Mexico HSBC Branch to Close Cayman Islands Accounts Elyssa Pachico - InSight
go to original July 20, 2012

The Mexican branch of British-based bank HSBC will close about 20,000 accounts in the Cayman Islands believed to have links to organized crime, after a US Senate investigation exposed the bank’s facilitation of money laundering operations.

The accounts have an estimated worth of $675 million, reports Mexico’s El Universal.

HSBC is closing the Cayman accounts in reaction to a 335-page report, the result of a year-long investigation by the US Senate, which accuses the bank of failing to enforce sufficient controls against money laundering.

The investigation has already resulted in the resignation of the bank’s global head of compliance.

The Cayman Islands have particularly weak banking oversight laws and are considered an offshore tax haven.

InSight Crime Analysis

The HSBC investigation is one of a number inquiries into international banks’ roles in money laundering for drug cartels. Some reports estimate that as much as $85 billion in drug money is laundered through US banks from Mexico per year.

Last year, Wachovia bank (which has since been absorbed by Wells Fargo) was accused of failing to carry out proper oversight of $420 billion that passed through its accounts. Some of that money was discovered to belong to the Sinaloa Cartel, and was later used to buy planes to smuggle drugs. The bank paid a fine of only $160 million, less than 2 percent of its 2009 profits.

Last month, a high-profile horse breeding business in the US run by the brother of Zetas boss Miguel Angel Treviño, alias “Z-40,” was accused of being a money laundering front for the gang. According to FBI testimony, the scheme used Bank of America accounts to move Zetas money across the border to the US. Although the bank is not facing prosecution, the fact that Treviño’s brother was able to coordinate the operation without raising any red flags for Bank of America is a troubling indication of a lack of proper controls within the US financial system.

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