Combating Money Laundering: Round Two
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individual who’d cashed $130,000 in U.S. travelers checks at Al Rajhi Bank and used the funds to support terrorists in Chechnya. When U.S. prosecutors asked the bank to provide authenticated records for the criminal trial, the bank refused. On top of that, a classified CIA report described in a New York Times article claimed the bank knew terrorists were using its accounts. All that, while U.S. terrorism experts described Saudi Arabia as providing more terrorist financing than any other country. In 2005, because of its terrorist financing concerns, HBUS decided to stop doing business with Al Rajhi Bank. Other HSBC affiliates, however, continued servicing the bank and even began pressing HBUS to restore Al Rajhi’s access to U.S. banknotes. Two years later, after Al Rajhi Bank threatened to cut off all business worldwide with HSBC unless its U.S. banknotes account was restored, HBUS re-opened that account. For the next four years from 2007 to 2010, HBUS supplied Al Rajhi Bank with $1 billion in physical U.S. dollars. HBUS stopped only after HSBC decided the entire bank would exit the U.S. banknotes business. The fourth issue we identified involved HBUS’ clearing $290 million in U.S. dollar travelers checks for Hokuriku Bank in Japan under suspicious circumstances. The problem came to light when OCC AML examiners visited an HBUS office in New York and stumbled across stacks of $500 and $1000 travelers checks with sequential numbers and the same illegible signature. HBUS admitted clearing up to $500,000 per day in travelers checks for Hokuriku Bank. When asked about them, Hokuriku claimed the checks were deposited by used car businesses in rural Japan, but also admitted having little to no information about the accountholders. A little sleuthing discovered that all of the checks were being issued by the same bank in Russia and sold to the same Russian who was signing and shipping them to Japan. The facts shouted money laundering, but HBUS closed the Hokuriku account only after pressure from the OCC. The fifth and final issue involved HBUS’ maintaining 2000 high-risk U.S. bearer-share corporate accounts with $2.6 billion in assets. Bearer-share corporations enable anyone who holds a company’s physical shares to claim ownership of the company, without recording an ownership stake in any government registry. The result: no one knows who owns the company unless they know who has possession of its physical shares. Widely condemned for facilitating money laundering, tax evasion, and crime, most banks won’t touch bearer-share corporations. Yet HBUS maintained 2000 bearer-share accounts at its New York, Miami, and Los Angeles branches. It was another blatant indicator of the bank’s high-risk profile.
