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HSBC flouted warnings, cozied up to IBBL

July 20, 2012

A report by the U.S. Senate has documented extensive ties between HSBC and Islami Bank Bangladesh Limited (IBBL), the biggest sharia bank in Bangladesh.  HSBC engaged in business activity with the Bangladeshi financial institution despite ample evidence of IBBL facilitating terrorist financing.

As previous Money Jihad coverage has shown, IBBL helped bankroll the dangerous spread of Wahhabi Islam in Bangladesh.  Last year, IBBL was also named by its own government for diverting zakat to fund militant jihad, and one of its sharia board advisers was arrested an interrogated for an attack against police officers.  And that was without even knowing the contents of this report, which are quite damning.

IBBL remains one of the world’s worst examples of the nexus between sharia finance and terror finance.  But HSBC didn’t seem to mind too much.

From Wednesday’s Daily Star:

Terror financed due to HSBC failure

US probe into British bank’s operation in Bangladesh exposes links of 2 local Islamic banks

Terror sharia bank worked closely with HSBC

Islami Bank Bangladesh Ltd and Social Islami Bank Ltd came into the spotlight yesterday for their alleged links to terrorist financing after a US Senate report exposed British banking giant HSBC’s internal governance failure to control flows of suspect funds.

Click here to read Full Text of US report

One of the banks was allegedly funding al-Qaeda, and Osama bin Laden’s brother-in-law held shares in a company that has shares in the bank.

In all these cases, profit motive rather than cautions from various levels within the bank and standard procedures ruled the game.

More thoughts were given to the bank’s making $47,000 in revenue that might go up to $75,000 a year later than to the terrorist links the banks allegedly had, or the US authorities’ view of the banks.

A report of the US Senate Permanent Subcommittee on Investigations, a congressional watchdog panel, has revealed these troubling information which show a “pervasively polluted” culture at HSBC Holdings Plc.

The bank acted as financier to clients seeking to route shadowy funds from the world’s most dangerous and secretive corners, including Mexico, Iran, Saudi Arabia and Syria, according to the report.

The US report also mentioned that Al Rajhi Bank, a Saudi bank, was involved in suspicious transactions.

HSBC apologised to the US Senate, saying it takes “compliance with the law, wherever it operates, very seriously”.

In one instance, when Islami Bank wanted to open a US dollar account with the HSBC US office, questions were raised about the Saudi bank Al Rajhi’s 37 percent ownership in Islami Bank. Ears of HSBC’s anti-money laundering unit were cocked.

But the then head of HSBC Global Banknotes, Chris Lok, felt that his interest in considering a new account depended upon whether there was enough potential revenue to make.

“Is this an account worth chasing….How much money can you expect to make from this name? It’s just that if the revenue is there then we are prepared for a good fight,” he wrote. “The money is there and we should go for this account.”

“Then Lok and others approved the account despite questions about its [Islami Bank] primary shareholder Al Rajhi Bank, whose past links to terrorist financing had received attention in the media …and troubling information about Islami Bank itself,” the senate report said.

HSBC’s own Financial Intelligence Group (FIG) unit had reported that Shaikh Abdur Rahman, chief of Bangladesh’s terrorist outfit JMB, had an account with Islami Bank. Bangladesh Bank found that two branches of Islami Bank had been engaged in “suspicious transactions” and urged the bank to take action against 20 bank employees for failing to report the suspicious transactions, according to the FIG report.

Six top militants including JMB chief Abdur Rahman and his deputy Siddiqul Islam alias Bangla Bhai were executed for killing two Jhalakathi judges in 2007.

HSBC’s Know Your Customer unit had reported that Islami Bank be classified as a highest risk client but HSBC rejected the suggestion. It meant HSBC did not subject the bank to any enhanced monitoring.

HSBC’s another internal report said a Saudi NGO, International Islamic Relief Organisation (IIRO), had been implicated in terrorist financing by the US government and included on the list of those prohibited to do business in the US. The IIRO had accounts with both Islami Bank and Social Islami Bank, and yet HSBC’s Compliance Department denied an internal request of due diligence on the bank.

“Today, although HSBC exited the US banknotes business in 2010, Islami Bank remains a customer of two dozen HSBC affiliates,” the report said.

Similarly on Social Islami Bank, the HSBC’s internal report said two shareholders of the bank — the IIRO and Islamic Charitable Society Lajnat al-Birr Al Islam — had alleged links to terrorism.

“IIRO has also reportedly funded al-Qaeda directly as well as several of its satellite groups. Osama bin Laden’s brother-in-law Mohammad Jamal Halifa headed the Philippine branch of the IIRO,” said the FIG’s internal report.

While the FIG cautioned about opening an account of Social Islami Bank, it failed to inform HSBC that Lajnat al-Birr, whose original name is Benevolence International Foundation, was designated by the US as a “financier of terrorism” with whom US persons are prohibited from doing business.

There were debates within HSBC about whether to open an account of Social Islami Bank, and yet the account was finally opened.

The FIG of HSBC also cautioned the bank about keeping Social Islami Bank as a client, an advice ignored by the British bank.

According to the US report, HSBC Bank USA, the US affiliate of the Asia-focused bank, supplied US dollars to Islami Bank and Social Islami Bank despite evidence of their links to terrorist financing.

The report, prepared by a team led by Senator Carl Levin, said in the case of Islami Bank, the factors included substantial ownership of the bank by al Rajhi, the central bank’s fines for failing to report suspicious transactions by militants, and an account provided to a terrorist organisation.

And in terms of Social Islami Bank, the factors included ownership stakes held by two terrorist organisations whose shares were exposed but never sold as promised, and a bank chairman found to be involved with criminal wrongdoing.

The report said Al Rajhi Bank was associated with Islami Bank Bangladesh that provided an account to a Bangladeshi who had been accused of involvement in a terrorist bombing.

Islami Bank was fined three times for violating the anti-money laundering requirements in connection with providing bank services to “militants.”

Al Rajhi Bank provided a correspondent account to Social Islami Bank, whose largest single shareholder had been the IIRO for many years.

A second shareholder was the precursor to the Benevolence Islamic Foundation, also later designated by the US as a terrorist organisation, said the report…

HSBC is getting raked over the coals for its mismanagement, but do the senators themselves realize that Western Union just launched a major joint initiative with IBBL?  Money Jihad is the only blog to our knowledge that has covered the problematic Western Union-IBBL venture.

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10 comments

  1. Islami Bank Bangladesh Ltd will file a formal complaint against the US senate report that links the bank to terrorist financing and money laundering, top officials said yesterday.


    • This is very interesting. However, please can you back your article with facts. As an AML/CFT Compliance professional, I was looking for blogs to follow which talked about money laundering and stumbled upon this one. However, I must say that all I’ve read are articles that arent backed by facts. The IBBL one for instance hasnt been substantiated as even the Senate Committee Report you referenced did not mention the name of any specific bank. Infact, due to the allegations regarding IBBL’s involvement, they issued a press statement (see link: http://www.thefinancialexpress-bd.com/more.php?news_id=137210&date=2012-07-20) where all allegations were refuted.

      I would appreciate facts backing your claims. I am interested in knowing if the were indeed implicated by the US Senate. If they were, then why wasnt it mentioned in the report specifically?

      Cheers


      • Actually, yes, the Senate did reference specific banks including IBBL in its report, and that was the basis of the Daily Star’s article.


  2. Top officials said besides the RBI overseeing HSBC’s Indian operations, intelligence agencies would also launch investigations based on the US Senate sub-committee’s report on how the bank had become a conduit for money laundering and possible terror financiers.


  3. [...] the Saudi financial institution’s terrorist links; and that HSBC partnered with Bangladeshi terror-funding sharia banks IBBL and Social Islami Bank, among other awful [...]


  4. [...] in connection with a terrorist attack against Bangladeshi police officers.  The U.S. Senate slammed British bank giant HSBC for maintaining relationships with IBBL despite evidence that it served [...]


  5. [...] in connection with a terrorist attack against Bangladeshi police officers.  The U.S. Senate slammed British bank giant HSBC for maintaining relationships with IBBL despite evidence that it served [...]


  6. [...] 8 percent of its corporate zakat to terrorists.  The U.S. Senate also blasted HSBC last year for its banking relationships with [...]


  7. […] fell under international scrutiny in 2012 after the U.S. Senate reported that HSBC continued to maintain a business relationship with […]


  8. […] in connection with a terrorist attack against Bangladeshi police officers.  The U.S. Senate slammed British bank giant HSBC for maintaining relationships with IBBL despite evidence that it served […]



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