Posts Tagged ‘HSBC’

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Lawsuit: sanctions evasion helped kill U.S. troops

November 30, 2014

Many of the attacks during the Iraq insurgency that left over 4,000 American troops dead were carried out by Sunni militants funded by and aligned with Al Qaeda, former members of Saddam Hussein’s regime, the Gulf monarchies, or combinations of all three. But a new lawsuit by veterans and the families of our war dead is pointing out that a lot of the killing of coalition forces also came from Shia terrorists trained and funded by Iran. Iran was able to fund the trainers of those terrorists partly because of Iran’s access at the time to the international financial system as allowed by major banks with branches in the U.S. despite the sanctions against Iran throughout the 2000s.

From Reuters earlier this month (h/t El Grillo):

U.S. veterans sue banks, claim they should pay for Iraq attacks

Wounded U.S. veterans and family members of U.S. soldiers killed in Iraq sued five European banks on Monday, seeking to hold them responsible for shootings and roadside bombings because they allegedly processed Iranian money that paid for the attacks.

The lawsuit filed in U.S. District Court in Brooklyn, New York, named Barclays Plc, Credit Suisse Group AG, HSBC Holdings Plc, Royal Bank of Scotland Group Plc and Standard Chartered.

Barclays, Credit Suisse, RBS and Standard Chartered declined to comment. HSBC did not respond to requests for comment.

The lawsuit was brought under the U.S. Anti-Terrorism Act, a 1992 law that permits victims to bring private suits against alleged financiers of militant operations.

The lawsuit alleges the banks conspired with Iranian banks to mask wire transactions in order to evade U.S. sanctions. The Iranian banks then funneled more than $100 million to militant groups that operated in Iraq at Iran’s direction, according to the suit.

The militant groups included a Shi’ite militia in Iraq, Kataib Hezbollah, as well as Quds Force, the overseas arm of Iran’s Islamic Revolutionary Guard Corps, the suit says.

Since 2009, the five banks have agreed to pay about $3.2 billion to the U.S. government to resolve allegations that they handled money in violation of sanctions against nations such as Iran, Libya and Cuba. All the banks signed deferred prosecution agreements with the U.S. Justice Department in addition to settlements with U.S. banking regulators…

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Muslim leaders decry bank account closures

August 15, 2014

Outraged by the decision of HSBC to close the accounts of clients who may be at risk of laundering money, evading sanctions, or financing terrorism, one of the trustees of the Ummah Welfare Trust (UWT) has called for a boycott by “Muslim brothers and sisters” and “their contacts” against the British bank.

The Federation of Student Islamic Societies also condemned the closure, saying it sets the precedent that such accounts can be “closed, without reason, at any time.” The Daily Mail notes that several Muslim Britons have taken to social media outlets to call HSBC’s decision “racist,” while the targets of the closures have blamed “Islamophobia.”

These knee-jerk and vitriolic responses are similar to the reaction of prominent individuals like Olympic medalist Mo Farah, who claimed that an attempt by Barclays to end a business relationship with one remittance company last year could mean “death to millions of Somalis,” and from U.S. Congressman Keith Ellison (D-MN) who screamed, “It’s wrong to close off the lifeline!” during a protest against banks in Minnesota that ceased remittance services to Somalia in late 2011.

Can we not have a civil and intelligent conversation about why the accounts have been closed, and what regulatory pressures brought this to bear, without spoiling for a confrontation and casting HSBC’s leaders as a bunch of ignorant bigots?

The targets of the closures purport to be upset that they were not given an adequate explanation for the account closures. But that’s a catch-22. If HSBC had disclosed the reasons for its suspicions—if hypothetically it had said that UWT operates two programs in Gaza that are administered by Hamas operatives—then UWT would probably claim that the disclosure was baseless and defamatory, and that the matter should have been handled in private.

Or if HSBC had maintained the accounts, HSBC’s leadership would be hauled before Congress again and asked to explain why it still operated accounts on behalf of controversial entities like the Finsbury Park mosque and UWT.

This is a case of damned if you do, damned if you don’t, and damned for the manner in which you did or didn’t do it.

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HSBC closes accounts: 2 Islamic nonprofits and 1 mosque

August 12, 2014

HSBC has closed the accounts of the Islamic charity Ummah Welfare Trust (UWT), the Finsbury Park Mosque in north London, and an Islamic advocacy group called the Cordoba Foundation. The closures are part of the British bank’s effort to improve compliance with U.S. and British regulations and after being heavily criticized and fined in 2012 for being too lax about the customers and correspondent banks it chose to do business with.

UWT’s accounts were closed by Barclays in 2009. A student group has reported that UWT has conducted projects together with the Al-Salah Islamic Association, a Hamas front. The Finsbury Park Mosque was formerly pastored by hate preacher and jihadist Abu Hamza. The Cordoba Foundation advocates for Palestinian causes, invited a guest to speak from the radical group Hizb-ut-Tahrir, and is run by a member of Britain’s Muslim Brotherhood.

Alex Brummer, city editor of the Daily Mail, offers this insightful analysis of HSBC’s move:

The notion that HSBC is closing down the bank accounts of Muslim groups and charities because of some kind of Islamophobia could not be more wide of the mark.

Britain’s biggest and most international bank is engaged in a determined effort to clean up its reputation and preserve its banking licenses in the United States after settling charges of money laundering and sanctions busting brought by the US Justice Department.

A coruscating 2012 report by the powerful Senate sub-Committee on Investigations found that HSBC had exposed the US ‘financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-laundering controls’.

The bank subsequently agreed to pay £1.12billion ($1.9billion) in fines to settle the claims and was given a five year probationary period to clean up its act.

Under the chairmanship of the redoubtable Scotsman Douglas Flint, who has been in charge of HSBC since 2010, it has rigorously sought to eliminate the risks of further money laundering charges that might put in danger its American banking licenses.

It has ruthlessly closed down branches, cancelled relationships with overseas banks and shut down the accounts of customers that might conceivably be regarded as risky because of links to money laundering, sanctions busting or potential terrorist activities.

In the troubled Middle East alone, it has doubled the number of compliance officers—internal enforcers—to 3,500 over the two years since it reached a settlement with the American authorities…

Improving the bank’s standards has been hugely expensive, with the global cost of the internal enforcement operation climbing to £296million ($500 million) a year…

Among the relationships that HSBC has severed, as it has gone about its task, is that with the Vatican Bank, recently renamed the Institute for the Works of Religion, because of its past association with money laundering. Such a move involving a prominent Roman Catholic institution strongly suggests Muslim causes and accounts have not been singled out as HSBC seeks to rebuild its reputation in Washington…

If HSBC could be accused of anything it is of being over-cautious in its dealings with the authorities and its elimination of potentially risky clients.

Thanks to Rushette for sending in the news.

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Ten biggest terror finance news stories of 2012

December 31, 2012
  1. Taliban funding remains intact despite international sanctions
    Reports in 2012 revealed that the Taliban’s funding remains intact, that none of the Taliban’s assets have been blocked by U.S. sanctions, that the Taliban retains its taxing authority over Afghans, and that the UN sanctions only 18 percent of the Taliban’s provincial shadow governors in Afghanistan.
  2. Islamic charities remain top terror financiers
    It’s questionable to even call this “news,” but understanding the role of Muslim charities in funding jihad, of which we saw multiple examples throughout 2012, is the Rosetta stone to bankrupting terrorism.  Instances of Muslim charities behaving badly cropped up, and in some cases have worsened, in both in the Middle East and in the West this year.In the Islamic world, the Saudi charitable foundation IIRO, whose branches in Indonesia and the Philippines were previously blacklisted by the U.S. for funding terrorism, is opening seven new branch offices.  In Bangladesh, the chief of the terrorist organization Jamatul Mujahideen Bangladesh (JMB) revealed that Muslim Aid, WAMY, the Muslim World League, the Qatari Charitable Society, and the Revival of Islamic Heritage Society, are among the primary donors to his jihad.  Read the rest of this entry ?
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HSBC’s mixed record on Sudan

September 14, 2012

Since 1997, the U.S. has maintained sanctions against Sudan, a state sponsor of terrorism.  The United Nations has imposed an arms embargo on Sudan’s Darfur region since 2004 and asset freezes of some Sudanese officials since 2005.  The U.S. Office of Foreign Assets Control (OFAC) has limited U.S. dollar transactions in Sudan since 2005.

But those sanctions have not prevented HSBC from periodically making improper transactions in U.S. dollars in Sudan from 2005 to 2008.  The instances described do not sound like intentional efforts to undermine the international sanctions regime against Sudan, but the actions were nonetheless negligent.  From the U.S. Senate’s report on HSBC earlier this summer (with internal citations omitted):

A second set of OFAC sensitive transactions involved Sudan, a country which is also subject to a comprehensive sanction program in the United States.  Internal bank documents indicate that, from at least 2005 to 2008, HBUS processed a considerable volume of U.S. dollar transactions involving Sudan that, once the new GCL [group circular letter from HSBC’s Compliance Group] took effect, should have decreased. The reasons they continued include a wide range of factors, from inadequate bank staffing reviewing OFAC transactions, to deceptive wire transfer documentation, to ongoing actions by HSBC affiliates to send these potentially prohibited transactions through HBUS.

In August 2005, a month after HSBC Group issued the GCL policy barring HSBC affiliates from engaging in U.S. dollar transactions in violation of OFAC prohibitions, HSBC Group head of Global Institutional Banking, Mark Smith, circulated a managerial letter identifying correspondent relationships that would be affected.  The letter stated: “An overriding observation is that the revised policy will most significantly impact the Cuban and Sudan correspondent bank relationships.” It also observed: “For Sudan and Cuba, most of our business is conducted in USD and the discussions already initiated with the affected banks will dictate the extent of our ongoing relationships.” In September 2005, a senior HBEU payments official Rod Moxley completed an analysis of U.K. transactions over a 10-day period that were stopped by the WOLF filter and noted “a considerable number of USD denominated transactions” for Sudan.

A year after the GCL took effect, however, one affiliate attempted to clear a Sudan-related transaction through HBUS in violation of company policy. On December 6, 2006, HBUS blocked a $2.5 million payment originating from an HSBC branch in Johannesburg, because the payment details referenced the “Sudanese Petroleum Corporation.” Although the payment had also been stopped by the WOLF filter in HSBC Johannesburg, an employee there had approved its release and sent the transaction through their correspondent account at HBUS. An internal email from HSBC Johannesburg explained that the release of the funds was:

a genuine error in an attempt to push the day[‘]s work through before the cut-off time. I believe the loss of three staff in the department leaving only two permanent staff remaining is causing the[m] to work towards clearing their queues rather than slow down to read the warnings such as these. … Having said that I also feel it is a matter of training where seeing the word ‘Sudan’ alone should have been warning enough.

The email also noted that the transaction had been sent by Commercial Bank of Ethiopia, which was “aware that this payment may not go through as they have attempted to make this payment via their other correspondent banks and failed.”

In July 2007, HBUS discovered that another client, Arab Investment Company, had been sending “multiple Sudan-related payments” through its U.S. dollar account at HBUS, that other banks later blocked for specifying a Sudanese originator or beneficiary, “suggesting that HBUS has been processing cover payments for this client.” An email identified seven wire transfers over a one-year period, collectively involving more than $1.1 million, in which the documentation provided to HBUS made no reference to Sudan, preventing the transfers from being stopped by HBUS’ OFAC filter. The email noted that two of the wire transfers later blocked by other banks had resulted in letters from OFAC seeking an explanation for HBUS’ allowing the transfers to take place, and suggested closing the client account to prevent more such incidents.

On another occasion, HBUS identified five wire transfer payments between January and November 2007, totaling more than $94,000, that turned out to be intended for a Sudanese company, but had been processed as straight through payments at HBUS, because “there was no beneficiary address and no mention of ‘Sudan’.”

In still other cases, wire transfers clearly referencing Sudan were stopped by HBUS’ OFAC filter for further review, but then allowed by HBUS staff to proceed. An HBUS internal report on OFAC compliance noted, for example, two blocked wire transfers involving Sudan, one for over $44,000 and the other for over $29,000, blocked on November 5 and December 7, 2007, respectively, by HBUS’ OFAC filter, but subsequently “released due to human error.”

In August 2008, HBUS noted that it was then holding over $3.2 million in Sudan-related payments sent to the bank from other HSBC affiliates.

The bulk of the funds came from blocking a $2.5 million payment from HSBC Johannesburg destined for the Sudanese Petroleum Corporation, but three other Sudan-related payments from HSBC affiliates were also identified, a $300,000 payment sent by HSBC Hong Kong; a payment for more than $367,000 payment from HSBC Dubai, and a payment for more than $58,000 from British Arab Commercial Bank Ltd.

The email listing these blocked funds noted that a court order was seeking transfer of the funds to a federal court in the United States in connection with a lawsuit seeking compensation for the families of 17 U.S. sailors killed in a 2000 terrorist attack on the USS Cole in Yemen.

In August 2010, in connection with an effort to exit correspondent relationships with 121 international banks that HBUS determined it could no longer support, HBUS CEO Irene Dorner sent an email noting references to 16 banks in Sudan. Ms. Dorner wrote:  “In Phase 2 there will be Trade names the exit for which may be more complicated but to give you a flavor of the problem we seem to have 16 correspondent banks in Sudan which cannot be right.”

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Revisiting the Golden Chain, 11 years later

September 11, 2012

At large:  Sulaiman Al-Rajhi

It was the 1990s.  Osama bin Laden was broke, busted, and disgusted.  Al Qaeda had spent its last dime, and Osama needed a bailout.  Sulaiman Al-Rajhi and 19 other millionaire and billionaire Muslims came to the rescue.  They constituted a “golden chain” of financial backers that would enable a second life for Al Qaeda in Afghanistan from which to stage the terrorist attacks of 9/11.

The U.S. Senate presented the evidence against the Golden Chain once again this summer in its report about the misdeeds of the British bank HSBC.  HSBC maintained a relationship with Al-Rajhi Bank, of which Sulaiman Al-Rajhi was a founder, until 2005 despite the earlier discovery of the Golden Chain and Al-Rajhi Bank’s record of facilitating terrorist transactions.

Don’t take my word for it.  This comes from the Senate’s Jul. 17, 2012, report:

Al Qaeda List of Financial Benefactors. The al Qaeda list of financial benefactors came to light in March 2002, after a search of the Bosnian offices of the Benevolence International Foundation, a Saudi based nonprofit organization which was also designated a terrorist organization by the Treasury Department, led to seizure of a CD-ROM and computer hard drive with numerous al Qaeda documents.  One computer file contained scanned images of several hundred documents chronicling the formation of al Qaeda. One of the scanned documents contained a handwritten list of 20 individuals identified as key financial contributors to al Qaeda. Osama bin Laden apparently referred to that group of individuals as the “Golden Chain.” In a report prepared for Congress, the Congressional Research Service explained:

According to the Commission’s report, Saudi individuals and other financiers associated with the Golden Chain enabled bin Laden and Al Qaeda to replace lost financial assets and establish a base in Afghanistan following their abrupt departure from Sudan in 1996.

One of the 20 handwritten names in the Golden Chain document identifying al Qaeda’s early key financial benefactors is Sulaiman bin Abdul Aziz Al Rajhi, one of Al Rajhi Bank’s key founders and most senior officials.

The Golden Chain document has been discussed in the 9-11 Commission’s report, in federal court filings, and civil lawsuits. Media reports as early as 2004 noted that the al Qaeda list included the Al Rajhi name. HSBC was clearly on notice about both the al Qaeda list and its inclusion of Sulaiman bin Abdul Aziz Al Rajhi.

What became of the Golden Chain?  As for Al-Rajhi, the most prominent individual listed, he remains at large with an estimated net worth of $6 billion, showing up on Forbes magazine cover stories and feature interviews in the Arab News.  By Al-Rajhi’s own admission, he’s working out a “meticulous scheme” for a mysterious charitable endowment to dispose of his assets.

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Ayatollah to the Revolutionary Guard: Charge it!

August 19, 2012

Money laundering expert Kenneth Rijock has been on fire lately about the alleged banking violations by HSBC, ING, and Standard Chartered.  Now he takes on MasterCard in a post entitled “Why are there 3 million MasterCard holders in Iran?”  Good question.  Rijock says he has reviewed a list of cardholders, and that the lists include senior Iranian leaders, which would indicate a significant loophole in the sanctions regime against Iran in addition to representing a major compliance failure on the part of the credit card company.

From Rijock’s blog on Aug. 2:

WHY ARE THERE 3m MASTERCARD HOLDERS IN IRAN ?

Whilst we are on the subject of banks like HSBC banking Iranians, in violation of international sanctions, we should also examine the role of American credit card issuers. I will cover the financial obscenity of vanilla [plain, unmarked] cards in a later article, but today it is time to expose the fact that major American credit card issuers, like MasterCard, are happy to do business with more than three million Iranian nationals.
Even the newest bank compliance officer knows that Politically Exposed Persons, or PEPs, from sanctioned countries like Iran, are off limits. So why are senior Iranian PEPs issued MasterCards ? I have seen some of the cardholder lists, and anyone with half a brain can determine, from both their occupations or professions, and email address categories, that a large number of the card-members appear to be PEPs, and in a country where many corporations are on the OFAC, EU, or UN sanctions lists, issuing them credit cards is compliance malpractise, plain and simple.

I am sure that MasterCard’s management (and lawyers) will respond that some obscure tax haven subsidiary, and not the USA parent, is involved, and that banks that process the cards are conveniently not from countries that subscribe to sanctions against Iran, are actually involved in the transactions, but know this: MasterCard’s American entities use proprietary software that shows each and every global transaction. They know damn well that their subsidiaries are dancing with the devil.

So, whilst the letter of the law is assuredly being followed, and there is no obvious OFAC violation under federal law, Iranian nationals apparently are free to use their MasterCards overseas. Who is charging the purchases of dual-purpose goods, that are thereafter used in Iran to advance the Weapons of Mass Destruction and Ballistic Missile programmes, I wonder.

It gets worse; If America attacks Iran, to destroy its illegal nuclear weapons programme, will some of the defensive systems employed by Iran to shoot down US warplanes have been obtained by Iranian purchasing officers, using their MasterCards ? This is where the pursuit of profit trumps patriotism; Some will call it Trading with the Enemy.

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