HSBC immersed in Mexican money laundering scandal
In 2007 and 2008 alone, HSBC’s Mexican subsidiary HBMX moved seven billion dollars in cash into the bank’s U.S. branches, despite warnings from both U.S. and Mexican authorities that much of the money was tied to drug cartels. The bank did not properly monitor these transactions and also refused to investigate numerous internal warnings.
The Senate report accused HBMX of lax anti-money laundering practices dating back to its purchase in 2002. The senators also slammed the bank for setting up a Cayman Islands subsidiary, which, they said, was used for money laundering and the purchase of aircraft by Mexican drug traffickers.
That subsidiary held 2.1 billion dollars in 50,000 client accounts, but had no staff or offices. Furthermore, 41% of the Cayman Islands accounts had no customer information attached. HSBC said it is now in the process of closing almost 20,000 Cayman Islands accounts as a result of the investigation.
HSBC has also closed an undisclosed number of Mexican branches “considered at high risk of money laundering,” fomer HSMX President Paul Thurston told the Senate Committee on Tuesday.
David Bagley, HSBC’s head of compliance, resigned at the Senate hearing, while Irene Dorner, president and chief executive of HSBC Bank USA, issued a public apology “for the fact that HSBC did not live up to the expectations of our regulators, our customers, our employees, and the general public.”
Mexico’s Special Investigation of Organized Crime (SIEDO) unit has several money laundering investigations open since 2008 which involve HSBC. The federal Attorney General’s Office (PGR) has not brought charges against the bank yet, but it is awaiting reports from the National Banking Commission (CNBV) and the U.S. Justice Department, which is conducting its own criminal investigation into HSBC’s operations.
The Senate report also accused HSBC of money laundering in other countries such as Iran and Russia.
The Party of the Democratic Revolution (PRD) candidate has accused the Institutional Revolutionary Party (PRI) of exceeding spending limits and laundering illicit campaign funds through Banco Monex.
Lopez Obrador claimed this money was then spent on pre-paid gift cards for use in Soriana stores. He alleged that the PRI gave these gift cards to voters in return for them backing Peña Nieto in the election.
But IFE President Leonardo Valdes said there was no evidence the cards had been handed out conditionally. Providing gifts for the electorate is not illegal in Mexico, as long as the party involved fully discloses its expenses and there is no stipulation that recipients must vote for the party’s candidate in return.
Moreover, IFE noted that with Peña Nieto having beaten Lopez Obrador by a margin of three million votes, a few thousand gift cards could not have decisively swung the election in his favor.
Nonetheless, in a press conference Thursday Valdez said the prosecutor for Electoral Crimes was investigating the allegations and IFE would impose the appropriate sanctions on the PRI were the party to be found guilty of any wrongdoing.
The PRI responded strongly to Lopez Obrador’s accusations, with a party statement declaring, “we reject as inadmissible the accusations of money laundering, which constitute a flagrant defamation.”
The ruling National Action Party (PAN) which came third in the election, has refused to join the PRD in calling for the results to be overturned. President Felipe Calderon was joined by the president-elect at his official residence, Los Pinos, on Tuesday evening, symbolizing the peaceful transition of power from the PAN to the PRI.
Lopez Obrador aside, the biggest victim of the vote-buying scandal has been the Soriana supermarket chain. Boycotted by angry voters, Soriana has seen its stock fall by 414 million dollars this month.
Soriana has denied any wrongdoing but as a result of the accusations and recent protests, its value on the Mexican Stock Exchange (BMV) dropped from 5.561 billion dollars on July 1 to 5.147 billion on July 9.
The allegations against Soriana and the PRI remain under investigation by the federal Attorney General’s Office (PGR).
Defeated candidate looks to the future
“The political struggle to change the history of Jalisco begins today, in this public square,” he told supporters at Guadalajara’s Plaza Liberacion on Sunday. “In 2015 we are going to give the first demonstration of this movement’s renewed strength.”
Alfaro claimed the event drew 20,000 supporters, although local authorities said there were no more than 4,000 in attendance.
“Today we have three years to prepare for the next election,” Alfaro said, hinting that he will run for mayor of Guadalajara in 2015.
The former mayor of Tlajomulco, Alfaro lost the state election by Aristoteles Sandoval of the Institutional Revolutionary Party (PRI).
Athough he was badly beaten in rural areas of Jalisco, Alfaro won by a margin of over 55,000 votes in the municipality of Guadalajara, suggesting he already enjoys sufficient support to win a mayoral election.
Becoming mayor would be a major stepping stone toward winning the next state contest in 2018, as Jalisco’s last three governors all served as mayor of Guadalajara prior to becoming elected.
The Tequila Files 