Senate Investigating Bank For Drug Cartel Cash
July 13, 2012

A Senate investigations committee will begin a probe into a major bank to determine whether it failed to protect against money laundering by Mexican drug cartels.

The probe is not unexpected. In 2010, the U.S. Treasury Department already targeted HSBC Holdings for not following the transactions of its clients closely enough. That's something banks are supposed to do themselves, under the Bank Secrecy Act.

Now the Senate Permanent Subcommittee on Investigations will question the CEO of HSBC North America Holdings on Tuesday.

Cartels may have moved unreported cash from money exchange houses, known as casas de cambio, into HSBC banks in Mexico. According to the Reuters news agency, two U.S. Attorneys have opened investigations into HSBC. The bank is also being investigated for its dealings with Iranian companies.

Investigators are checking to see whether wire transfers were being monitored, for example, or whether suspicious activity wasn't being reported quickly enough.

In a regulatory filing, HSBC Bank USA already told its investors it had been investigated and begun the required compliance with the Federal Reserve and the Bank Secrecy Act.

In a similar investigation in 2011, Wachovia Bank was fined $160 million for allowing nearly a half trillion dollars to be laundered in the same manner.