June 10, 2023

DealBook: HSBC Official Will Give Up Post

David Bagley told senators that he would step down as head of compliance for HSBC.Jonathan Ernst/Bloomberg NewsDavid Bagley told senators that he would step down as head of compliance for HSBC.

9:00 p.m. | Updated

The top compliance executive for global banking giant HSBC announced during a Senate hearing on Tuesday, which examined the global bank’s repeated failure to stop illegal foreign transactions, that he will step down from that role.

David Bagley, the head of compliance for the British bank since 2002, broke from his prepared testimony to tell the Senate Permanent Subcommittee on Investigations that “now is the appropriate time for me and for the bank for someone new to serve as the head of group compliance.”

The subcommittee released a report on Monday accusing HSBC, Europe’s largest bank, of serving as a conduit for money flowing into the United States from Mexican drug traffickers and Middle Eastern banks with ties to terrorists.

Mr. Bagley was one of six HSBC executives who appeared in front of the subcommittee. Paul Thurston, the former head of HSBC’s offices in Mexico, said that when he arrived in Mexico in 2007 the problems he found “frankly took my breath away.”

All of the executives apologized for the bank’s past conduct and promised reform, though the senators expressed their doubts in light of the bank’s being cited by regulators in 2003 and 2007 for extensive money-laundering violations.

“We have some ways to go to regain the trust of regulators and the public,” said Irene Dorner, the chief executive of HSBC’s operations in the United States. “We’re burning the bridges to make sure no one can get back to the way it was before.”

Ms. Dorner is part of the new top management that has been brought in to HSBC since regulators accused the bank of wrongdoing in 2010. Some of the executives at the hearing were at the bank during the period covered by the report, from 2001 to 2010, and were accused of having direct responsibility for some of the shortcomings.

Christopher Lok, the former head of HSBC’s banknotes department, was said to have pressed other executives at the bank to reopen the account of a Saudi Arabian bank with suspected ties to Al Qaeda.

During the hearing, Mr. Lok said that “there were some occasions when I communicated with my colleagues in compliance in a manner that was unnecessarily aggressive and harsh. These communications were unprofessional, and I deeply regret them.”

The head of the subcommittee, Carl Levin, Democrat of Michigan, said he was happy to hear the bank’s contrition, but he added that accountability “has been significantly missing in this situation.”

Regulators have recently cracked down on several banks that were accused of not doing enough to stop transactions coming into the United States from countries facing financial penalties, like Iran and North Korea. The Senate subcommittee used HSBC as a “case study” for problems it said are widespread in the finance industry.

The Senate report also said that HSBC’s American regulator, the Office of the Comptroller of the Currency, had not adequately punished HSBC when it discovered problems at the bank.

Thomas J. Curry, who became the comptroller of the currency in April, told the subcommittee that his agency was embracing the report’s recommendations for changes at the agency.

“The agency has been much too slow in responding and addressing what are significant weaknesses and violations at this institution,” Mr. Curry said, noting that some of the examiners’ conduct was troubling and reprehensible. He said that in the future he wants the agency to be more nimble and take in the complete picture of the bank’s operations.

Senator Tom Coburn of Oklahoma, the panel’s ranking Republican, asked Grace E. Dailey, the Office of the Comptroller’s former large bank supervisor, to sum up where the agency had failed. She said examiners had done a lot of work but failed to step back and take prompt action. Not pleased, Mr. Coburn said that kind of answer means that the problems will persist.

Mr. Curry stepped in to assure the senators that the panel’s concerns will be “thoroughly and fairly reviewed” and the proper action taken. Pushing for specifics, Mr. Levin asked what happens when an examiner wants to take action against a bank but is prevented by a supervisor. “They can appeal to me,” Mr. Curry said.

Mr. Levin predicted that Mr. Curry will be fielding calls from examiners in the coming months.

Article source: http://dealbook.nytimes.com/2012/07/17/hsbc-says-official-will-step-down-as-bank-vows-to-fix-scandal/?partner=rss&emc=rss

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