Butterfield chairman named in scathing US report on HSBC
Butterfield Bank executive chairman Brendan McDonagh is mentioned in a scathing 335-page US Senate report that describes a decade of compliance failures by global bank HSBC.Mr McDonagh served as COO of HSBC North America from 2004 to 2006, becoming CEO of HSBC North America Holdings in 2008, before retiring in 2010. He joined Butterfield earlier this year.Senate investigators are focused on New York-based HSBC Bank USA NA as a “nexus” for US dollar services and transfers.The report noted HSBC’s Mexican bank shipped $7 billion in bulk cash to the firm’s US bank in 2007 and 2008.That was more than all HSBC affiliates and other banks in Mexico and left US and Mexican authorities concerned that the volumes could only be supplied by the illegal drug trade, according to the report.The report states: “The evidence also indicates that while HSBC Group was fully informed about HBMX’s (HSBC Mexico) AML and compliance deficiencies, little of that information was conveyed to HBUS, despite HBMX’ extensive correspondent relationship with HBUS. When asked about the lack of communication, HBMX CEO Paul Thurston indicated that he reported HBMX’s AML problems to HSBC Group and believed Group would communicate necessary information to HBUS. HSBC Group CEO Michael Geoghegan told the Subcommittee that HBMX problems were discussed at HSBC Group Management Business (GMB) meetings, which ... Brendan McDonagh attended, so he thought HBUS was aware of the problems..“HSBC Group Compliance head David Bagley told the Subcommittee that Group Compliance could have informed HBUS Compliance about the problems at HBMX, but ‘we did not think of it’.”E-mails to Mr McDonagh were also cited and he was mentioned in connection with a hiring freeze affecting compliance personnel.Mr McDonagh is not accused of any wrongdoing.HSBC’s Bermuda operation is not named anywhere in the report.Asked about the impact of yesterday’s hearing, an HSBC Bermuda spokesperson stated: “HSBC Bank Bermuda Limited, a wholly owned indirect subsidiary of HSBC Holdings plc, complies with all laws and regulations, including anti-money laundering legislation. HSBC Bank Bermuda Limited is a sound financial institution and is rated A+/Stable/A-1.”Meanwhile, in a filing to the Bermuda Stock Exchange, HSBC Holdings said in a statement: “With a new senior leadership team and a new strategy in place since last year, HSBC has already taken concrete steps to augment the framework to address these issues including significant changes to strengthen compliance, risk management and culture.”The bank said these steps include:— Creation of a new global structure, which makes HSBC easier to manage.— Control with four global businesses and ten global functions allowing a coordinated and consistent approach, including compliance and risk.— Substantial increase in resources, doubling of global expenditure and significant strengthening of compliance as a control function.— Adopting and enforcing a single standard globally determined by the highest regulatory standard we must apply anywhere.This includes, the bank said:— Maximising information sharing for risk management purposes across HSBC to the extent permitted by law.— Applying a globally consistent approach to knowing your customer regulations.— Requiring all HSBC affiliates to independently complete due diligence on other HSBC affiliates with which they have a correspondent banking relationship.