HSBC chief steps down over money laundering probe

The head of compliance at British banking giant HSBC resigned in front of a US Senate subcommittee yesterday after it emerged the bank had exposed the US to billions of dollars worth of money laundering, drug trafficking, and terrorist financing.

David Bagley, who has been HSBC head of group compliance since 2002, stepped down before the Homeland Security and Governmental Affairs subcommittee after its findings were published.

Mr Bagley, who had a 20-year career with the bank and is based in London, said: “Despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators.”

Earlier in the hearing, subcommittee chairman Senator Carl Levin said HSBC’s compliance culture had been “pervasively polluted for a long time”.

The revelations are another blow to the reputation of the banking industry following the current scandal over the manipulation of the Libor inter-bank lending rate.

Mr Bagley told the panel that he had recommended to HSBC senior management it was the “appropriate time’ for “someone new to serve as the head of group compliance”.

In his written submission to the subcommittee, he said the bank had “learned a number of valuable lessons” and partly blamed the oversights on the bank’s rapid growth.

“The bank underestimated some of the challenges presented by its numerous acquisitions, and despite efforts to meet these challenges, we were not always able to keep up,” he said.

Mr Bagley added that HSBC was in the process of “shedding the historical compliance model that the bank has outgrown”.

He also revealed the bank is to close 20,000 accounts on the Cayman islands as result of the money laundering probe.