Managers from unit battled auditors with four-part strategy — Discredit, Deny, Deflect and Delay
by Greg Farrell | Bloomberg | Originally published July 7, 2015
HSBC Holdings Plc, smarting from a $1.9 billion fine for providing banking to money launderers and sanctions-dodgers, promised U.S. officials it would clean up its act.
Within a year, its reform efforts met resistance from leaders of HSBC’s U.S. investment-banking unit — some of whom mounted a campaign of bullying, footdragging and discrediting against in-house watchdogs, according to previously unreported details from a report by the bank’s court-appointed monitor.
HSBC agreed to submit to the monitor’s oversight in late 2012, as part of a pact with the U.S. Justice Department that required it to bolster its in-house controls. Armed with that directive, HSBC compliance officers singled out a half-dozen clients whose activities could put the London-based bank at risk — including a Saudi bank that had been linked to Sept. 11, 2001, hijackers — and advised the U.S. investment-banking division to consider dropping those relationships.
There was no indication that the U.S. managers jumped to investigate. Instead, some of them requested that the six banks’ alleged sins be omitted from an in-house audit that compliance-team members were preparing to submit to HSBC’s top executives. The compliance team’s final audit omitted specifics about the banks, according to the monitor’s report.
As that audit took shape, U.S. investment banking managers put up other resistance, according to the court-appointed monitor’s report: One manager shouted at a compliance officer for wasting his time and dismissed her findings. Overall, the report says, managers from the unit battled auditors with what one compliance officer characterized as a four-part strategy — Discredit, Deny, Deflect and Delay.