Here’s how one of the biggest banks in the
world, HSBC, started laundering Mexican Cartel
money! Wait until you hear about the extremely
simple trick to hide everything!
Move That Dough
Mexican Cartels are essentially huge businesses.
Huge, illegal businesses that generate MASSIVE
amounts of income. We’re essentially talking
about billions of dollars a year. And things
aren’t slowing down for these cartels. In
fact, business is growing and it’s booming!
Record-high production trends were noticed
by the World Health Organization in 2018,
meaning that profits in recent years have
been even bigger! It totally makes sense because
the population keeps growing. And if the percentage
of people who’re customers stay the same,
that means the revenue grows. So okay, we
know that the business Mexican Cartels are
doing is illegal, and it’s big. So how do
they actually move all that money? If you
think about it, their business isn’t exactly
an online business. Making the money is the
relatively easy part for the cartels since
they can control that themselves. Almost all
of the money that they get is street money,
assuming that they’re controlling ALL the
operation from top to bottom. But moving the
cash and getting it into bank accounts is
where things get tough. The cartels have to
deal with a lot of money aren’t a hundred
dollars bills. For example, a million bucks
alone in $5 dollar bills would weigh well
over FOUR HUNDRED pounds. Moving the money
physically into Mexico alone is a huge pain.
While many small cartels take the risk of
smuggling cash back to Mexico in bulk, more
sophisticated cartels don’t do that. The
biggest cartels have BILLIONS of dollars they
have to deal with. Here’s how they cleaned
the money.
Wash Method #1
We’re going to give you guys a crash course
on money laundering. There are plenty of different
ways to launder money, but they essentially
boil down to two ways. The first method is
laundering money through a bank. The cartel
will first deposit their money at a bank.
Then, a process known as "layering" begins.
The cartel will send the money through various
wire transfers to a lot of different accounts.
That means a lot of transfers to a lot of
different names in a lot of different countries.
The cartel will hire a veritable army of people
to deposit small amounts of cash in banks
all over the country, in cities large and
small. They’ll vary the amount of their
deposits and withdrawals in order to make
the paper-trail way harder to follow in case
anyone decides to check on anything. A lot
of these people get caught anyways, but to
the cartels, that's simply the cost of doing
business. Once the money is back in the money
system, it can now be used. But the biggest
problem with this method is because of the
10,000 dollar limit. You probably know that
the IRS requires a bank to report any deposits
over 10 thousand dollars. With billions of
dollars to launder, you can imagine how tedious
that amount of money can get! It’s almost
extremely tedious unless you can get the bank
in on it!
Wash Method #2
The second method is laundering the money
through what’s called trade based laundering.
This was a technique El Chapo’s cartel developed
into an art form! The simplest way to do this
is by buying easily sold high end items such
as say, a Rolex or a gold bar, from a legitimate
company in the US. Anything that’s more
like a commodity, the better. They then would
sell the item back in Mexico for pesos. The
more sophisticated method is actually owning
legitimate cash based businesses and laundering
the money that way. A really quick example
would be a restaurant. A lot of restaurants
involved in money laundering are actually
legitimate businesses with real staff, a real
menu, and real profits. The dirty money will
be mixed in with the clean money. The dirty
money is essentially explained with fake profits.
You can't launder money through a business
using anything that’s traceable. So cartels
are looking for a business with a lot of cash
turnover. Cash isn’t traceable, so any cash-intensive
businesses are used to launder money. Laundromats,
used car dealerships, and restaurants are
some of the most popular businesses. For example,
El Chapo's cartel laundered money through
the Los Angeles fashion district! His cartel
was exploiting the immigrant-heavy garment
industry's relaxed attitude toward reporting
large transactions. This allowed the cartel
to buy clothes in large quantities and ship
the clothes across the border, where they
were sold for pesos!
Corruption Everywhere
So if it’s so tough to launder money, then
how did the Cartels get so big and powerful?!
There’s also another question you may be
thinking about now. Why isn’t Mexico putting
a stop to all of that? One word. Corruption.
There’s a lot of corruption in the Mexican
government. Well, some of it is a choice.
But at the same time, a lot of it isn’t.
As a famous saying goes, people are forced
to either accept the bribe or face the consequences.
A lot of times, cartel members would show
up at a place of business and ask them to
do whatever it was they needed them to do.
And of course, there would be a cash bribe
placed on the table. But at the same time,
cartel members would have already done their
research. They would place pictures of that
employee’s family members on the table!
Obviously, the people would know how to take
a hint. So a lot of people are between a rock
and a hard place. Corruption, forced or unforced,
in Mexico has contributed to the domination
of Mexican cartels. So where exactly does
one of the world’s biggest banks, HSBC,
come into this?
Bital Bank
Bital Bank was a bank used by the Sinaloa
cartel, the one El Chapo ran. They’re still
the most powerful cartel in the world. Well,
they needed a lot of money laundered, and
doing it through a bank was one of their ways.
And Bital was the bank that El Chapo’s cartel
picked. A lot of money was coming and going
from Bital bank. And in case you guys didn’t
know it, there were a lot of corrupt officials
working at the bank. HSBC was looking for
a larger presence in Mexico. And that’s
why in 2002, HSBC acquired Bital Bank, which
was the 5th largest bank in Mexico at the
time. You’d expect that an international
bank that operates across several continents
and the LARGEST bank in Europe would look
into Bital. And yes, HSBC did. They noticed
lots of money flooding into Bital bank. And
that was something HSBC wanted a piece of.
Standard-risk
Banks that are as big as HSBC definitely don’t
shoot in the dark. They definitely do their
due diligence. HSBC had their own rating system
for determining how risky a banking culture
was. Before they enter a market, they rate
the banking system in that specific country
with the lowest level of risk being rated
as “standard”, and the highest as “high”.
For Bital, HSBC somehow rated them as “standard”,
the lowest level of risk. This was in spite
of plenty of evidence that there could be
large amounts of unmonitored cash that was
flooding the bank! HSBC was advised to introduce
high levels of control for bank transactions.
But they stood by their choice that the level
of risk was low in Mexico, contrary to the
evidence. They made a conscious decision to
not look closely at the transactions that
were going on at the bank!
All about the $$$
Essentially, HSBC bought a bank that was filled
with Cartel bank accounts. And we get it.
When Banks buy another bank, they want to
maximize their profits. They were easily taking
in hundreds of thousands of dollars a day
from the cartel. To speed up the deposits
cartel members even designed “specially
shaped boxes” that fit the size of teller
windows at HSBC branches! HSBC grew to be
known as THE place to launder money in Mexico
among cartels. Between 2007 and 2008 for example,
HSBC Mexico shipped out roughly $7 billion
dollars to HSBC's US branches. That was more
money than any other HSBC affiliates. Mexican
and US authorities were extremely concerned
back then that cartels were able to circumvent
the anti-money laundering controls at US banks
by transporting US dollars to Mexico, and
then using HSBC Mexico to transfer it to the
US. HSBC didn’t care. They just wanted to
make as much money as possible from their
Mexican branches. And this went on for years.
El Chino
The cartels were happy, and HSBC was happy.
How did it ever all come crashing down? Enter
Zhenli Ye Gon, or whose better known as El
Chino in the Narco world. He’s a Chinese-Mexican
businessman who ran a company in Mexico called
Unimed. This was a wholesale pharmaceutical
company that did business in Mexico.
From 2002 to 2004, Unimed was legally authorized
by the Mexican government to import thousands
of tons of different chemicals into Mexico.
This included precursor chemicals that Cartels
would need to make their newest product. Let’s
just say that El Chino didn’t make his fortune
through his pharmaceutical company. He’s
a member of El Chapo’s Cartel!
So the cartels would get the ingredients they
needed from Unimed. However, on July 1st,
2005, Unimed’s license ran out. But Zhenli
Ye Gon continued to import chemicals without
a license. That’s when police decided to
raid his house in Mexico City. So in March
2007, the Mexican government went into his
house and made an insane discovery. They found
over TWO hundred million US dollars in cash!
The cash was all OVER the place. There were
just stacks and stacks of cash, everywhere.
That’s when the police found out that he
had been doing a lot of banking with HSBC.
This is in ADDITION to the cash he had on
hand in his mansion! HSBC Mexico began to
actually look into his records and found out
that he had been banking with them for a long
time. He was moving so much money, that HSBC
London, the bank’s headquarters, began getting
suspicious. They had given an order to its
Mexican branch years ago in 2004 that they
had to close his account. That never happened!
Know Your Customer
Because a bank can get into big trouble whenever
they aid illegal activities through money
laundering, it’s in their best interest
to get to know their customers. But HSBC never
did that. It wasn’t only El Chino that had
these money laundering issues. It was a bunch
of other people that were doing money laundering
all over the US. Investigators noticed a lot
of shady criminal transactions throughout
different areas of the US. One particular
thing they realized is that these transactions
had triggered anti-money laundering alerts
set in place at HSBC.
One particular example was a doctor in West
Virginia. Dr. Barton Adams was essentially
committing fraud with medicaid and medicare.
He was stealing millions of dollars from these
programs by seeking duplicate payments and
billing for services not performed. He under-reported
his income with false tax returns and then
he laundered the money! HSBC moved all of
his money around for him to his shell companies,
and never asked questions.
These types of transactions were just the
tip of the iceberg. HSBC was moving billions
of dollars around for many criminal organizations
and other corrupt businessman.
Nothing to see here
Like we said earlier, HSBC DID have anti-money
laundering systems in place. A bank usually
has tight controls all around their operations.
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they just ignored it. For example, if someone
tries to move $50,000 for the first time,
the system will generate an alert. Usually
someone at the bank will ask a few questions.
But not at HSBC.
The system at HBSB gave out plenty of these
warnings. But it just seemed that no one cared
enough to act on them. Billions of dollars
were moved throughout HSBC but ended up missing.
And that means one thing only – it’s money
used to fund illegal activities.
The OCC
The OCC, or The Office of the COMPtroller
of the Currency, is a federal agency that’s
responsible for monitoring the banking system
for the US. After these money laundering problems
were noticed at HSBC, the OCC sent a warning
notice to them in 2010. Basically the OCC
let HSBC know that they uncovered some suspicious
activity, and they’re gonna be looking closer
at their activities.
After receiving a warning from the OCC, HSBC
was like, “You know what. The OCC is right.
We SHOULD started paying more attention to
what’s happening with our transactions!”
One of the things that the OCC told HSBC to
do was to go back and look at its questionable
transactions. So HSBC decided to create a
special department to do this.
Anti-Money Laundering Experts
So HSBC hired a bunch of people. They were
what HSBC called, “AML experts”. These
were anti-money laundering experts who were
supposed to go through all the HBSB backlogs
and double check for any “missed alerts”.
Apparently, there were over 17,000 missed
alerts! HSBC was basically forced to hire
this team by the OCC. So HSBC did what any
bank would do, and that’s follow OCC’s
orders. HSBC hired as many of these auditors
as possible since they had a huge backlog
of these missed alerts.
So they hired AML experts actually started
working their way through these “missed”
system alerts. There’s basically a blacklist
of people and organizations that banks SHOULDN’T
be doing business with called the OFAC Sanctions
list. What the AML experts found was that
there were a ton of transactions involving
a lot of people on the Sanctions list! So
if any individual or organization is on the
list, transactions automatically don’t go
through. But how were these transactions approved
and going through at HSBC?! HSBC used dashes
and dots to hide the names of anyone on the
list!
Here’s a silly example to help you understand
how they did this. Let’s say someone named
John Smith was on this blacklist. And someone
wants to send money to John Smith. Now, sending
money to John Smith wouldn’t be possible
since he’s on the list. So to get around
that, HSBC would have the name in there as
J O dot H N Smith, or some variation.
Someone at HSBC would manipulate the spelling
of the name in order to get around the system!
It seems like HSBC London headquarters knew
ALL about the shady business going on. Or
did they? Did they want their AML experts
to ACTUALLY check for anything? Because a
few of the AML experts actually figured things
out!
HSBC Hearing
After it became clear something’s up, the
CIA got involved. After further investigation,
HSBC executives went in front of the Senate.
So what happened? HSBC’s attitude was somewhat
along the lines of, “yes, yes, we know,
let’s get this over with and move on with
life, we’ll fix this… sometime”
HSBC essentially admitted that these transactions
DID happen. But they said that it wasn’t
their fault! Executives just pushed the blame
down the line. Blame was pushed around everywhere
but everyone just said that they didn’t
know anything.
In July 2012, a US Senate committee issued
a report that stated that HSBC breached money-laundering
rules. Executives should have gone to jail.
But instead, what happened? Nothing. No one
was fined, no one was charged at the bank.
Just the bank itself was fined.
Not our responsibility
HSBC and the US government settled in 2012.
The US Attorney was actually forced to step
down and drop any charges against the bank.
With the settlement, HSBC was penalized $1.9
billion dollars, the largest fine ever under
the Bank Secrecy Act! That fine was for violating
four U.S. laws designed to protect the U.S.
financial system. It may sound like a lot
of money, until you realize that 1.9 billion
dollars was only equivalent to 5 weeks of
HSBC’s profit that year.
HSBC laundered at the very least $881 million
dollars through the U.S. financial system
for cartels. These are just the KNOWN transactions.
The real number can be easily in the billions!
They also failed to monitor more than $670
billion in wire transfers and more than $9.4
billion in purchases of physical dollars from
its Mexico unit. HSBC acknowledged that for
years, it had ignored warning signs that cartels
in Mexico were using its branches to launder
millions of dollars.
But the US government didn’t go hard after
HSBC even though they determined HSBC helped
to launder massive amounts of money for cartels.
The government had an opportunity to punish
HSBC for their transgressions back in 2012,
but they decided to not do it. No one knows
why the government decided to not go after
clear white collar crime.
What HSBC Really Did
Basically, HSBC sold their soul to the devil.
They decided to do business with illegal organizations
just so they can pocket billions of dollars
in profit. This allowed cartels to operate
in Mexico and the US without impunity! When
HSBC bought Bital bank, it’s our suspicion
that they knew EXACTLY what they were buying.
They knew that the cartels were a growing
business and that that specific business would
grow. So they basically bought up these accounts
and decided to continue to do business with
them.
And in order to continue to do business, they
helped to hide cartel members and other criminal
identities with a simple system of dots and
dashes. The executives wanted the criminal
business and because it’s a lot of money
and they were okay with whatever that came
with it. Even when they were caught, they
still didn’t care! They just put up some
fake resistance just because the OCC told
them to! They basically tried to hire as many
incompetent auditors in order to show the
OCC that they at least tried. But the auditors
actually uncovered their simple little method
that allowed transactions to go through.
It’s hard to think that HSBC executives
had NO clue what was going on, and that they
WEREN’T in on this.
During their public statement, their spokesperson
added that a PART of the BONUSES for senior-level
executives would go towards paying the fine.
What do you guys think? Did HSBC knowingly
do this?
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