We got something that looks suspiciously like accountability today in a Senate Permanent Subcommittee on Investigations hearing. Earlier today I previewed this hearing, based on a damning report detailing HSBC’s propensity to allow money laundering to occur on its watch on a mass scale. The report showed pretty clearly that HSBC enabled Mexican drug lords and terrorist financiers to gain access to the sophisticated US finance system, created all sorts of ways for tax dodgers and seedy individuals to avoid anti-money laundering statutes, and concealed numerous violations of prohibitions against doing business with Iran.
Six HSBC executives testified in the hearing, including the chief compliance officer, David Bagley. And Bagley took an unusual stance for members of this industry: he took the blame.
HSBC Holdings Plc (HSBA)’s head of group compliance, David Bagley, told a Senate hearing he will step down amid charges the bank gave terrorists, drug cartels and criminals access to the U.S. financial system by failing to guard against money laundering [...]
“As I have thought about the structural transformation of the bank’s compliance function, I recommended to the group that now is the appropriate time for me and for the bank for someone new to serve as the head of group compliance,” Bagley said. “I have agreed to work with the bank’s senior management towards an orderly transition of this important role.”
Now, Bagley could get a fat lump sum in severance out of this, for all I know. But the admission of guilt, that act alone, is striking and unusual. Other executives at the hearing focused on making changes and expressing that typical Congressional hearing style of apology. But Bagley basically said “This is on me, I’m responsible, and I’m going to leave my job.” If it weren’t connected to a decade of misconduct I’d have a little more respect – we’ve known about these kinds of violations at HSBC at least since a Bloomberg article in 2005 – but there’s at least a lesson in there for the rest of the industry.
HSBC also faces penalties in the hundreds of millions of dollars for their misconduct.