“Do not mention Iran” *

HSBC clearly not in the Middle East
HSBC Middle East’s HQ until June this year. Clearly not in the Middle East

Jersey C.I. – If British politics hadn’t been in leopard-print convulsions a week past Tuesday, this little gem on the BBC News website about HSBC might have made bigger headlines.

It comes from a U.S. congressional report entitled (you have to love this) Too Big to Jail.

In a nutshell, it turns out the UK’s biggest bank escaped money laundering charges in the U.S. because of fears such a case would cause another financial meltdown, a la 2008. That was despite “blatant criminal violations”

And there we were thinking it was moral hazard that CAUSED the 2008 crisis. Silly us.

Oh, and HSBC’s biggest cheerleader? The UK’s very own Chancellor of the Exchequer, George Osborne (although apparently the UK’s very own “regulator” the FSA, was getting in the way too).


So what the heck’s this doing on a blog about Jersey?

Remember all that brouhaha about HSBC, Iran, Mexican drug cartels and money laundering? A lot of that was going down in Jersey about ten years ago, especially the Iranian stuff.

How? HSBC staff in places like Jersey were pretending money from Iran wasn’t from Iran in order to sneak the cash past regulators in America, which has (or had) rules against that sort of thing because Iran sponsors terrorism, wants nukes and is run by nutty mullahs.

Here’s what U.S. Senator Carl Levin said back in 2012, after it all came to light: “HSBC used its U.S. bank as a gateway into the U.S. financial system for some HSBC affiliates around the world to provide U.S. dollar services to clients while playing fast and loose with U.S. banking rules.

“Due to poor anti-money laundering controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions [Iran].”

One of those “affiliates” – the one at the centre of the dodgy dealings with Iran, outlined at length in U.S. congressional reports – was HSBC Middle East.


It is (or was) based not in the Middle East but on the Esplanade, right here in Jersey, opposite where the little choo-choo trains tootle along packed with holidaymakers.

Even if criminal money laundering charges never transpired, U.S. authorities eventually forced HSBC to stump up nearly $2 billion in a settlement.

You can bet the regulators in Jersey took an equally tough line.


The Jersey Financial Services Commission has actually never said very much about HSBC Middle East.

Late last year it made this announcement, but it makes no mention of Iran.

And why would it?

For some reason, the announcement is an outline of an inspection the commission ordered focused on the years immediately AFTER the period (up to about 2007) when the U.S. identified so much iffy business going on down on the Esplanade.

Unsurprisingly, HSBC was well in the process of cleaning up its act by the time of the aforementioned Jersey investigation.


That said, what little the commission did say is still interesting. Here’s a snippet:

“The general trend was material non-compliance with Jersey’s regulatory, anti- money laundering and sanctions regime during the beginning and middle of the Reporting Period [from 2008 to 2012], followed by a substantial improvement in standards.”

And get this: the commission found that even after HSBC was in clean-up mode, 86% of a sample of HSBC Middle East’s customers between 2008 and 2012 posed a money-laundering risk.

86%. Almost. All. Of. Them.

Yet no $2 billion cigar for Jersey.

The commission’s crushing punishment for HSBC?

“HSBC Middle East’s remediation plan has been discussed at length with the Commission and significant progress has been made to date in its execution.

“The effectiveness of implementation of the plan will be independently verified during the course of 2015/16, and closely monitored by the Commission in liaison with regulators in the relevant jurisdictions.”

They must be terrified.

So terrified, in fact, that exactly two weeks after the commission published the above statement, HSBC announced its Middle East business would be moving its brass plate, if not its actual offices, to Dubai, a move it completed a couple of weeks ago.

How on earth will the commission keep an eye on it there?

*  The headline for this article is a quote from correspondence between HSBC employees during the bank’s sanction-busting dealings with Iran. They were discussing how to keep Iranian transactions off U.S. regulators’ radar

One thought on ““Do not mention Iran” *”

  1. Well done Mike.
    It really is scandalous that the supposed tough regulator will hit the small boys hard who can’t defend themselves but not even really give a slap on the wrist when the big boys are involved…..

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