HSBC probe may have prompted Austrac concerns about CBA transactions

The Australian 6:22pm August 7, 2017

Leo Shanahan Sky News business reporter

Austrac’s respected former chief executive Paul Jevtovic — also a former boss of the Australian Crime Commission — left the regulator to join HSBC in April this year as its head of financial crime based in Hong Kong.

HSBC Australia could have played a crucial role in tipping off Australian and US authorities into alleged money laundering by organised crime gangs worth hundreds of millions of dollars to Hong Kong accounts.

As CBA awaits any global fallout from its alleged facilitation in the money laundering of hundreds of millions of dollars to organised crime and terrorist organisations, the matter is understood to already be on the radar of US authorities after HSBC raised CBA transactions with Australian regulator Austrac as part of an investigation by American authorities into HSBC.

Sky News Business and The Australian understand some of the tens of millions in money allegedly funnelled through the CBA to Hong Kong by an Asian drug syndicate was raised with Austrac by HSBC in Australia as part of a Department of Justice and FBI-led investigation into the global giant’s own money laundering scandal that has cost HSBC billions in fines.

In August 2015, the same time Austrac and the Australian Federal Police were investigating alleged CBA money laundering, the Sydney headquarters of HSBC has been subject to ongoing visits by a US government monitoring team.

The visits were part of an agreement that the bank struck with authorities to avoid criminal prosecution after it was used by Mexican and Columbian drug cartels to launder billions of ­dollars through its accounts.

Under US anti-money laundering and anti-terrorism laws a bank can be found liable despite the behaviour not taking place in the United States. The CBA has a presence in the US, but CBA chief Ian Narev has denied the latest scandal risks the bank falling foul of US authorities.

Austrac claims that one Asian drug syndicate moved $44m through cash deposits from Australia via fake CBA account holders to offshore accounts in Hong Kong.

In September 2015, Austrac gave HSBC an exemption from “tipping off” rules in a bid to allow it to hand over details of bank accounts and transactions in possible breach of Australian and US anti-money laundering and counter-terrorism laws.

It is understood some of those transactions to Hong Kong red-flagged by HSBC in Australia concerned funds that originated in CBA accounts.

The handing over of material to Austrac in 2015 also coincides with an investigation by Austrac into how IDMs and other smart tellers were operating and whether banks were complying anti-money laundering and anti-terrorism laws.

HSBC worked closely with Austrac in mid-2015 in an attempt to avoid further sanctions under Australian and US law.

Austrac’s respected former chief executive Paul Jevtovic — also a former boss of the Australian Crime Commission — left the regulator to join HSBC in April this year as its head of financial crime based in Hong Kong.

Both Austrac and HSBC have declined to comment.

Under a five-year deferred prosecution agreement struck in 2013, the bank escaped criminal prosecution after being forced to pay $US1.9bn in fines and allowing a Department of Justice-sanctioned monitor the right to audit the bank’s staff and systems to ensure adherence to US anti-money laundering laws and a sanctions-compliance program.

The US government found the lack of controls of HSBC’s US arm between 2006 and 2010 allowed Mexican and Columbian drug cartels to launder $US881m in drug-trafficking proceeds from Mexican accounts to the US.

Between 2000 and 2006 the US arm of HSBC was also found to have “knowingly and wilfully” processed payments worth $US660m “on behalf of banks and other entities located in Cuba, Iran, Libya, Sudan, and Myanmar in violation of US sanctions”.

The investigative team is led by independent compliance monitor Michael Cherkasky whose large team has been conducting an intense audit of HSBC’s operation around the world.