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(CNS Business): The Cayman Islands Monetary Authority (CIMA) has admitted to an “the apparent breakdown of anti-money laundering (AML) procedures” at the Cayman Islands branch of HSBC Bank Mexico (HBMX) in the wake of revelations by a US Senate committee that tens of thousands of accounts at its Cayman branch had possible links to organized crime and were poorly regulated. As the regulator of financial services institutions in the Cayman Islands, CIMA officials insisted they are taking this seriously, as the authority announced that it is investigating whether the bank breached any local laws or regulations. Earlier this week Mexican regulators imposed a fine of nearly $28 million on HBMX for not having sufficient anti-money laundering controls.
CIMA’s Managing Director, Cindy Scotland, said in a release from the authority on Friday, that apart from the investigations into the actions of the Cayman Islands Branch of HSBC Mexico, CIMA also would conduct a complete review of its regulatory framework, including the home host relationship (meaning the relationship between the regulators of HBMX and CIMA); and the relevant sections of the Cayman Islands' Money Laundering Regulations and The Guidance Notes on the Prevention and Detection of Money Laundering and Terrorist Financing in the Cayman Islands.
The US Senate committee released a damning 330-page report on 17 July on the failure of the London-based HSBC, Europe's largest bank, to institute safeguards to prevent money laundering through some of its affiliates, which included a detailed investigation into HSBX and its Cayman Islands accounts. The committee found that the Cayman accounts had operated for years with lax anti-money laundering (AML) and Know Your Customer (KYC) controls and information. An estimated 15% of the accounts had no KYC information at all, which, the report stated, meant that HBMX had no idea who was behind them, while other accounts were, in the words of one HBMX compliance officer, misused by “organized crime”.
"CIMA has a long history and strong reputation of acting to ensure that the regulatory framework in the Cayman Islands is sound," Scotland said. "We intend to continue, and moreover, enhance that reputation in light of the growing complexity and interconnectedness of the global financial services industry. “
On Wednesday, HSBC said Mexico’s National Banking and Securities Commission levied its fine in part due to the late reporting of more than 1,700 unusual transactions, the failure to report 39 such transactions, and 21 administrative failures. The bank apologised for its failures, and acknowledged “that in the past it had sometimes failed to meet the standards that regulators and customers expect”.
HSBC faces a fine of as much as $1bn following the revelations detailed in the Senate reprot, according to some analysts.
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