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16 June 2022

How HSBC laundered millions for Mexican drug lords

In 2012 the bank paid $1.9bn for its part in helping El Chapo's Sinaloa cartel to launder money. Why has no one taken the fall?

By Chris Blackhurst

In the mid-2000s two men lived on opposite sides of the world: one, a London-based banker, wanted his organisation to be the biggest in the world; the other, the head of a Mexican import-export group, supplied much of North America and beyond. Their organisations helped each other.

The first was Stephen Green, chairman of HSBC and an ordained priest who went on to write a book entitled Good Value: Reflections on Money, Morality and an Uncertain World. The second was Joaquín “El Chapo” Guzmán, leader of the Sinaloa drugs cartel.

El Chapo was seeking a way of laundering the dirty money his organisation received from the sale of heroin, cocaine and crystal meth. The dollar bills it processed were literally dirty – crumpled and grubby – and he had billions of them. Fortunately HSBC, which in 2002 had bought Bital, Mexico’s fifth-largest bank, as part of its push to conquer the globe (given the improbable codename Project High Noon by HSBC management), was able to assist.

For years El Chapo’s employees and associates, through front companies and place people, laundered billions of dollars via HSBC Mexico. Bank employees were threatened and made to turn a blind eye; there was little attempt to hide the origin of these huge cash deposits – El Chapo’s people even designed special pouches to exactly fit the cashiers’ windows.

The bank’s bosses were so thrilled with its growth in Mexico, much of it from Sinaloa, that they opened up the world of HSBC to their new customer, encouraging it to avail itself of services in the Cayman Islands, an offshore tax haven. In no time at all 50,000 accounts were routed there from Mexico City. From the Cayman Islands, the account holders could transfer their drug dollars anywhere across the international financial network. HSBC had become a vast laundry for some of the nastiest criminals on Earth.

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[Read more: “No one in government cared until the war”: how the UK left it too late to fight financial crime]

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Eventually US law enforcement caught up. The CIA was keen to prosecute HSBC and its executives but the British chancellor, George Osborne, intervened. His department claimed, and the US Justice Department begrudgingly accepted, that pressing charges could bring down the bank and with it the banking eco-system. No hard evidence was offered for this assertion, but the result, in 2012, was that the bank agreed to a deferred prosecution agreement (DPA) and was fined $1.9bn, the largest such fine in US history. It also promised to reform its ways, allowing an independent monitor to check on progress.

At the time $1.9bn equated to just five weeks of the bank’s profits; internally, it was treated as a cost of doing business. By the time it was handed out Green was a colleague of Osborne: Lord Green, a trade minister. El Chapo was not so fortunate. He was finally captured and extradited to the US where he received life in jail plus 30 years.

In the UK, where HSBC was based, there was not even an official inquiry. The bank had grown so big that even when it was found out to have sinned, or at least when its executives could have been interrogated in a court of law, that was not allowed to happen. At the time Eric Holder, the US attorney-general, said of HSBC and its work for El Chapo: “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute – if we do bring a criminal charge – it will have a negative impact on the national economy, perhaps even the world economy.”

In my new book, Too Big to Jail, I explore the greed and hubris of bankers who ignored repeated warnings, who paid little attention to what was happening in a place far away from their London headquarters, and who, when the balloon burst, walked away unscathed.

Compared with the US and other jurisdictions the UK does not take white collar crime seriously enough. In the crash of 2008 no senior banker was pursued through the criminal courts for almost bringing the world economy to its knees. Then it was said we could not afford to allow a major bank to go down: they were too big to fail.

As a society, we’re drawn into worshipping the power of “big” – big bank, big corporation, big numbers, big salary, big bonus, big house, big car, big boat. Big. HSBC had made itself bigger and, in the process, it became too big to manage, too big to fail and too big to jail.

Chris Blackhurst is the author of “Too Big to Jail – Inside HSBC, the Mexican drug cartels and the greatest banking scandal of the century” (Macmillan).

[Read more: Why kleptocrats and money launderers love Companies House]

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