Argentina Sues British Companies over Falklands Development

By INDALECIO ALVAREZ | AFP | JUNE 5, 2012

Argentina declared British oil exploration off the Falklands “illegal” on Monday and immediately set about suing five companies for pursuing activities around the contested islands.

Britain responded almost immediately, saying the islanders were entitled to develop their own natural resources and it was Buenos Aires that was breaking the law with its campaign of harassment and intimidation.

“These latest attempts to damage the economic livelihoods of the Falkland Islands people regrettably reflect a pattern of behavior by the Argentine government,” a Foreign Office spokeswoman said.

“From harassing Falklands shipping to threatening the islanders’ air links with Chile, Argentina’s efforts to intimidate the Falklands are illegal, unbecoming and wholly counter-productive.”

Argentina last month pressed Britain in a diplomatic note to let it launch direct flights to the islands.

Three decades after the Falklands War, the promise of oil reserves is inflaming tensions between Britain and Argentina while also boosting the economic hopes of the islanders — estimated to number just 3,140.

Britain has ruled the archipelago — 8,000 miles (12,900 kilometers) from its own shores and less than 300 miles off the southern coast of Argentina — since 1833 as a self-governing overseas territory.

Argentina says it acquired the windswept islands, which it calls the Malvinas, from Spain in 1816.

On April 2, 1982, Argentine forces invaded and occupied the Falkland Islands and South Georgia, a smaller island governed by Britain further out in the South Atlantic.

Britain dispatched a naval task force and regained control of the islands when the Argentine forces surrendered on June 14, but not before 649 Argentine and 255 British servicemen had died.

The renewed war of words over the Falklands has intensified around the 30th anniversary of the bloody 74-day conflict.

Argentine President Cristina Kirchner on Monday declared the British oil hunting activity “illegal and clandestine” and accused the firms of operating “in the sovereign area of the argentine nation.”

Her government said the classification formally paved the way for criminal proceedings to begin.

“The declaration of clandestineness clears the way for the immediate launch of civil and criminal action against these businesses,” said a foreign ministry statement that spoke of seeking fines and penalties.

It said the Argentine government would soon be in communication with Britain’s Treasury, its Financial Services Authority, the International Organization of Securities Commissions (IOSCO) and the New York Stock Exchange.

Argentina first announced in March that it intended to take legal action against the British oil concerns but it has never made clear how it intends to go about it or where it intends to file suit.

The companies — Desire Petroleum, Falkland Oil and Gas, Rockhopper Exploration, Borders and Southern Petroleum and Argos Resources — “are not authorized by the Argentine government under law,” read a resolution published Monday in Argentina’s Official Bulletin by Energy Secretary Daniel Cameron.

The islands’ oil reserves, which have remained untapped until now but which analysts predict could be worth tens of billions of dollars, have been a major source of tension between the countries since their discovery in 1998.

At the time, a barrel of crude sold for less than $10 — today it would fetch $125 — and firms led by Anglo-Dutch energy giant Shell abandoned their exploration on the grounds it was not profitable enough.

The rocketing price of oil since then has enticed the five companies back to the islands, hoping to cash in on what might be one of the world’s last new sources of fossil fuels.

To Argentina’s dismay, drilling resumed in 2010 with Rockhopper and Desire Petroleum taking the lead.

Three small companies followed suit, but until now only Rockhopper — named after one of the Falklands’ resident penguin breeds — has confirmed significant reserves, in the Sea Lion field to the north of the islands.

Rockhopper plans to start developing the field this year, and expects to pump the first of its estimated 450 million barrels in 2016, according to analysts Edison Investment Research (EIR).

 

Argentina: A Sociedade sem Sexo nem Gênero?

O governo liderado por Cristina Fernandez oficialmente apoia mudança de sexo e terapia hormonal para transsexuais e éfinanciará o programa com dinheiro arrecadado com impostos.

POR LUIS MIRANDA | THE REAL AGENDA | 14 MAIO 2012

Os adultos que querem uma cirurgia de mudança de sexo ou terapia hormonal na Argentina serão capazes de fazê-lo como parte de seus planos de saúde público ou privado segundo uma nova lei de direitos de gênero que foi aprovada quarta-feira.

O projeto também dá às pessoas o direito de especificar o gênero como aparece no cartório, quando suas características físicas não correspondem à maneira como se vêem.

Os senadores aprovaram a Lei da Identidade de Gênero por uma votação de 55-0, com uma abstenção e mais de uma dúzia de senadores que se declararam ausentes – com a mesma margem aprovou-se uma lei em favor de uma “morte com dignidade”.

A presidente Cristina Fernández deu seu apoio à lei e deve assina-la em breve. Ela disse várias vezes que tem orgulho que a Argentina se tornou a primeira nação latino-americana a legalizar o casamento gay há dois anos, permitindo que milhares de casais do mesmo sexo tenham os mesmos direitos que casais heterossexuais.

Para muitos, os direitos entre os sexos era o próximo passo.

Qualquer adulto agora é capaz de mudar oficialmente seu sexo, nome de nascimento e imagem sem ter que obter a aprovação dos médicos ou juízes – e sem ter que passar por mudanças físicas com antecedência, como muitas jurisdições dos EUA exigem.

“É como dizer que você pode mudar seu sexo legal sem ter que mudar o seu corpo. Isso é ultrajante “, disse Katrina Karkazis, uma antropóloga da Universidade de Stanford, quem também é bioeticista médica e escreveu um livro intitulado” Arrumando o Sexo “sobre os aspectos médicos e jurídicos que surgem quando as características físicas não correspondem inteiramente com sua identidade de gênero.

“Há um conjunto de critérios médicos que as pessoas devem ter antes de mudar seu sexo nos EUA, e isso dá valor e autoridade ao indivíduo sobre a maneira em que quer viver. É realmente incrível “, disse ele.

Quando os argentinos queiram mudar seus corpos, as empresas de cuidados de saúde, deveram dar a cirurgia ou terapia hormonal. Estes tratamentos estão incluídos no “Plano de saúde obrigatório”, o que significa que ambos os planos privados e públicos e os prestadores não poderão cobrar dinheiro adicional para usar esses serviços.

“Este projeto permitirá para muitos de nós ver a luz, sair da escuridão, e aparecer”, disse o senador Osvaldo Lopez de Tierra del Fuego, o único legislador abertamente gay na Argentina.

“Há muitas pessoas em nosso país que merecem existir”, disse Lopez.

As crianças também têm uma voz na lei: os jovens menores de 18 anos que querem mudar de gênero ganham o direito de fazê-lo com a aprovação de seus guardiões. Mas se os pais ou responsáveis querem uma mudança de identidade de gênero e não têm o consentimento da criança, então o juiz deve intervir para garantir que os direitos das crianças sejam protegidos.

Argentina não precisa se preocupar com um grande número de pessoas buscando mudanças de sexo, Karkazis prevê.

“Isso não vai criar uma grande demanda no sistema nacional de saúde para estes procedimentos. Eles são difíceis, dolorosos e irreversíveis. E é por isso que muitas pessoas não fazem “, disse ela.

Mas porque a lei diz que as pessoas podem mudar legalmente sua identidade sem ter que se submeter a cirurgia genital ou terapia hormonal, essas mudanças podem ser mais benignas e reversíveis, mesmo se um dia você muda a sua auto-imagem.

Outros países vizinhos como Uruguai, adotaram leis de direitos de gênero, mas a Argentina “está na vanguarda do mundo” por causa desses benefícios que ela garante, disse Cesar Cigliutti, presidente da Comunidad Homosexual Argentina.

“Este é verdadeiramente um direito humano: o direito à felicidade”, disse o senador Pichetto Miguel durante o debate “.

Argentina: La Sociedad sin Sexo ni Género

Gobierno liderado por Cristina Fernández apoya oficialmente cambios de sexo y terapia hormonal para las personas transgénero y lo financia con dinero recaudado de los impuestos.

POR LUIS MIRANDA | THE REAL AGENDA | 14 MAYO 2012

Los adultos que quieren una cirugía de cambio de sexo o terapia hormonal en la Argentina serán capaces de hacerlo como parte de sus planes de salud públicos o privados bajo una ley de derechos de género aprobada el miércoles.

La medida también da a las personas el derecho a especificar como su género aparece en el registro civil cuando sus características físicas no coinciden con la forma en que se ven a sí mismos.

Los senadores aprobaron la ley de Identidad de Género por una votación de 55-0, con una abstención y más de una docena de senadores que se declararon ausentes – con el mismo margen se aprobó una ley en favor de una “muerte con dignidad”.

La presidenta Cristina Fernández lanzó su apoyo a la ley y se espera que la firme pronto. Ella ha dicho a menudo lo orgullosa que está que la Argentina se convirtiera en la primera nación de América Latina en legalizar el matrimonio gay hace dos años, permitiendo a miles de parejas del mismo sexo casarse y disfrutar de los mismos derechos legales que las parejas heterosexuales casadas.

Para muchos, los derechos de género fueron el siguiente paso.

Cualquier adulto ahora será capaz de cambiar oficialmente su género, imagen y nombre de nacimiento sin tener que obtener la aprobación de los médicos o los jueces – y sin tener que someterse a cambios físicos de antemano, como muchas jurisdicciones de Estados Unidos requieren.

“Es como decir que usted puede cambiar su sexo legal sin necesidad de cambiar su cuerpo en absoluto. Eso es inaudito “, dijo Katrina Karkazis, una antropóloga de la Universidad de Stanford médica y bioeticista que escribió un libro titulado “Arreglando el Sexo “, sobre el tratamiento médico y legal de las personas cuyas características físicas no corresponden plenamente con su identidad de género.

“Hay todo un conjunto de criterios médicos que las personas  deben tener para cambiar su género en los EE.UU., y esto le da al individuo una cantidad extraordinaria de autoridad sobre la forma en que queremos vivir. Es realmente increíble “, dijo.

Cuando los argentinos quieran cambiar sus cuerpos, las compañías de cuidado de la salud tendrán que dar cirugía o terapia hormonal. Estos tratamientos se incluirán en el “Plan Médico Obligatorio”, que significa que tanto planes privados como públicos y los proveedores no podrán cobrar extra por los servicios.

“Esta ley va a permitir que muchos de nosotros veamos la luz, salgamos de la oscuridad, y aparezcamos”, dijo el senador Osvaldo López de Tierra del Fuego, el único legislador nacional abiertamente gay en la Argentina.

“Hay muchas personas en nuestro país que también merecen el poder de existir”, dijo López.

Los niños también tienen una voz en la ley: Jóvenes menores de 18 años que quieren cambiar sus géneros ganan el derecho a hacerlo con la aprobación de sus tutores legales. Pero si los padres o tutores quieren un cambio de identidad de género y no tienen el consentimiento del niño, entonces el juez debe intervenir para garantizar que los derechos del niño están protegidos.

Argentina no tiene que preocuparse de un gran número de personas que pidan cambios de sexo, Karkazis prevee.

“Esto no va a crear una gran demanda en el sistema nacional de salud para estos procedimientos. Son difíciles, dolorosos e irreversibles. Y es por eso que muchas personas no lo hacen “, dijo.

Pero debido a que la ley dice que la gente puede cambiar legalmente su identidad sin tener que someterse a una cirugía genital o la terapia hormonal, estos cambios pueden ser más benignos y reversibles, incluso, si algún día la persona cambia de autoimagen.

Otros países vecinos como Uruguay, han aprobado leyes de derechos de género, pero la Argentina “está a la vanguardia del mundo” debido a estos beneficios que garantiza, dijo César Cigliutti, presidente de la Comunidad Homosexual Argentina.

“Este es verdaderamente un derecho humano: el derecho a la felicidad”, dijo el senador Miguel Pichetto durante el debate “.

Traducido del artículo: The ‘Gender-free’ Society Sets Foot in Argentina

The ‘Gender-free’ Society Sets Foot in Argentina

Cristina Fernandez’s led government has officially endorse government-sponsored, taxpayer-financed sex changes and hormone therapy for transgender people.

ASSOCIATED PRESS | MAY 10, 2012

Adults who want sex-change surgery or hormone therapy in Argentina will be able to get it as part of their public or private health care plans under a gender rights law approved Wednesday.

The measure also gives people the right to specify how their gender is listed at the civil registry when their physical characteristics don’t match how they see themselves.

Senators approved the Gender Identity law by a vote of 55-0, with one abstention and more than a dozen senators declaring themselves absent — the same margin that approved a “death with dignity” law earlier in the day.

President Cristina Fernandez threw her support behind the law and is expected to sign it. She has often said how proud she is that Argentina became Latin America’s first nation to legalize gay marriage two years ago, enabling thousands of same-sex couples to wed and enjoy the same legal rights as married heterosexual couples.

For many, gender rights were the next step.

Any adult will now be able to officially change his or her gender, image and birth name without having to get approval from doctors or judges — and without having to undergo physical changes beforehand, as many U.S. jurisdictions require.

“It’s saying you can change your gender legally without having to change your body at all. That’s unheard of,” said Katrina Karkazis, a Stanford University medical anthropologist and bioethicst who wrote a book, “Fixing Sex,” about the medical and legal treatment of people whose physical characteristics don’t fully match their gender identity.

“There’s a whole set of medical criteria that people have to meet to change their gender in the U.S., and meanwhile this gives the individual an extraordinary amount of authority for how they want to live. It’s really incredible,” she said.

When Argentines want to change their bodies, health care companies will have to provide them with surgery or hormone therapy on demand. Such treatments will be included in the “Obligatory Medical Plan,” which means both private and public providers will not be able to charge extra for the services.

“This law is going to enable many of us to have light, to come out of the darkness, to appear,” said Sen. Osvaldo Lopez of Tierra del Fuego, the only openly gay national lawmaker in Argentina.

“There are many people in our country who also deserve the power to exist,” Lopez said.

Children also get a voice under the law: Youths under 18 who want to change their genders gain the right to do so with the approval of their legal guardians. But if parents or guardians want a gender identity change and don’t have the child’s consent, then a judge must intervene to ensure the child’s rights are protected.

Argentina need not worry about vast numbers of people demanding sex changes, Karkazis predicted.

“This isn’t going to create a huge demand on the national health system for these procedures. They’re difficult, painful, irreversible. And this is why many people don’t do it,” she said.

But because the law says people can legally change their identities without having to undergo genital surgery or hormone therapy, these changes can be more benign and even reversible, if some day the person’s self-image changes.

Other countries, including neighboring Uruguay, have passed gender rights laws, but Argentina’s “is in the forefront of the world” because of these benefits it guarantees, said Cesar Cigliutti, president of the Homosexual Community of Argentina.

“This is truly a human right: the right to happiness,” Sen. Miguel Pichetto said during the debate.”

HSBC Permits Money Laundering for Wealthy Clients

Documents and E-mails show that the bank not only doesn’t inquire about the origin of funds, but also works hard to conceal the transfer of large amounts of cash from clients of Iranian, Lebanese, Brazilian and Cuban origin.

Most suspicious transactions are done through the HSBC’s New York and Miami offices.

By CARRICK MOLLENKAMP, BRETT WOLF and BRIAN GROW | VANCOUVER SUN | MAY 8, 2012

In April 2003, the Federal Reserve Bank of New York and New York state bank regulators cracked the whip on HSBC Bank USA, ordering it to do a better job of policing itself for suspicious money flows. Staff in the bank’s anti-money laundering division, according to a person who worked there at the time, flew into a “panic.”

The U.S. unit of London-based HSBC Holdings Plc quickly rallied. It hired a tough federal prosecutor to oversee anti-money laundering efforts. It installed monitoring systems for operations that had grown unwieldy during the bank’s U.S. expansion. The aim, as HSBC said in an agreement with regulators at the time, was to “ensure that the bank fully addresses all deficiencies in the bank’s anti-money laundering policies and procedures.”

Nearly a decade later, the effort has failed to satisfy law-enforcement officials.

The extent of that failure is laid out in confidential documents reviewed by Reuters that originate from investigations of HSBC’s U.S. operations by two U.S. Attorneys’ offices.

These documents allege that from 2005, the bank violated the Bank Secrecy Act and other anti-money laundering laws on a massive scale. HSBC did so, they say, by not adequately reviewing hundreds of billions of dollars in transactions for any that might have links to drug trafficking, terrorist financing and other criminal activity.

In some of the documents, prosecutors allege that HSBC intentionally flouted the law. The bank created an operation that was a “systemically flawed sham paper-product designed solely to make it appear that the Bank has complied” with the Bank Secrecy Act and is able to detect money laundering, wrote William J. Ihlenfeld II, U.S. Attorney for the Northern District of West Virginia, in a draft of a 2010 letter addressed to Justice Department officials.

In that letter, Ihlenfeld compared HSBC unfavorably to Riggs Bank. In 2004 and 2005, that scandal-plagued Washington bank was fined a total of $41 million after it was found to have violated anti-money laundering laws, and it was acquired by PNC Financial Services.

“HSBC is to Riggs, as a nuclear waste dump is to a municipal land fill,” Ihlenfeld wrote.

The allegations laid out in the Ihlenfeld letter and other documents couldn’t be confirmed. It is possible that subsequent inquiries have led investigators to alter their views of what went on inside HSBC’s compliance operation.

As they are, the documents reviewed by Reuters, combined with regulatory filings, court documents and interviews with current and former HSBC employees, paint a damning portrait of a bank allegedly unable, and unwilling, to police itself or its clients.

HSBC’s U.S. anti-money laundering division – the people charged with ensuring that the bank toes the line of regulators and law enforcement – has experienced high turnover among executives. Since 2005, at least half a dozen overseers have come and gone. Compliance staff also encountered pushback from bankers eager to maintain relationships with lucrative clients whose dealings raised red flags.

In the Miami office – an important center for HSBC’s private-banking and retail operations – a longtime private banker was fired for alleged sexual harassment after he warned compliance officers that clients were engaged in shady dealings.

In one email exchange submitted as evidence in that case, employees debated whether the bank should help a Miami client get around U.S. sanctions by moving the client’s business to HSBC’s Hong Kong office. “I believe that the best outcome would be for the customer to open a relationship with Hong Kong just for leters (sic) of credit purposes. He travels there all the time,” private banker Antonio Suarez wrote in a 2008 email. Suarez has since left the bank and couldn’t be reached for comment.

UNDER THE RADAR

The revelations come as HSBC confronts multiple investigations into its internal policing abilities. The Justice Department, the Federal Reserve, the Office of the Comptroller of the Currency, the Manhattan district attorney, the Office of Foreign Assets Control and the Senate Permanent Subcommittee on Investigations are scrutinizing client activities such as cross-border movements of bulk cash, and transactions linked to Iran and other parties under U.S. economic sanctions, the bank said in a February regulatory filing.

“We continue to cooperate with officials in a number of ongoing investigations,” HSBC spokesman Robert Sherman said. “The details of those investigations are confidential, and therefore we will not comment on specific allegations.” HSBC said in its February filing that it was likely to face criminal or civil charges related to the probes.

A successful case against HSBC could result in an onerous fine and represent one of the most significant money laundering cases ever brought against an international bank. It also would draw unaccustomed attention to the challenges governments — and financial institutions — face in monitoring the trillions of dollars flowing through banks’ back-office operations, flows essential to the daily functioning of the global financial system.

“Disguised in the trillions of dollars that is transferred between banks each day, banks in the U.S. are used to funnel massive amounts of illicit funds,” Jennifer Shasky Calvery, head of the Justice Department’s Asset Forfeiture and Money Laundering Section, said in congressional testimony on organized crime in February.

In response to Reuters inquiries about the investigations, Gary Peterson, chief compliance officer of HSBC’s U.S. bank operations, said: “Since joining HSBC in 2010, I’ve been proud to lead an AML (anti-money laundering) team that has vastly increased investments in people, systems and expertise. We are continuously seeking to strengthen our core AML mission: to detect and deter money laundering and terrorist financing – and our efforts are showing results.”

To date, the only enforcement action detailing any anti-money laundering shortcomings at HSBC was a 2010 consent order from the Office of the Comptroller of the Currency, the Treasury agency that is HSBC’s chief regulator. The OCC, calling HSBC’s compliance program “ineffective,” told the bank to conduct a review to identify suspicious activity. This “look-back” was expected to yield a report to HSBC and regulators. The status of the report isn’t known. A spokesman for the OCC declined to comment.

The West Virginia U.S. Attorney’s probe of HSBC, which ran from 2008 until at least 2010, originated in a case against a local pain doctor who allegedly used HSBC accounts to launder ill-gotten gains from Medicare fraud. Over time, the U.S. Attorney’s office began to discern that, as Ihlenfeld wrote in his letter, the doctor’s case was just “the tip of the iceberg” in terms of the volume of suspicious money sluicing through HSBC.

The U.S. attorney for the Eastern District of New York in Brooklyn – one of the most powerful prosecutors outside of Justice Department headquarters in Washington – has conducted a parallel investigation, in collaboration with the Justice Department’s money laundering section.

Specifics on the investigations have until now been cloaked in secrecy. The documents reviewed by Reuters for the first time fill in some of the details. Taken together, they depict apparent anti-money laundering lapses of extraordinary breadth. Among them, according to the documents:

* The bank understaffed its anti-money laundering compliance division and hired “gullible, poorly trained, and otherwise incompetent personnel.” In 2009, the OCC deemed a senior compliance official at HSBC to be incompetent – the same executive in charge of implementing a new anti-money laundering system.

* HSBC failed to review thousands of internal anti-money laundering alerts and generate legally required suspicious activity reports, or SARs, on transactions picked up by the bank’s internal monitoring system. SARs are important because they are sent to U.S. law enforcement and scrutinized for leads to criminal activity. In May 2010, the bank’s backlog of alerts was nearly 50,000 and “growing exponentially each month,” according to one of the documents.

* Hundreds of billions of dollars moved unchecked each year through various bank operations because of lax due diligence and monitoring of accounts with foreign correspondent banks, which are financial institutions that rely on U.S. banks for processing services. The bank maintained accounts with “high risk” affiliates such as “casas de cambios” – Mexican foreign-exchange dealers – widely suspected of laundering drug-trafficking proceeds, and some Mexican and South American banks.

* In some instances, “management intentionally decided” not to review alerts of suspicious activity. An investigation summary also says, “There appear to be instances where Bank employees are misrepresenting” data sent to senior managers, and where management altered risk ratings on certain clients so that suspect transactions didn’t set off alarms.

Sherman, the HSBC spokesman, said the bank cleared the backlog of alerts and has remained current. Sherman also said the bank “regularly reviews risk ratings. We have revised and strengthened our country risk rating review policies.”

Spokesmen for the U.S. Attorney in Wheeling, West Virginia, and for the U.S. Attorney in Brooklyn declined to comment. The Justice Department in Washington also declined to comment, citing “an ongoing investigation into this matter.”

THE MIAMI CONNECTION

HSBC was born in 1865 as the Hongkong and Shanghai Banking Corp in the then-British colony of Hong Kong. It had little presence in the U.S. market until its purchase in the 1980s of Marine Midland Banks Inc based in Buffalo, New York.

Now the fifth-largest bank in the world in terms of market value, HSBC had $2.6 trillion in assets at the end of 2011 and operations in 85 countries and territories. Its North American business, which includes HSBC Bank USA and a consumer finance unit, accounts for about 5 percent of HSBC’s profit.

In 1999, HSBC’s U.S. unit paid $10 billion to buy Republic New York Corp and a European affiliate, banks controlled by Lebanese financier Edmond Safra. The deal doubled HSBC’s private bank to 55,000 clients with $120 billion in assets and broadened business in New York, Florida, Latin America and Europe.

The purchase also yielded one of the world’s biggest banknote businesses, an operation that handles bulk cash exchanges between central banks and large commercial banks. In 2003, HSBC plunged into the U.S. market for subprime lending, paying $14 billion for Household International Inc.

By then, all banks faced U.S. regulatory pressure aimed at stopping shady money flows. In the wake of the September 11, 2001, attacks, the Patriot Act took effect, attempting, among other things, to choke off terrorist financing by strengthening requirements that banks look for and report suspicious activity. In recent years, U.S. law enforcement added an emphasis on money tied to the illegal drug trade.

When the 2003 order came down from regulators for HSBC to improve its anti-money laundering efforts, the bank had no centrally organized means of monitoring the movement of money across borders. That’s when it hired Teresa Pesce. Pesce came from the high-profile U.S. Attorney’s office in Manhattan, where she made a name for herself as a tough prosecutor overseeing money laundering prosecutions.

Pesce “knew the ropes,” according to a person who worked in compliance at the time, and the sense among many staffers was that a “savior was here.” One of her first initiatives was to order the installation of the Customer Account Monitoring Program, or CAMP, a technology system designed to filter suspicious retail transactions across HSBC’s U.S. operations.

In 2006, regulators lifted their 2003 order, according to people familiar with the situation.

Pesce left the bank in 2007 to run KPMG LLP’s anti-money laundering consulting business. A lawyer for Pesce declined to comment.

Despite Pesce’s efforts, problems with HSBC’s program persisted. In 2009, the OCC determined that Lesley Midzain, a compliance executive with little direct experience running anti-money laundering programs, was incompetent. She was in charge of the installation of a monitoring program to replace Pesce’s CAMP system, which the OCC had determined was “inadequate to support the volume, scope and nature of international money transfer transactions,” according to the documents reviewed by Reuters. Efforts to locate and obtain comment from Midzain were unsuccessful.

The former compliance-division staffer said that in the Miami office in particular, with millions of dollars from Mexico, Brazil, Argentina and other countries flowing through the Premier private-banking business for wealthy clients, “it was a nightmare to figure out what was going on down there.”

Those observations mesh with allegations in a 2010 lawsuit against HSBC brought by Tomas Benitez, a longtime private banker in South Florida who had worked at Republic Bank. Benitez alleged that HSBC fired him in January 2009 after he warned colleagues that clients had violated U.S. restrictions on trade with Iran and Cuba.

HSBC said in a court filing that it fired Benitez for alleged sexual harassment – allegations Benitez denied.

In court documents, Benitez alleged that during an audit meeting in 2008, an unidentified federal bank examiner told HSBC employees that a client referred to only as “CM” “had multiple affiliations whose ties to Iran and Cuba were part of their ordinary course of business.

At a follow-up meeting, the account was discussed because of indications its owner “was funneling large amounts of funds in and out, with no apparent business purpose,” Benitez alleged. He told Clara Hurtado, director of anti-money laundering compliance at HSBC’s private bank in Miami, that the account had ties to Iran and Cuba and “as a result, it should not be maintained,” according to the lawsuit.

After the meeting, Benitez alleged, another banker said “he would not allow Benitez’s word and suspicions to defeat a million-dollar-plus account relationship.” The account wasn’t terminated, Benitez alleged.

Hurtado declined to comment. She left HSBC in 2009, according to her LinkedIn account.

In an email exchange submitted as an exhibit in the lawsuit, Hurtado and other HSBC employees discussed whether the bank could help a Miami client avoid violating U.S. sanctions by issuing letters of credit for the client from the bank’s Hong Kong offices, according to Benitez’s lawsuit. “Clara, we are persuing (sic) another solutions……(anything but losing the account!!!),” Suarez, the private banker, wrote in an email. The banker suggested issuing the letters of credit through Hong Kong.

In January 2009, HSBC fired Benitez. In late 2010, a federal judge dismissed his case and demand for pay, saying there was no evidence of a connection between Benitez’s concerns about the accounts and the firing. The judge didn’t address Benitez’s allegations about illicit transactions.

Benitez’s Miami lawyer, Mark Raymond, declined to comment on his client’s behalf.

HSBC spokesman Sherman declined to comment on Benitez’s case. “It’s inappropriate to comment on unsubstantiated allegations in termination of employment cases,” he said.

OBVIOUS TO STOOGES

Around the time Benitez was sounding warnings in Miami, authorities were accelerating an investigation in West Virginia of Barton Adams, a pain clinic operator in the Ohio River town of Vienna. In 2008, the U.S. Attorney in Wheeling indicted Adams on 157 counts of alleged healthcare fraud and other crimes. They allege that Adams moved hundreds of thousands of dollars in Medicare fraud proceeds between a U.S. HSBC account and HSBC accounts in Canada, Hong Kong and the Philippines.

Adams has pleaded not guilty.

In building their case against him, the West Virginia prosecutors determined that HSBC’s compliance problems were systemic. As Ihlenfeld wrote in his letter to the Justice Department: “The Adams money laundering practices – which Moe, Larry, and Curly would dismiss as too transparent – would not be detected by HSBC regardless of who the customer was, or where any transaction occurred.” HSBC, he said, “systematically and egregiously” violated the Bank Secrecy Act.

One document reviewed by Reuters says HSBC developed a “large appetite for risk” after snapping up business with Mexican foreign-exchange houses formerly handled by Wachovia Corp. In 2010, Wachovia agreed to pay $160 million as part of a Justice Department probe that examined how drug traffickers had moved money through the bank.

West Virginia prosecutors focused much of their attention, according to the documents, on HSBC’s failure to report suspicious activity on hundreds of billions of dollars in business from “high-risk” sources.

For instance, 73 percent of accounts with foreign correspondent banks were rated “standard” or “medium” risk and thus weren’t monitored at all, the documents say, noting that oversight of such accounts was “extremely limited despite indications of possible terror financing.” In one example, the bank “summarily cleared as many as 5,000” internal alerts of suspicious activity from correspondent customers in Argentina after lowering the country’s risk rating.

Investigators cited a litany of failings in the bank’s back-office operations — the vast but mundane business of clearing transactions by moving big sums of money around the globe. In the bank’s “remote deposit capture” business – an operation that electronically zaps checks around the world — HSBC “failed to detect, review and report large volumes of sequentially numbered traveler’s checks” from non-U.S. sources. Such checks are a red flag signaling possible money laundering, regulators have said.

HSBC also repatriated more than $106.5 billion in banknote deposits through foreign correspondent accounts, many of them in Mexico and South America, in a three-year period. And yet, “since 2005, the bank has filed only 19 suspicious activity reports relative to the receipt of bulk cash and banknote activities.”

People familiar with HSBC and the reports said 19 is a low number given the risk of the clients. Between 2005 and 2010, banks and other depository institutions filed more than 3.8 million SARs, according to the Financial Crimes Enforcement Network, a bureau of the Treasury Department.

Similarly, investigators found that HSBC didn’t report any suspicious activity after Drug Enforcement Administration agents posing as drug dealers deposited millions of dollars in Paraguayan banks and then transferred the money to accounts in the U.S. through HSBC. They have also been examining connections between one of the Paraguayan banks and Hezbollah, the Lebanon-based Islamist group classified by the U.S. as a terrorist organization. HSBC has since ended its relationship with the Paraguayan bank, according to government documents.

Ultimately, the U.S. Attorney’s office in West Virginia entered into plea negotiations with HSBC, the documents show. A person familiar with the investigation said a deal could have resulted in one of the largest settlements ever in a bank money laundering case.

For reasons that aren’t clear, prosecutors in West Virginia were told to stand down while the Eastern District of New York and other Justice Department divisions continued to investigate, according to a Justice Department document and an HSBC regulatory filing. The West Virginia probe could ultimately prove to be a narrow slice of a broader case if criminal or civil charges emerge.