THE ROLE OF HSBC IN THE STANFORD BANK FRAUD

The following letter is being sent to the British and European MP's and MEP's by the Stanford Victims Coalition European Group.

I would urge all Europeans to write similar letters to their MP's, Prime ministers, newspapers and anyone else who will listen. The role of HSBC in Stanford's massive fraud must be brought to the Public's attention, and the bank forced to tell Stanford's victims where the money was sent and WHY they failed in their duty of care as a Correspondent Bank.

Dear Mr .........

THE ROLE OF HSBC IN THE STANFORD BANK FRAUD

I am writing to you as one of the thousand British and European Investors who lost their life savings and retirement funds following the collapse of Stanford International Bank (SIB) based in Antigua.

As you may be aware, Allen Stanford has been accused by the US Securities and Exchange Commission of running a massive Ponzi scheme. Moreover he used the British banking system as the conduit for all European deposits. HSBC in London acted as the correspondent bank. Most people around the world are aware of HSBC. Their willingness to act as correspondent gave Stanford an aura of respectability.

Stanford provided deposit instructions indicating that customers could make deposits in Antigua based SIB by wiring funds to HSBC in London. HSBC were aware of these instructions, and expressly agreed with Stanford to receive wire deposits for further transfer to SIB in Antigua. Further, these instructions specifically included a SWIFT code, purportedly for SIB in Antigua.

Depositors in SIB throughout Europe wired funds to HSBC with the intent that such funds would be transferred to SIB in Antigua for deposit in their accounts. HSBC conveyed to depositors in SIB that funds transmitted to HSBC were being deposited in Antigua, and being entrusted to a legitimate banking institution.

It has been determined by the receivers’ forensic accountants that all, or substantially all, of the funds never reached Antigua, but were redirected by HSBC, in concert with and/or at the direction of Stanford, to other Stanford controlled bank accounts in Toronto, Canada; Houston, Texas; and elsewhere. The funds were then distributed to other Stanford entities; “invested” in Allen Stanford’s private ventures; used to fund his lavish lifestyle; or paid out to earlier investors to perpetuate the fraudulent scheme.


Based upon its longstanding correspondent banking relationship with Stanford, HSBC knew, or should have known, that Stanford was conducting an illegal and fraudulent scheme, and that depositors were being deceived into believing their funds were being deposited in a legitimate banking institution in Antigua.

Furthermore, HSBC have refused to divulge the ultimate destination of the funds without a UK Court Order, and the Financial Services Ombudsman is powerless to investigate.

The UK Money Laundering Regulations, introduced throughout the EEA in 2007, and which were passed into British law as Statutory Instrument 2007 number 2157, state:-

1)A credit institution (“the correspondent”) which has or proposes to have a correspondent banking relationship with a respondent institution (“the respondent”) from a non-EEA state must—(a) gather sufficient information about the respondent to understand fully the nature of its business; (b) determine from publicly-available information the reputation of the respondent and the quality of its supervision.

In 1991 HM Treasury requested Allen Stanford surrender the banking licence of his earlier Guardian International Bank, then situated on Montserrat, for alleged money-laundering activities. Later, sanctions were imposed on Antigua following Stanford’s attempt to rewrite the Country’s banking regulatory laws. Stanford was repeatedly fined by FINRA for violations of the US Banking Code, and was made to hand over $3million of laundered Mexican drug money to the DEA. When determining his ‘reputation’ prior to agreeing to act as correspondent, HSBC would have been aware of all of this.

2)A credit institution must not enter into, or continue, a correspondent banking relationship with a shell bank….A “shell bank” means a credit institution, or an institution engaged in equivalent activities, incorporated in a jurisdiction in which it has no physical presence involving meaningful decision-making and management, and which is not part of a financial conglomerate or third-country financial conglomerate.

In the course of their investigation into SIB, the receiver has stated that, in his opinion no meaningful decision making or management was undertaken in Antigua. Hence, as defined in these regulations, SIB is a ‘shell’ bank. It would have been clear to HSBC that the management of SIB was not from Antigua, yet they continued to act as correspondent.

In 2002, The Wolfsberg Group, of which HSBC is a member, published its Principles for Correspondent Banking. In these Principles, ‘Higher Risk; correspondents are defined under; ‘Customer Risk,’ specifically, private offshore banks such as SIB; and ‘Country Risk,’ in particular, Countries such as Antigua, which have a history of sanctions, corruption, and inadequate anti-money laundering regulations. Under the Principles, such correspondents are required to be subject to even higher levels of due diligence, and those correspondents associated with shell banks, or where the results of the due diligence produce significant uncertainties that cannot be resolved, are to be specifically avoided.

The UK and EU Regulations, and the recommendations of the Wolfsburg Group are just a few of the guidelines that HSBC chose to ignore. Had they abided by the Basel II Accords, the Financial Action Task Force (FATF) Recommendations, or even the recognised Know Your Client (KYC) list of advice given to banks, it ought to have been very clear that Allen Stanford was perpetrating a fraud of enormous proportions with a clear aim of defrauding thousands of innocent victims of their money. The red flags are there, yet they went unheeded. HSBC had an obligation to report the Red Flags, and a duty of care that could have safeguarded many depositors from losing their life savings. It is clearly stated in the Basel II report that if a bank fails to deliver funds to the requested account, and account holders consequently lose money, then the bank has to make good those losses.

Whilst many of the subtleties of the Stanford scandal have only recently entered the public domain, HSBC as one of the worlds leading banks, has a wealth of industry knowledge, and considerable resources to undertake detailed due diligence. Their willingness to act as correspondent, not only gave Stanford a veneer of respectability, but enabled him to extend and perpetuate the fraud throughout Europe.

Prior to, and during, their establishment of a correspondent banking relationship with Stanford, HSBC gathered sufficient information concerning Stanford to understand Stanford’s business and, as a result, knew, or should have known, that Stanford was conducting a fraudulent scheme, and that it was both inappropriate, and illegal, for HSBC to continue to act as correspondent Bank.

HSBC must be made to answer why they failed in so many areas to abide by the regulations governing their correspondent relationship with Stanford; why

They chose not to report what was happening to the deposits they so willingly transferred; and must be held accountable that those funds were not delivered to the specified accounts.

Your help and assistance in this matter is requested to help the innocent victims who have suffered as a result of HSBC’s lack of care and due diligence, resulting in the loss of their life savings totalling £150 Million.

Whilst writing this letter, I have today learned that HSBC Chairman, Stephen Green, is to become the UK Minister of Trade. You can imagine my dismay.

I look forward to hearing what action you intend to take and how you can help all of the European victims in this fraud.