On July 17, 2012, a Senate Permanent Subcommittee on Investigations report and hearing reviewed how HSBC and its U.S. affiliate exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controlsSen. Carl Levin, D-Mich., Subcommittee Chairman, said “HSBC used its U.S. bank as a gateway into the U.S. financial system for some HSBC affiliates around the world to provide U.S. dollar services to clients while playing fast and loose with U.S. banking rules. Due to poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions. The bank’s federal bank regulator, the OCC, tolerated HSBC’s weak AML system for years. If an international bank won’t police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the U.S. bank being used to aid and abet that illicit money.”The Subcommittee issued a 330-page report released at the hearing along with supporting documents.The Subcommittee report called for ten recommendations, both in terms of regulatory and legislative changes. Testimony by the Office of the Comptroller of the Currency shows that it has already adopted many of the report's recommendations.The report and hearings have already resulted in changes in regulatory policies. It remains to be seen whether its legislative recommendations will be realized. The report and hearings will likely further sensitize the banking sector of the risks and concerns raised.To watch the hearing and obtain the testimony and Subcommittee press release, see http://www.hsgac.senate.gov/subcommittees/investigations/hearings.