UPDATE 1-US senator plans to refer HSBC to regulator

* Levin critical of service provided to Angolan officials

* Also hits Bank of America over arms dealer

* Panel hearing spotlights anti-money laundering loopholes
(New throughout with Levin on HSBC, other detail, byline)

By Dan Margolies

WASHINGTON, Feb 4 (BestGrowthStock) – A senior U.S. senator said on
Thursday he planned to refer HSBC Holdings (HSBA.L: )(0005.HK: ) to
its U.S. bank regulator in connection with questionable
accounts it provided for senior Angolan officials.

Senator Carl Levin, who chairs the Permanent Subcommittee
on Investigations, made his remarks after a hearing by the
panel on the flow of tainted foreign money into the United

Levin was particularly scathing about HSBC at the hearing
and the role of a Connecticut office of the bank in providing
offshore accounts in the Bahamas nearly a decade ago to the
Angolan central bank.

Afterward, Levin told Reuters in a telephone interview that
he intended to refer the matter to the Office of the
Comptroller of the Currency, an arm of the U.S. Treasury.

“They’ve got some real regulatory problems in terms of
their obligation to know their customers here in America,” said
the Michigan Democrat.

Levin said he was not pleased with answers given at the
hearing by Wiecher Mandemaker, director of general compliance
for HSBC Bank USA. “I thought his answers were very

Asked to comment about Levin’s remarks, HSBC, Europe’s
largest bank, said it takes compliance matters very seriously.

“HSBC’s record demonstrates a commitment to vigorous
enforcement and continuous enhancement of anti-money laundering
policies and practices,” the bank said in an e-mailed

A subcommittee report said attempts in 2002 by the
then-head of the Angolan central bank, Aguinaldo Jaime, to
transfer $50 million in government funds to the United States
had been rebuffed by Citigroup (C.N: ) and Bank of America
(BAC.N: ).

Nonetheless, Levin said at the hearing, London-based HSBC
helped the Angolan central bank avoid a British court order
freezing some of its assets.

“Is it your policy that when a client tells you that it
wants to establish an account to avoid your own government’s
court order, you view that as a legitimate request?” Levin
asked Mandemaker.

“The entities choose the venue that’s appropriate for
them,” Mandemaker replied.

The hearing was designed to call attention to legal
loopholes that allow lawyers and other professionals to
circumvent anti-money laundering laws.

But it quickly focused on the HSBC and Bank of America
after three witnesses — two lawyers and a lobbyist — invoked
their Fifth Amendment right against self-incrimination and
declined to answer questions.

The three helped the son of the president of Equatorial
Guinea funnel more than $100 million into U.S. bank accounts,
according to the subcommittee report.

The report recommended restrictions on lawyers, lobbyists,
real estate agents and escrow agents to make it more difficult
for them to allow illicit foreign money into the United


Levin criticized Bank of America for failing to scrutinize
questionable accounts by a notorious arms dealer and flag them
for possible money laundering.

He cited an internal report by Bank of America’s own Global
Anti-Money Laundering Unit that raised questions about an arms
dealer, billionaire Pierre Falcone, who had moved more than $17
million through the bank.

Falcone, who defied a United Nations arms embargo during
Angola’s civil war, was jailed by a French court on corruption
charges and has a history of run-ins with the law, Levin said,
but the bank found that Falcone’s account activity was “not

“It’s incredible to me,” Levin told Bank of America
executive William Fox, who heads the unit.

Fox said that the bank had made “a bad judgment call” and
has since instituted a “more robust” reviewing process for
so-called Politically Exposed Persons — the language used in
international agreements to refer to politically powerful
foreign officials, their relatives and their close associates.

One of the recommendations in the subcommittee’s report is
that Congress enact a law to strengthen bank controls over such

The USA Patriot Act of 2001 already requires banks to give
enhanced scrutiny to private banking accounts of senior foreign
figures. There are exemptions for real estate and escrow
agents, which the subcommittee has recommended be lifted.

Stock Market Basics

(Reporting by Dan Margolies; Editing by Tim Dobbyn)

UPDATE 1-US senator plans to refer HSBC to regulator