CIMA revokes banking licence of HSBC Mexico's Cayman Branch

The Cayman Islands Monetary Authority (“CIMA”) has revoked HSBC Mexico’s banking license in Cayman following an investigation into the Cayman Islands Branch of HSBC Mexico SA.

Four months ago the bank’s parent company admitted the money laundering at the Cayman registered subsidiary.

According to a statement released by CIMA on 27^th February, they have “concluded that the Cayman Islands Branch of the company is conducting business in a manner detrimental to the public interest, the interest of its depositors or of the beneficiaries of any trust or other creditors and that the direction and management of its business has not been conducted in a fit and proper manner”.

The scandal surrounding the Mexican based branch of HSBC has already led to the Bank agreeing to  pay $1.92 billion to settle US money laundering allegations. A US Senate committee report had revealed that tens of thousands were poorly regulated, and had possible links to organized crime.  An estimated 15% of the accounts had no KYC information at all.

So what are the lessons to be learned here?  Firstly, the finger of blame for KYC lapses is often pointed at smaller businesses, but this shows that there are still very large organisations which have a lot of work to do to get their house in order.   In some ways, it can be easier in very large businesses for the leaders to become divorced from what is going on at the coal face. We should not necessarily assume that small is bad, and big is good – best practice, and worst, comes in all shapes and sizes.

Secondly, it shows that no business is big enough to be exempt from draconian action if it fails in its KYC obligations.  There was a time when regulators would have been reluctant to tackle big businesses with household names for fear of damaging the jurisdiction’s reputation.  It seems those days have gone.