Green caught up in HSBC scandal

GOVERNMENT minister Lord Green was last night dragged into the scandal surrounding HSBC  after the Labour party said the peer has “serious questions to answer” regarding his time in charge of the bank.

Green was chief executive of HSBC between 2003 and 2006, then chairman until 2010. During this period some of HSBC’s clients were involved in routing funds through drug cartels, terrorists and renegade states, according to a US Senate investigation that released its findings this week.

In one incident HSBC’s Mexican arm transferred $7bn (£4.5bn) cash into the bank’s US operations using armoured vehicles, even though both Mexican and US authorities warned HSBC that the money must be tied to illegal proceeds from drug gangs.

The Senate report also claims that lax controls saw the bank route suspicious funds from countries including Iran, Syria and Burma and assist a Saudi bank with links to al-Qaeda.

“The report is so serious that the bank’s head of compliance has already resigned,” Chris Leslie MP, Labour’s shadow financial secretary to the Treasury, said yesterday.

“Stephen Green, who was executive chairman of the bank when this took place and is now a trade minister in David Cameron’s government, now has serious questions to answer about what he knew and when.”

Emails released as part of the investigation reveal that Green was kept informed by the bank’s then compliance chief David Bagley.

Bagley resigned in spectacular fashion in front of the US Senate subcommittee on Tuesday during a session in which six HSBC executives answered questions on compliance failures at the bank.

In 2005 Green was told there was “little doubt” that a transaction from Burma breached US government sanctions, raising the prospect of “a significant risk of financial penalty”.

He was also updated on growing concerns about HSBC’s involvement in so-called “U-turn” transactions involving Iran, whereby funds were routed from a third party foreign bank into HSBC and then back out into another foreign bank.

HSBC now faces a US Justice Department investigation with predictions that the fine could hit $1bn.

Green, 63, is an ordained Church of England vicar and had been mentioned as a candidate to succeed Sir Mervyn King as Bank of England governor, a move which looks much less likely in light of the row over HSBC. Appointed a Conservative peer in 2010, he is responsible for UK Trade & Investment.

In 2009 he published a book entitled “Good Value: Reflections on Money, Morality and an Uncertain World”. Between 2006 and 2010 he was chairman of the British Bankers’ Association (BBA), the trade body that compiles Libor.

Green declined to comment.