HSBC allowed 'Ponzi scheme' of millions to filter through despite warnings


Britain’s largest bank allowed fraudsters to transfer millions of dollars around the world despite being warned by regulators, according to leaked files.


HSBC allowed the $80m (£62m) proceeds of a Ponzi scheme to move to accounts in Hong Kong in 2013 and 2014 via its US business.


The files show the Ponzi scheme started soon after the bank was fined $1.9bn (£1.4bn) in the US over money laundering. It had promised to clamp down on these sorts of practices.


The FinCEN files are a leak of up to $2trn transactions in total and centre on more than 2,000 suspicious activity reports submitted to the US Financial Crimes Investigation Network (FinCEN) between 2000 and 2017.


The leak shows how money was laundered through some of the world's biggest banks and how criminals used anonymous British companies to hide their money.


The Ponzi scheme was started in Los Angeles by Ming Xu, a Chinese evangelical pastor.


Xu said he was operating a global investment bank, World Capital Market, that would pay out 100% profit in a 100 days. In reality, he was running the WCM777 Ponzi scheme.


Through travelling seminars, Facebook and webinars on YouTube, it raised $80m selling supposed investment opportunities in cloud computing.


The investment scam that HSBC was warned about was called WCM777. It led to the death of investor Reynaldo Pacheco, who was found under water on a wine estate in Napa, California, in April 2014.


Police say he had been bludgeoned with rocks.


California regulators began investigating the fraud in September 2013, but the Hong Kong accounts associated with the scam were not shut until April 2014, by which time they had been largely cleared out.


HSBC filed its first Suspicious Activity Report (SAR) about the scam on 29 October 2013, relating to more than $6m sent to the fraudsters' accounts in Hong Kong.


Bank officials said there was "no apparent economic, business, or lawful purpose" for the transactions - and noted allegations of "Ponzi scheme activities".


A second SAR in February 2014 identified $15.4m in suspicious transactions, and a "Potential Ponzi scheme".


A third report in March related to a company associated with WCM777 and nearly $9.2m, and noted the regulatory moves by US states and an investigation ordered by Colombia's president.


Meanwhile, JP Morgan also allowed £1bn to move through its bank without ever knowing who owned it, resulting in suspicion that the money may have originated in organised crime.


Semion Mogilevich, known as the 'Russian boss of bosses', has been accused of crimes including gun running, drug trafficking and murder, and is said to be the one who may have transferred the money through JP Morgan.


JPMorgan also processed more than $50 million in payments over a decade,for Paul Manafort, the former campaign manager for President Donald Trump, the records show.


More companies registered in the UK feature in the suspicious activity reports than those of any other country. The UK is referred to as a “higher risk jurisdiction” by FinCEN because of the frequency with which its businesses are flagged up in the reports.


London has been combating a reputation of being a “haven” for so-called dirty money and the government has already announced a plan to reform Companies House as an effort to crack down on illegal activity.