Household HSBC Watch

Sunday, 14 November 2004
Reported by the Gulf Daily News - Voice of Bahrain

Iraqi bank contracts

WASHINGTON: The US-led post-war government in Iraq awarded business to two multinational banks fined for violating US sanctions against Iraq during the regime of Saddam Hussein, records show.

The US-appointed interim Iraqi government awarded one of the first foreign banking licenses in Iraq to British bank HSBC - the only firm fined twice for transactions with Saddam’s Iraq by the US Treasury Department.

A CIA report last month said Saddam’s regime also stashed illicit oil profits in accounts at an HSBC branch in Jordan. And an Iraqi bank under Saddam was one of five investors in a London bank controlled by HSBC.

The deal gave one of Saddam’s bankers a seat on the board of directors of the British Arab Commercial Bank until last year.

HSBC said in a statement its internal reviews have found no evidence of wrongdoing.

J P Morgan Chase, the American bank chosen by US officials to manage the Trade Bank of Iraq, paid a fine four years ago to resolve allegations its Chase Manhattan Bank allowed a $50,000 funds transfer involving Saddam’s Iraq.

Bids from 58 banks from around the world were considered in selecting the consortium led by J P Morgan.

J P Morgan and HSBC were the only banks on that list which had paid fines for violations involving Saddam’s Iraq.

J P Morgan spokeswoman Kristin Lemkau said the transfer was a mistake. She said a Chase employee improperly allowed the transaction to go through after it had been halted by the bank’s internal controls.

The money was destined for an Iraqi soccer association, Lemkau said.

Sean McCormack, a spokesman for President George W Bush’s National Security Council, did not respond to questions on Friday about the banking arrangements. Former US officials with Iraq’s Coalition Provisional Authority, which ran Iraq from Saddam’s ouster until last June, also declined to answer questions about the arrangements.

The Iraqi interim government awarded banking licences in January to HSBC and the National Bank of Kuwait. Neither has opened any branches in Iraq.

HSBC got the licence despite its recent connections with Saddam’s regime.

HSBC USA, the British bank’s American subsidiary, paid the US Treasury Department’s Office of Foreign Assets Control more than $223,000 in 2000 and 2001 to settle allegations it violated trade embargoes against Iraq and other rogue nations. The fines covered a dozen transactions involving Saddam’s Iraq, Libya, Sudan, Cuba and the former Yugoslavia.

US consumer advocacy organization Household - HSBC Watch stated that “US consumers who open a Best Buy credit card account or an HSBC bank account are thereby condoning and accepting HSBC’s slap in the face of the US.”

“Our own US backed Iraqi government should have excluded these banks from consideration, after strong urging from our Office of the Comptroller of the Currency. It didn’t happen. British and US troops paid with their lives in Iraq. This is a travesty.”