Black Dossier: HSBC & Terrorist Finance

It's tough being the world's second largest bank.

HSBC, the London-based British multinational banking and financial services giant operates in 85 countries with 7,200 offices worldwide with assets totaling more than $2.6 trillion (£4.06tn).

They're also caught-up in serial scandals: the Libor interest rate-fixing scam, serious charges of drug money laundering as well as suspicions that bank officers "palled around" with terrorist financiers.

Founded in 1865 when the British Crown seized Hong Kong as a colony in the aftermath of the First Opium War, British merchants (today we'd call them drug lords) needed a bank to handle the brisk trade in the illicit substance and launched the Hongkong and Shanghai Banking Company Limited. Rebranded "HSBC" in 1991, the bank expanded at breakneck speed in the heady days after The Wall fell.

While some might call them a success story, exemplars of financial wizardry in tough economic times, more appropriately perhaps, we might borrow a term from Mafia lore to describe their preeminent position in the capitalist pantheon of corrupt institutions: juiced.

'Sorry, now Go Away'

Today, the "War on Drugs" rivals the "War on Terror" for top spot on the global hypocrisy index.

Moral equivalencies abound. After all, when American secret state agencies manage drug flows or direct terrorist proxies to attack official enemies it's not quite the same as battling terror or crime.

Pounding home that point, a new report by the Senate Permanent Subcommittee on Investigations accused HSBC of exposing "the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls."

That 335-page report, "U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History," (large pdf file available here) was issued after a year-long Senate investigation zeroed-in on the bank's U.S. affiliate, HSBC Bank USA, N.A., better known as HBUS.

Drilling down, we learned that amongst the "services" offered by HSBC subsidiaries and correspondent banks were sweet deals with financial entities with terrorist ties; the transportation of billions of dollars in cash by plane and armored car through their London Banknotes division; the clearing of sequentially-numbered travelers checks through dodgy Cayman Islands accounts for Mexican drug lords and Russian mafiosi.

From richly-appointed suites at Canary Wharf, London, the bank's "smartest guys in the room" handed some of the most violent gangsters on earth the financial wherewithal to organize their respective industries: global crime.

A case in point. In 2008 alone the Senate revealed that the bank's Cayman Islands branch handled some 50,000 client accounts (all without benefit of offices or staff on Grand Cayman, mind you), yet still managed to ship some $7 billion (£10.9bn) in cash from Mexico into the U.S. Now that's creative accounting!

Playing fast and loose with U.S. banking rules, Subcommittee Chairman Carl Levin (D-MI) said that by exploiting the bank's "poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions."

Describing a "compliance culture" that was "pervasively polluted for a long time," Levin said it "will take more than words for the bank to change course."

Yet weasel words and butt-covering were all that were proffered to the American people even before Senate hearings began. Bank spokesman Robert Sherman said in an emailed statement that HSBC "will acknowledge that, in the past, we have sometimes failed to meet the standards that regulators and customers expect. We will apologize, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong."

Right on cue, chief compliance officer David Bagley dramatically fell on his sword during those hearings and resigned on camera. It was quite a performance even by Washington's tawdry standards.

Appearing contrite, Bagley told the panel: "Despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators. ... I recommended to the group that now is the appropriate time for me and for the bank, for someone new to serve as the head of group compliance."

While there's no word yet just how big Bagley's golden parachute will be, it's a sure bet he won't spend a day in jail, nor for that matter will Lord Stephen Green, HSBC's former Chairman and Chief Executive Officer.

Between 2003-2010, Green tilled the helm after serial stints directing The Bank of Bermuda Ltd., HSBC Mexico, SA, HSBC Private Banking Holdings (Suisse) SA and HSBC North American Holdings Inc.; units which feature prominently in the scandal. Sensing perhaps that the jig was up, last year he joined David Cameron's Conservative government as Minister of State for Trade and Investment.

Unlike Pappy Bush who claimed to be "out of the loop" during the Iran-Contra guns-for-drugs affair, Green was fully apprised of bank shenanigans and the Senate published emails which prove it.

Cheekily however, while underlings take the fall, Green told The Daily Telegraph, "I do not believe that I have a case to answer other than in the important sense that as chairman and chief executive I was responsible for what the company did. HSBC has expressed regret for the failures. I share that regret."

The Telegraph noted that Green has not considered resigning from Cameron's government, saying he was "very engaged" with his current plum post.

Ironically enough, the current Baron of Hurstpierpoint is an ordained priest in the Church of England and the author of an inspirational tome, Good Value: Reflections on Money, Morality and an Uncertain World. And no, you can't make this stuff up!

The top spot is now occupied by Stuart Gulliver who, quicker than you can say "we're sorry," admonished employees to "do better" and expressed remorse over his firm's "unacceptable behavior." Never mind that before ascending the throne, Gulliver was director of HBUS, HSBC Latin American Holdings Ltd., and HSBC Bank Middle East Ltd., divisions that have raised more than an eyebrow or two amongst Subcommittee investigators.

Topping Bagley's Kabuki-lite performance with her own rendition of clown car camp, Irene Dorner, HBUS's President and CEO told the Senate: "We deeply regret and apologize for the fact that HSBC did not live up to the expectations of our regulators, our customers, our employees, and the general public. HSBC's compliance history, as examined today, is unacceptable. ... We've worked hard to foster a new culture that values and rewards effective compliance, and that starts at the top."

Bathos aside, it was a polite way of saying "let's move on" and get back to the business of lining our pockets; after all, it's what we do best.

'The past is never dead. It's not even past'

Years before hijackers slammed passenger planes into the World Trade Center and the Pentagon killing nearly 3,000 people, secret state agencies began to exploit the fraternal links between Osama bin Laden's Afghan-Arab database of disposable Western intelligence assets, also known as al Qaeda, and prominent financial institutions.

In his 1999 book, Dollars for Terror, journalist Richard Labévière relates how a former CIA analyst explained: "The policy of guiding the evolution of Islam and helping them against our adversaries worked marvelously well in Afghanistan against the Red Army. The same doctrines can still be used to destabilize what remains of Russian power, and especially to counter the Chinese influence in Central Asia."

Was a new Cold War dawning?

No. In fact, it was the same Cold War. Only this time it was tricked-out in seductive finery by denizens of Western think-tanks and on-the-make NGOs. In the age of spin and endless news cycles, they'd hit upon a splendid formula to pour the "old" imperialist wine into new bottles: "humanitarian intervention" and a "responsibility to protect."

It was a brilliant script. In the blink of an eye our media-saavy masters could "enhance democracy" and "reform markets," magically transforming publicly-owned resources into privately-held assets controlled by banks! That terrorist proxies would serve as walk-ons and help drive the final nail into the coffin of national sovereignty wasn't considered proper conversation in polite company.

Labévière wondered whether "the new forms of terrorism actually embody the highest stage of capitalism?" They did, and "the straw men of the bin Laden Organization's subsidiaries [were] very well received by the business lawyers of Wall Street and the Bahamas, by the wealth managers of Geneva, Zurich and Lugano, and in the hushed salons of the City of London."

Not so curiously perhaps, "the privatization of violence and the privatization of the economy has become paradigmatic." In fact, "apart from any religious purpose," Labévière wrote, "the 'Jihad' is gaining ground as a profitable activity. It becomes liable to all the mafioso devolutions, and sinks into pure banditry. In many cases, Islamist ideology is used as a wonder worker to paper over banditry in all its forms."

Bin Laden as a Mafia capo di tutti capi? It certainly was a novel reading of geopolitical machinations!

More to the point, if an "army marches on its stomach," who then are the money men who put food in their bellies and kalashnikovs in their hands?

Bankrolled by Saudi and Gulf banks with a wink, a nod and logistical support from their old friends, the CIA and the Pentagon, today's Green condottieri once again are on the march, wrecking havoc and sowing chaos, with particular attention paid to states targeted as official enemies by the Global Godfather. Just ask the Iraqis, Libyans and Syrians.

While the Senate report may have disclosed that HSBC turned a blind eye to terrorist financing among it correspondent banks, the Riyadh-based Al Rajhi Bank for one, Saudi Arabia's largest privately-held financial institution, such arrangements hardly flourished in a vacuum.

With assets totaling $59 billion (£92.5bn), the Al Rajhi's are amongst the wealthiest families in the Kingdom. Investigators found that after 9/11 "evidence began to emerge that Al Rajhi Bank and some of its owners had links to organizations associated with financing terrorism, including that one of the bank's founders was an early financial benefactor of al Qaeda."

While the Al Rajhi family deny any role in financing terrorism, they have declined "to address specific allegations made in American intelligence and law-enforcement records, citing client confidentiality," The Wall Street Journal reported back in 2007.

Journalist Glenn R. Simpson averred that "a 2003 CIA report claims that a year after Sept. 11, with a spotlight on Islamic charities, Mr. Al Rajhi ordered Al Rajhi Bank's board 'to explore financial instruments that would allow the bank's charitable contributions to avoid official Saudi scrutiny'."

"A few weeks earlier," the Journal disclosed, the Agency said that "Mr. Al Rajhi 'transferred $1.1 billion to offshore accounts--using commodity swaps and two Lebanese banks--citing a concern that U.S. and Saudi authorities might freeze his assets.' The report was titled 'Al Rajhi Bank: Conduit for Extremist Finance'."

Although U.S. law enforcement and secret state agencies "acknowledge it is possible that extremists use the bank's far-flung branches and money-transfer services without bank officials' knowledge," the Journal noted that CIA analysts had concluded that "senior Al Rajhi family members have long supported Islamic extremists and probably know that terrorists use their bank."

It goes without saying that one should always approach CIA reports with a healthy dose of skepticism, especially in light of the Agency's well-documented history of employing cut-outs such as al Qaeda as terrorist cats' paws.

Such reports however, lay a trail of bread crumbs that policy makers can either act upon or more likely, ignore. That senior Bush and Obama administration officials did nothing with this information, never mind the regulatory agencies charged to enforce anti-money laundering laws, is testament to the corrupt, bipartisan nature of American policy as a whole.

It also beggars belief that Lord Green or the bank's compliance officers were unaware of CIA allegations or that Britain's own foreign intelligence arm, MI6, hadn't apprised top officials of the risks involved. In fact, as we'll see below, HSBC's own internal documents prove otherwise.

Osama's 'Golden Chain'

There were certainly plenty of red flags flying which should have alerted bank officials.

In March 2002, al Qaeda's list of financial benefactors surfaced when computers were seized in Sarajevo at the Bosnian headquarters of the Benevolence International Foundation, "a Saudi based nonprofit organization which was also designated a terrorist organization by the Treasury Department."

Osama bin Laden, who held a Bosnian passport issued by the breakaway government fronted by Western "liberal interventionist" darling Alija Izetbegović during NATO's dismemberment of socialist Yugoslavia, was a supporter of the Nazi SS Handschar Division during World War II. Bin Laden referred to this group of financial angels as his "Golden Chain."

Additional evidence also emerged in 2002 during Operation Green Quest, a Treasury Department effort to "disrupt terrorist financing in the United States."

In March of that year, law enforcement officials raided the Herndon, Virginia offices of the SAAR Foundation "an Al Rajhi-related entity." Indeed, the name "SAAR" was an acronym for the organization's founder, Sulaiman Abdul Aziz Al Rajhi, the controlling partner of the Al Rajhi Bank.

Subcommittee investigators commented that "one of the 20 handwritten names in the Golden Chain document identifying al Qaeda's early key financial benefactors is Sulaiman bin Abdul Aziz Al Rajhi, one of Al Rajhi Bank's key founders and most senior officials."

An affidavit supporting the search warrants "detailed numerous connections between the targeted entities and Al Rajhi family members and related ventures. The affidavit stated that over 100 active and defunct nonprofit and business ventures in Virginia were part of what it described as the 'Safa Group,' which the United States had reasonable cause to believe was 'engaged in the money laundering tactic of 'layering' to hide from law enforcement authorities the trail of its support for terrorists."

Green Quest investigators were particularly keen on unraveling links between the SAAR Foundation and the Swiss Al Taqwa Bank, incorporated in the Bahamas in 1988 for "tax purposes."

Founded by Swiss Nazi sympathizer and convert to Islam, Albert Armand (Achmed) Huber, who professed admiration for both Adolph Hitler and Osama bin Laden, the bank was accused by U.S. officials in helping al Qaeda launder funds. Although the Treasury Department froze its assets in 2001, the investigation was shut down by the Bush administration before deeper linkages could be fully uncovered.

In 2011, a lawsuit was filed by insurance giant Lloyd's of London against Saudi Arabia which sought to recover pay outs to victims of the 9/11 attacks. The suit noted "that two individuals who were former executives at Bank al Taqwa, Ibrahim Hassabella and Samir Salah, were also associated with the SAAR Foundation."

At the time, The Independent reported that the legal claim suggested that defendants "'knowingly' provided resources, including funding, to al-Qa'ida in the years before the attack and encouraged anti-Western sentiment which increased support for the terror group."

According to court briefs, "Absent the sponsorship of al-Qa'ida's material sponsors and supporters, including the defendants named therein, al-Qa'ida would not have possessed the capacity to conceive, plan and execute the 11 September attacks. The success of al-Qa'ida's agenda, including the 11 September attacks themselves, has been made possible by the lavish sponsorship al-Qa'ida has received from its material sponsors and supporters over more than a decade leading up to 11 September 2001."

Senate investigators, citing Green Quest and Lloyd's case files, noted that "Mr. Hassabella was a former secretary of al Taqwa Bank and a shareholder of SAAR Foundation Inc. Mr. Saleh was a former director and treasurer of the Bahamas branch of al Taqwa Bank, and president of the Piedmont Trading Corporation which was part of the SAAR network. The U.S. Treasury Department has stated: 'The Al Taqwa group has long acted as financial advisers to al Qaeda, with offices in Switzerland, Liechtenstein, Italy and the Caribbean.' Regarding Akida Bank, the lawsuit complaint alleged that Sulaiman bin Abdul Aziz Al Rajhi was 'on the board of directors of Akida Bank in the Bahamas' and that 'Akida Bank was run by Youssef Nada, a noted terrorist financier'."

The report went on to state that "HSBC was fully aware of the suspicions that Al Rajhi Bank and its owners were associated with terrorist financing, describing many of the alleged links in the Al Rajhi Bank client profile."

As icing on the cake, a 2007 study published by the Congressional Research Service (CRS) also found that "Saudi individuals and other financiers associated with the Golden Chain enabled bin Laden and Al Qaeda to replace lost financial assets and establish a base in Afghanistan following their abrupt departure from Sudan in 1996."

Assets I might add, that were used to bankroll the 9/11 attacks.

'Keen to maintain the relationships'

HSBC's dubious links to the Al Rajhi Bank didn't end with information discovered in the "Golden Chain" files; it fact, they were the tip of the proverbial iceberg.

After 9/11, the FBI reported that three of the hijackers, Hani Hanjour, Nawaf Alhazmi and Abdulaziz Alomari cashed thousands of dollars in travelers checks and received wire transfers from an unnamed individual drawn on accounts at the Al Rajhi Bank.

As researcher Kevin Fenton pointed out in Disconnecting the Dots, links among most of the hijackers were discovered through their banking transactions. "In this context," Fenton wrote, "it is worth noting that Global Objectives, a British banking compliance company, identified fifteen of the nineteen hijackers as high-risk individuals and established database profiles for them before the attacks. ... The list of high-risk people maintained by Global Objectives was available to dozens of banks," a list that presumably also included HSBC.

While there is no evidence that HSBC, or for that matter the Al Rajhi Bank, had prior knowledge of the 2001 atrocity, the gross indifference exhibited by these institutions through their violation of "know your client" (KYC) rules governing financial transactions reveal a callous disdain for elemental norms as they raced to inflate their balance sheets come hell or high water.

Privileged communications amongst senior staff revealed they were well aware of the issues and risks involved, yet did worse than nothing, they lobbied that HSBC continue their arrangements with the Al Rajhi Bank.

Suspicions were such that senior staff "classified Al Rajhi Bank as a 'Special Category of Client' (SCC), its highest risk designation." This was done, Senate investigators noted, because the Kingdom was considered a "high risk country" and due to the fact Al Rajhi's largest shareholder, Sulaiman bin Abdul Aziz Al Rajhi was considered "a Politically Exposed Person (PEP)."

Internal HSBC documents also revealed that in 2002, that is, after the 9/11 provocation, "the International Private Banking Department asked to transfer [several] accounts to HSBC's Institutional Banking Department in Delaware which had superior ability to monitor account activity."

In fact, transferring Al Rajhi accounts to the bank's Delaware division would have just the opposite effect and bank officials knew it.

As journalist Nicholas Shaxson noted in his exposé of offshore banking, Treasure Islands, "Delaware is the biggest state provider of offshore corporate secrecy." Shaxson pointed out that Delaware's Chancery Court has a "'business judgement rule' under which courts should not second-guess corporate managers," thereby "granting corporate bosses extraordinary freedoms from bothersome stockholders, judicial review, and even public opinion."

So much for any alleged "superior ability to monitor account activity"!

HBUS's Joseph Harpster wrote an email, stating: "The most recent concern arose when three wire transfers for small amounts ($50k, $3k and $1.5k) were transferred through the account for names that closely resembled names, not exact matches, of the terrorists involved in the 9/11 World Trade Center attack. ... The profile of the main account reflects a doubling of wire transfer volume since 9/01, a large number of travelers checks but with relatively low value and some check/cash deposits. According to the account officer, traffic increased because they have chosen to send us more business due to their relationship with Saudi British Bank and the added strength of HBC versus Republic. ... Maintaining our business with this name is strongly supported by David Hodghinson of [Saudi British Bank] and Andre Dixon, Deputy Chairman of [HSBC Bank Middle East]. Niall Booker and Alba Khoury [of HBUS] also support."

Aside from adverse publicity, the "low value" of the transactions seemed not to have troubled Harpster or his associates in the least. After all, the total "cost" of murdering 3,000 human beings were certainly small compared to the price of a vacation home in the Hamptons or a new Maserati.

Anxious there might be increased scrutiny from regulators (no worries there!), Harpster's email was forwarded by Douglas Stolberg, the head of Commercial and Institutional Banking to Alexander Flockhart, then a senior executive in Retail and Commercial Banking at HBUS. Stolberg noted: "As we discussed previously, Compliance has raised some concerns regarding the ongoing maintenance of operating/clearing accounts for Al Rajhi group." He forwarded recommendations on how to handle the account: "Retain [International Private Banking] as the relationship manager domicile for continuity purposes, and as we understand there is interest in further developing private banking business with family members. ... Domicile the actual accounts with Delaware where HBUS's most robust account screening capabilities reside."

"Screening capabilities" which could be shielded from nosy regulators due to Delaware's strict bank secrecy laws.

Stolberg went on to state: "[T]his has become a fairly high profile situation. Compliance’s concerns relate to the possibility that Al Rajhi's account may have been used by terrorists. If true, this could potentially open HBUS up to public scrutiny and/or regulatory criticism. SABB [Saudi British Bank] are understandably keen to maintain the relationships. As this matter concerns primarily reputational and compliance risks, we felt it appropriate for SMC [Senior Management Committee] members to be briefed ... so that they may opine on the acceptability of the plan. Please advise how you would prefer us to proceed." (emphasis added)

According to Senate staff, "Mr. Harpster reported a week later that Mr. Flockhart had decided to transfer the accounts to HBUS in the Delaware office."

But HSBC weren't the only entities hoping to curry favor with the Kingdom. A 2009 Government Accountability Office (GAO) report went on to note that "certain performance targets set by the State Department had been dropped in 2009, such as the establishment of a Saudi Commission on Charities to oversee actions taken by Saudi charities abroad as well as certain regulations of cash couriers."

Although GAO "recommended that the United States reinstate the dropped performance targets to prevent the flow of funds from Saudi Arabia 'through mechanisms such as cash couriers, to terrorists and extremists outside Saudi Arabia,' the State Department's "most recent annual International Narcotics Control Strategy Report contains no information about Saudi Arabia's anti-money laundering or terrorist financing efforts."

One reason why the State Department's report contains "no information" just might be the Obama administration's policy of supporting Saudi-backed Salafi terrorists soon to come online in Libya and Syria, financed through "Saudi charities abroad" or more directly through "cash couriers."

'You'd better be making lots of money!'

The Senate disclosed that HSBC "provided Al Rajhi Bank with a wide range of banking services, including wire transfers, foreign exchange, trade financing, and asset management services."

"In the United States," investigators learned that "a key service was supplying Al Rajhi Bank with large amounts of physical U.S. dollars, through the HBUS U.S. Banknotes Department."

"The physical delivery of U.S. dollars to Al Rajhi Bank was carried out primarily through the London branch of HBUS, often referred to internally as 'London Banknotes'."

Indeed, "HBUS records indicate that the London Banknotes office had been supplying U.S. dollars to Al Rajhi Bank for '25+ years.' In addition to the London branch, HBUS headquarters in New York opened a banknotes account for Al Rajhi Bank in January 2001. The U.S. dollars were physically delivered to Al Rajhi Bank in Saudi Arabia."

"On one occasion in 2008," Senate staff reported, the head of HSBC Global Banknotes Department told a colleague: 'In case you don't know, no other banknotes counterparty has received so much attention in the last 8 years than Alrajhi.' Despite, in the words of the KYC client profile, a 'multitude' of allegations, HSBC chose to provide Al Rajhi bank with banking services on a global basis."

Even though the Al Rajhi Bank "had not been indicted, designated a terrorist financier, or sanctioned," HSBC's Group Compliance section recommended that affiliates should sever their ties.

After that initial decision however, "HSBC affiliates disregarded the recommendation and continued to do business with the bank, while others terminated their relationships but protested HSBC's decision and urged HSBC to reverse it."

Complaints by lower level staff continued, disregarded by higher-ups, even though a U.S. indictment was issued in February 2005 for two individuals "accused among other matters, of cashing $130,000 in U.S. travelers cheques at Al Rajhi Bank in Saudi Arabia" and then smuggling the cash to CIA-backed terrorists in Chechnya.

Although internal bank documents showed that officials decided to cut their ties to the Saudi financial institution, they reversed themselves when pressure was brought to bear by Al Rajhi officials. Between 2006 and 2010, Al Rajhi received shipments totaling more than $1 billion in physical cash in the lucrative banknotes business from HSBC's U.S. affiliate according to investigators. Officials at the Saudi bank "had threatened to pull all of its business from HSBC if the U.S. banknotes business were not restored."

Senate staff reported that on January 4, 2005, "HBUS AML Compliance head Ms. Pesce sent an email to Daniel Jack, an HBUS AML Compliance Officer who often dealt with the London Banknotes office, instructing him to: '[p]lease communicate that Group Compliance will be recommending terminating the Al Rajhi relationship.' Mr. Jack inquired as to when that recommendation would be made. She responded: 'I expect to see an email from Susan Wright today. She tells me that HBME [HSBC Bank Middle East] does not agree with Compliance and will not be terminating the relationship from the Middle East, but she/David B[agley] recommend that in light of US scrutiny, climate, and interest by law enforcement, we in the US sever the relationship from here'."

At the time, Susan Wright was "the Chief Money Laundering Control Officer for the entire HSBC Group. She reported to David Bagley, head of the HSBC Group's overall Compliance Department."

Senate investigators noted that the "documents do not explain why HSBC Middle East disagreed with the decision or why it was allowed to continue its relationship with Al Rajhi Bank, when HSBC's Group Compliance had decided to sever the relationship between the bank and other HSBC affiliates due to terrorist financing concerns."

It soon became clear however, that "HSBC Group Compliance began to narrow its scope." Shortly thereafter a trader in the Banknotes department wrote, "for us is business as usual." Alan Ketley, HBUS AML Compliance Officer commented on the decision not to include Al Rajhi Trading in their earlier decision to sever all ties: "Looks like you're fine to continue dealing with Al Rajhi. You'd better be making lots of money!"

Meanwhile, "Al Rajhi Bank communicated the threat to 'pull any new business with HSBC' unless given a 'satisfactory explanation' why HSBC had stopped supplying it with U.S. dollars via its relationship managers," the Senate disclosed.

In short order, it was business as usual.

Despite continuing allegations of terrorist financing swirling around Al Rajhi Bank, HBUS "continued to supply, through its London branch, hundreds of millions of U.S. dollars to Al Rajhi Bank in Saudi Arabia. In addition, at Al Rajhi Bank's request, HBUS expanded the relationship in January 2009, by authorizing its Hong Kong branch to supply Al Rajhi Bank with non-U.S. currencies, including the Thai bat, Indian rupee, and Hong Kong dollar." (emphasis added)

When concerns were raised internally once again, Christopher Lok, the head of HSBC's Global Banknotes Department in New York fired back: "This is an on-going debate that will never go away. My stance remains the same, i.e. until it[']s proved we cannot simply rely on the Wall Street Journal['s] reports and unconfirmed allegations and 'punish’ the client'."

Needless to say, Hong Kong's "arrangement" with Al Rajhi went forward.

Despite "troubling information" which should have led to HSBC's quick exit from the banknotes market, the Senate reported that "HBUS continued to supply U.S. dollars to the bank, and even expanded its business, until 2010, when HSBC decided, on a global basis, to exit the U.S. banknotes business."

• • •

In conclusion, one needn't be a "conspiracy buff" to posit a link from HSBC to Al Rajhi to "cash couriers" operating across the Middle East in support of a multitude of U.S.-Saudi-backed "regime change" gambits in play today; policies which "worked marvelously well in Afghanistan against the Red Army."

As investigative journalist Ed Vulliamy pointed out in The Observer, the issues involved here are wider than drug money laundering or terrorist finance. "It is about where banks, law enforcement officers and the regulators--and politics and society generally--want to draw the line between the criminal and supposed 'legal' economies."

Commenting on the HSBC scandal, Robert Mazur, a former Customs Department deep-cover specialist and author of The Infiltrator, who penetrated Medellín cartel money laundering operations during the prosecution and collapse of BCCI in 1991, told The Observer that "the only thing that will make the banks properly vigilant to what is happening is when they hear the rattle of handcuffs in the boardroom."

"The stark truth is," Vulliamy wrote, "the notion of any dichotomy between the global criminal economy and the 'legal' one is fantasy. Worse, it is a lie. They are seamless, mutually interdependent--one and the same."

Oops, Sorry: FBI E-Mail Snooping "A Technical Glitch"

Today's New York Times reports that the FBI's Engineering Research Facility (ERF) gained access to e-mail messages from an entire computer network rather than the single e-mail address approved by the secretive FISA court.

Under color of a "national security investigation" the incident was described as "a technical glitch" and "apparent miscommunication" with an unnamed internet provider.

Doubtless the guilty party is one of the telecom giants seeking retroactive immunity via BushCo's "Protect America Act" -- an onerous piece of corporatist flotsam solely designed to alleviate industry anxieties that outraged citizens would actually defend their rights through the courts.

Claiming that Bureau spies noticed a "surge" in the e-mail activity they were monitoring, the FBI alleges the provider "had mistakenly set its filtering equipment to trap far more data than a judge had actually authorized."

Times' reporter Eric Lichtblau avers,

The episode is an unusual example of what has become a regular if little-noticed occurrence, as American officials have expanded their technological tools: government officials, or the private companies they rely on for surveillance operations, sometimes foul up their instructions about what they can and cannot collect.

The problem has received no discussion as part of the fierce debate in Congress about whether to expand the government's wiretapping authorities and give legal immunity to private telecommunications companies that have helped in those operations.

Nor would we expect there to be any "discussion," let alone a "fierce debate" in Congress when it comes to protecting Americans' fourth amendment rights. Treated as mere "technical glitches" best left to "experts," our masters demand we change the channel and move along.

But we will not "move along" as we reflect here on earlier examples of FBI "technical glitches" -- or worse -- that led directly to the 9/11 attacks; the alleged trigger for the imposition of the Bush crime family's police state agenda and the "retroactive immunity" granted their Saudi and capitalist paramours:

From the Center for Cooperative Research's Complete 9/11 Timeline:

January 15-Early February 2000: Suspected Advance Man Helps 9/11 Hijackers Settle in San Diego
  
Hijackers Nawaf Alhazmi and Khalid Almihdhar arrive in Los Angeles and stay there for two weeks. Omar al-Bayoumi, a suspected al-Qaeda advance man and possible Saudi agent, arrives in Los Angeles and visits the Saudi Consulate there. According to Newsweek, "Law-enforcement officials believe al-Bayoumi may [have] a closed-door meeting with Fahad al Thumairy, a member of the consulate's Islamic and Culture Affairs Section." [NEWSWEEK, 7/28/2003] (In March 2003, al Thumairy is stripped of his diplomatic visa and barred from entry to the US, reportedly because of suspected links to terrorism. [WASHINGTON POST, 11/23/2003]

The FBI's "best source" in San Diego says that al-Bayoumi "must be an intelligence officer for Saudi Arabia or another foreign power." A former top FBI official working on the al-Bayoumi investigation claims: "We firmly believed that he had knowledge [of the 9/11 plot], and that his meeting with them that day was more than coincidence." [NEWSWEEK, 7/28/2003]

Former senator Bob Graham (D-FL), whose Congressional investigation was blocked by the Bush regime and the FBI to protect "ally" Saudi Arabia, informs us:

The FBI did not even canvass its own counterterrorism sources, among whom was the informant in San Diego who knew both of the men [Alhazmi and Almihdhar] and had housed one of them. Had the Bureau simply sent a directive to all its field offices, telling them to check the two names with their sources, it is quite possible they would have come across vital information and been able to interdict the attack. Thus was lost the twelfth such opportunity. (Intelligence Matters, New York: Random House, 2004, p. 75) [emphasis added]

Was an electronic "driftnet" necessary prior to 9/11? After all, a Bureau mole had penetrated the plot and yet, the FBI failed to act. Why?

Investigative journalists Greg Palast and David Pallister writing in The Guardian tell us:

FBI and military intelligence officials in Washington say they were prevented for political reasons from carrying out full investigations into members of the Bin Laden family in the US before the terrorist attacks of September 11.

FBI documents shown on BBC Newsnight last night and obtained by the Guardian show that they had earlier sought to investigate two of Osama bin Laden's relatives in Washington and a Muslim organisation, the World Assembly of Muslim Youth (WAMY), with which they were linked.

The FBI file, marked Secret and coded 199, which means a case involving national security, records that Abdullah bin Laden, who lived in Washington, had originally had a file opened on him "because of his relationship with the World Assembly of Muslim Youth -- a suspected terrorist organisation".

But the FBI files were closed in 1996 apparently before any conclusions could be reached on either the Bin Laden brothers or the organisation itself. High-placed intelligence sources in Washington told the Guardian this week: "There were always constraints on investigating the Saudis".

They said the restrictions became worse after the Bush administration took over this year. The intelligence agencies had been told to "back off" from investigations involving other members of the Bin Laden family, the Saudi royals, and possible Saudi links to the acquisition of nuclear weapons by Pakistan.

"There were particular investigations that were effectively killed." ("FBI claims Bin Laden inquiry was frustrated. Officials told to 'back off' Saudis before September 11," The Guardian, November 7, 2001)

I could continue with this line of inquiry but I think my point is clear. There were political reasons why pre-9/11 investigations were halted at the highest levels and they had nothing to do with preparing the ground for any alleged "inside job."

For reasons of state (read: unlimited profits for the oil multinationals and preparations for the coming invasion of Iraq) the gangsters occupying the White House could care less whether or not the Afghan-Arab database al-Qaeda would attack the American people. Why would they?

Before 9/11, the U.S. and NATO were utilizing their intelligence assets in the Balkans, the Kosovo Liberation Army (KLA) and the Bosnian al-Mujahid Brigade, as well as criminal syndicates and dodgy charities funded by Saudi Arabia and Kuwait -- allied with al-Qaeda and international drug trafficking networks -- for offensive action against neighboring Macedonia.

Is it any different today? The national security state's "Protect America Act" is an oxymoronic exercise in deceit and mendacity by propaganda specialists well-schooled in the black arts of deception. Commenting on the "unintentional" error on the part of its internet spies, FBI spokesman Michael Kortan told The New York Times, "The system worked exactly the way it's designed."

I couldn't agree more.

U.S. Militarism & the Drug Trade: the Afghan Dossier

In The Politics of Heroin: CIA Complicity in the Global Drug Trade, whose 1972 edition the CIA tried to suppress, Alfred W. McCoy writes,

Although the drug pandemic of the 1980s had complex causes, the growth in global heroin supply could be traced, in large part, to two key aspects of U.S. policy: the failure of the DEA's interdiction efforts and the CIA's covert operations. By attacking heroin trafficking in separate sectors of Asia's extended opium zone in isolation, the DEA simply diverted heroin exports from America to Europe and shifted opium production from southern Asia to Southeast Asia and back again--raising both global consumption and production with each move. Moreover, the increasing opium harvest in Burma and Afghanistan, America's major suppliers were largely the product of CIA covert operations. [Alfred W. McCoy, The Politics of Heroin: CIA Complicity in the Global Drug Trade, Brooklyn, NY: Lawrence Hill Books, 1991 edition, p. 440]

Fast-forward 30 years. Writing in today's Guardian, Patrick Wintour informs us:

Afghanistan's opium economy will take up to 20 years to eradicate and require a £1bn investment from world leaders, according to a government study published yesterday. ... Its conclusions came as the UN produced fresh figures on the opium trade. The UN's Office on Drugs and Crime (UNODC) believes this year's crop will be similar to, or slightly lower than, last year's record harvest. ... In 2007 Afghanistan had more land growing drugs than Colombia, Bolivia and Peru combined.

This is the sad face of the "new" Afghanistan, "liberated" from the ISI-linked Taliban and hailed by the toxic Bush regime as the first "success" of its ballyhooed (and malign) "war on terror." Preoccupied with stoning uppity women, applying sharia "law" (fully the "moral equivalent" of Blackwater Christian Crusaders), censoring journalists or padding Dubai bank accounts with assets looted from the Afghan people, the puppet Karzai regime -- like the Taliban before it, and now -- have a limitless source of "product" on hand to fuel their rapacious appetite for boodle.

UNODC's chief, Antonio Maria Costa, commenting on the report warns, "Europe and other major heroin markets should brace themselves for the health and security consequences."

These consequences won't be long in coming.

The 102-page précis, compiled by the Department of International Development and the World Bank (dubious sources, to be sure), suggest what is needed to stem the flow of illicit drugs from the world's number one narco state are not more guns -- or U.S. Apache helicopter gunships -- but a concerted effort to rebuild Afghanistan's shattered economy.

But the likelihood of this happening any time soon, given America's propensity for shady alliances with far-right drug- and warlords, say in Colombia or Kosovo just for kicks, is virtually nil.

One might reasonably ask, what has become of the billions of dollars in "development" aid doled out by U.S., Asian and European taxpayers?

According to Anthony Fontenot and Ajmal Maiwandi, just about what one would expect from an American military and CIA "liberation" racket:

Amid the ruined mud-bricked buildings of a city that has been devastated by war and neglect, divided into sinister, heavily fortified, military compounds, and occupied by armed local and foreign mercenaries, stand randomly dispersed extravaganzas of glass-and-tile palaces: symbols of the plunder that currently provides the economic base for the "reborn" Kabul. One result of the so-called War on Terror in Afghanistan is that vast amounts of money are now pouring into luxury real estate. ["Capitol of Chaos: The New Afghanistan of Warlords and Infidels," in Evil Paradises, New York: The New Press, 2007, p. 69]

Yes, "luxury real estate." As if Kabul were a deranged subdivision in southern California, Afghan warlords and the local equivalent of the "Real Housewives of Orange County" loll in sumptuary excess. No matter that the masses of impoverished Afghan farmers and proletarians literally starve to death, their assets (such as they are in a society devastated by decades of war fought on behalf of foreign masters) expropriated by criminal gangs dressed to kill in Armani suits.

Fontenot and Maiwandi report:

As in many parts of the world dominated by chaos and the naked struggle for power, the eccentric Afghan aesthetic forged by businessmen, militia commanders, drug barons, and warlords represents the first signs of an emerging postwar order and pathology. ... a collage of generic international products fused with kitsch samplings of Afghan vernacular architecture and textile patterns, all of which reflect the schizophrenic psyche of a war-torn society. [op. cit. p. 75]

Such is the terminal logic of U.S. militarism, where CIA "specialists" and corporate mercenaries are the shock troops of a predatory capitalism gone wild. Like marauding Borg threatening to "assimilate" the entire planet to a cultural wasteland of shopping malls, the international drug traffic fuels an endless cycle of violence, where, in the immortal words of robber-baroness Leona Helmsley, "the little people" always pay the price.

Blowback in Karachi

Today's Asia Times Online reports that Pakistan's al-Qaeda affiliate is stepping up attacks against the regime of U.S.-allied dictator/president Pervez Musharraf. AToL's Pakistan Bureau Chief, Syed Saleem Shahzad writes:

Tuesday afternoon's fierce gun battle in this port city [Karachi] is stark evidence that al-Qaeda-linked sleeper cells have been activated against the Pakistani state.

At least three members of Jundullah (Army of God) were killed in the clash with police and paramilitary forces. Two policemen also died. One of the dead militants was the suspected leader of the cell, Qasim Toori, who was wanted in connection with previous deadly attacks in Pakistan.

Attentive readers will recall that Jundullah, led by Baitullah Mehsud and Islamic Movement of Uzbekistan chief, Tahir Yuldashev, have conveniently been accused of orchestrating Benazir Bhutto's assassination last year, on December 27. Both groups are affiliated with bin Laden and Zawahiri's Afghan-Arab database, al-Qaeda.

While the authorship of the assassination remains unclear, left-wing Pakistani sources believe Bhutto's murder was ghostwritten by far-right Islamist elements within Pakistani state security, notably the infamous Inter-Services Intelligence (ISI) and the shadowy Intelligence Bureau (IB).

According to Shahzad,

In recent weeks, Jundullah has become estranged from the main Taliban movement led by Mullah Omar, who insists that militant activities should be confined to Afghanistan, and not directed against Pakistan.

This might be plausible given that Pakistan's quest for "strategic depth" against its regional adversaries, notably India, Russia and Iran, banks on a long-range project to install a pliant regime in Kabul. The Afghan Taliban is loath to bite the hand that feeds it, and Omar, the semi-illiterate one-eyed jihadi commander has demanded that his "brothers" attack only U.S.-led NATO forces and refrain waging war on the Pakistani state itself.

In an interview with a Taliban spokesperson, AToL's Bureau Chief informs us,

Afghan Taliban spokesman Zabihullah Mujahid said that when the Pakistani Taliban began fighting against the United States and other allied forces who had occupied Afghanistan, they were united. But subsequently, he said, Baitullah and other Pakistani militants had started fighting the Pakistani military and "we have cut all ties with them and openly disown them".

The Pakistani Taliban in North Waziristan have already agreed on a ceasefire with Pakistan, and are expected to make an announcement to this effect within a few days.

By stoking ethnic and regional tensions, Pakistan hopes to bend the Afghan jihadis in their direction thus undercutting al-Qaeda. This is hardly a new policy, and like earlier schemes cooked-up by Islamabad is likely to fail. According to author Michael Griffin's incisive study, Reaping the Whirlwind: Afghanistan, Al Qa'ida and the Holy War [London: Pluto Press, 2003]:

The hands of Pakistan and, to a lesser extent, the US and Saudi Arabia in the formation of the first post-Soviet government was, in effect, to guarantee that it would fold. ... But despite a decade of Pakistan and US planning, there was no government-in-waiting to fill the vacuum left by the PDPA [People's Democratic Party of Afghanistan]. It had to be created from scratch, supervised by the ISI, the CIA and Saudi intelligence service from political elements initially selected for funding and fighting on the basis that they served the best interests of Pakistan, not Afghanistan. [p. 21.]

Since the U.S./Pakistan/Saudi orchestrated intervention against the leftist PDPA Afghan government thirty years ago, Islamabad has gambled it can control the far-right über Islamist forces they have set in motion. Clearly, they have badly miscalculated. With the United States demanding military access to the semi-autonomous federal tribal regions, the prospect of permitting U.S. Special Forces and CIA paramilitary operatives leeway to launch attacks independent of Pakistani government control has boxed-in the Musharraf regime between the devil and the deep, blue sea.

Now, it appears, al-Qaeda aligned militants are stepping-up their campaign for a regressive "caliphate" inside the Pakistani heartland itself. Shahzad writes,

The police were tipped off about the presence of a group in the eastern part of the city called Landhi which had been involved in a large bank robbery. The police launched a raid against what they thought was a bunch of criminals, and to their horror were fired on by light machine guns.

Clearly, these were no ordinary robbers, as their weapons and fighting skills quickly demonstrated. After three hours, the paramilitary Rangers were called in, but by then two policemen had been killed.

Though only a small skirmish in a wider war, Tuesday's gun battle with police is an ominous sign of things to come. Whether or not al-Qaeda will tip the balance against the Pakistani state remains to be seen. Much of the Pakistani population despise bin Laden's medieval hordes and have demonstrated time and again they have little patience for an autocratic, priest-ridden regime, especially one backed up by Washington and the armed-fist of the capitalist state.

In the short term, however, Pakistan's disastrous alliance with the U.S. and Saudi Arabia against its own people has already led to an effective split within the ranks of the Army and its various intelligence arms, with an unknown proportion of officers and security operatives dead set against rolling-up the criminal and terrorist networks they had launched.

Shortly before his brutal torture and execution by the Taliban, former PDPA leader Najibullah told an American reporter,

We have a common task -- Afghanistan, the USA and the civilised world -- to launch a joint struggle against fundamentalism. If fundamentalism comes to Afghanistan, war will continue for many years. Afghanistan will turn into a centre of world smuggling for narcotic drugs. Afghanistan will be turned into a centre for terrorism. [Griffin, p. 4.]

The proverbial chickens, with careful guidance from Washington, have now come home to roost not only, however, in Afghanistan...