July 16 (Reuters) - One of the top U.S. bank regulators drew stinging criticism in a Senate report on Monday for its inability to police widespread and long-term lapses in halting money laundering inside HSBC Holding Plc's U.S. operations.
The report said the Office of the Comptroller of the Currency allowed compliance problems to "fester" at the bank for years and that the agency failed to take strong action to correct the problems until it learned that two U.S. law-enforcement agencies were probing money laundering through HSBC accounts.
The OCC's failure to force HSBC to fix a broken anti-money laundering system "identified by its examiners over a six-year period indicates that systemic weaknesses in the OCC's (anti-money laundering) oversight model require correction," the U.S. Senate Permanent Subcommittee on Investigations said in its report.
Thomas Curry, who took over as comptroller less than four months ago, will appear at a subcommittee hearing on Tuesday to answer questions from lawmakers on why the OCC failed to take stronger action against HSBC.
In a statement on Monday, Curry said that anti-money laundering compliance "is crucial to our nation's efforts to combat criminal activity and terrorism, and the OCC expects national banks and federal thrifts to have programs in place to effectively comply with these laws."
Curry said the Senate report had made a number of "thoughtful" recommendations, "which we fully embrace."
The OCC took over as HSBC's primary regulator in 2004. The year before, the Federal Reserve Bank of New York and state banking regulators in New York had ordered HSBC to fix anti-money laundering problems.
According to the Senate report, OCC examinations subsequently identified anti-money laundering deficiencies.
"Each time problems were identified, (HSBC) promised to correct them and sometimes did," the Senate report said. "But those corrective actions were narrowly targeted."