[ by Howard Haykin ] David Bagley, Head of Compliance for HSBC, Britain's largest bank, while providing testimony to U.S. Senators during Tuesday's Senate Permanent Subcommittee on Investigations hearings, broke away from his prepared testimony to say that "now is the appropriate time for me and for the bank for someone new to serve as the head of group compliance." The hearing was held solely to flush out details on the money laundering transactions that flowed through HSBC, and to understand what U.S. regulators were doing (or not doing) throughout.

HSBC has repeatedly failed to stop illegal foreign transactions - ongoing violations took place from 2001 through 2010.  Bagley had been the compliance executive for global banking giant HSBC since 2002.

The subcommittee released a report on Monday accusing HSBC, Europe's largest bank, of serving as a conduit for money flowing into the United States from Mexican drug traffickers and Middle Eastern banks with ties to terrorists. Mr. Bagley, One of 6 HSBC executives to Testify. Paul Thurston, the former head of HSBC's offices in Mexico, said that when he arrived in Mexico in 2007 the problems he found "frankly took my breath away." All the executives apologized for the bank's past conduct and promised reform, though the senators expressed their doubts in light of the bank's being cited by regulators in 2003 and 2007 for extensive money-laundering violations. Irene Dorner, the chief executive of HSBC's operations in the United States had this to say: "We have some ways to go to regain the trust of regulators and the public.  We're burning the bridges to make sure no one can get back to the way it was before." Ms. Dorner is part of the new top management that has been brought in to HSBC since regulators accused the bank of wrongdoing in 2010. Some of the executives at the hearing were at the bank during the period covered by the report, from 2001 to 2010, and were accused of having direct responsibility for some of the shortcomings. Senator Carl Levin, (D-MI), who chairs the subcommittee, was happy to hear the bank's contrition, but added that accountability "has been significantly missing in this situation." We recommend that members read a related story, posted Wednesday in BEHIND THE NEWS - Comptroller of the Currency Answers Senate about His Office’s Oversight Failures - which covers some of the testimony from HSBC's regulators, a unit of government that we sarcastically have dubbed, HSBC's  "Partner in Crime". [Dealbook, 7/17/12]