[ by Howard Haykin ] Even before the Senate Panel opens its hearings on HSBC Holdings Plc money laundering operations, two thing are quite apparent:  (i) for quite a while, the bank "really cleaned up" while the regulators seemed to be taking a siesta;  (ii) tomorrow's Senate Panel will turn up the heat on current and former bank regulators who are there to testify. After all, the Senate panel wants to understand what, if any, oversight was conducted, and why did it take as long as it did for regulators to finally detect HSBC's illegal money flows between the U.S. and international offices. Investigation RoadMap. Tuesday's Senate investigation is expected to be a roadmap for other investigations being conducted by the Treasury and Justice departments, according to people familiar with those inquiries.  Those investigations are likely to lead to fines or settlements totaling hundreds of millions of dollars, up to as high as $1 billion. Comptroller of the Currency Thomas Curry, along with a lawyer from the Office of the Comptroller of the Currency and a former OCC official are scheduled to testify before the U.S. Senate Permanent Subcommittee on Investigations, which is releasing a 450-page report Tuesday exposing how money from high-risk corners of the world – including the Middle East and Mexico, moved through the British bank. The Senators are expected to asked the current and former OCC officials about how the office, a principal regulator of HSBC's U.S. operations, monitored the bank's AML compliance, according to these people.  A Reuters investigation found persistent and troubling lapses in the bank's AML compliance since 2010. Also scheduled to testify are executives from HSBC and its U.S. unit, about how the bank, after years of run-ins with U.S. authorities over alleged AML lapses supposedly has cleaned up its act since the OCC issued HSBC a consent order on money laundering in 2010.  Among the HSBC officials will be Stuart Levey, former undersecretary for terrorism and financial intelligence at the Treasury department.  He joined HSBC as chief legal officer in January. Officials from the U.S. Treasury and Department of Homeland Security also are scheduled to testify. Regulators have been trying to rein in the flow of illegal money through HSBC for the past decade, and the hearing on Tuesday is just one of many.  Two U.S. Attorney's offices have probed multiple lapses inside the bank, including the movements of bulk cash in transactions tied to Mexican forex dealers, which are widely suspected of laundering drug-trafficking proceeds, according to documents reviewed by Reuters. Office of Foreign Assets Control (OFAC) is conducting an examination into how HSBC handled funds tied to Iran, according to an HSBC regulatory filing in May.  OFAC's inquiry extends beyond HSBC, and other banks have agreed to fines as part of probes conducted by OFAC and the district attorney in Manhattan – including Lloyds Banking Group, Credit Suisse Group, and Barclays Plc. Tuesday Debut for Curry. The hearing on Tuesday also could yield new details on how well the Comptroller of the Currency regulated HSBC's U.S. operations. Mr. Curry took over as comptroller of the currency in April.  Because Curry is new to the job, a 2nd OCC witness may provide more clarity about the agency's oversight.  That witness, Grace Dailey, is the former deputy comptroller for large bank supervision. In an e-mailed statement, an HSBC spokesman said, "We will be discussing a number of compliance issues with members of the subcommittee, including past (AML) practices and in particular, HSBC's remediation and resolution of compliance matters.  The board and leadership of HSBC are fully committed to implementing the highest standards and have already made significant changes to our organization's structure to bring this about." Red Flags About OCC Investigation Methodology. Documents reviewed by Reuters show that the OCC investigation leading up to the 2010 order raised a number of red flags about the way the bank attempted to monitor suspect transactions. One document reportedly has the OCC referring to one AML official at HSBC as "incompetent." Citigroups was also scrutinized by the OCC, and the agency's report in April noted that Citigroup fell short of establishing strong systems to identify money laundering. At the time, Citigroup said that problems identified by the OCC had been fixed. [Reuters, 7/16/12]