WASHINGTON, July 17 (Yonhap) -- Executives from HSBC Holdings admitted Tuesday that the largest European bank had some loopholes in controlling transactions involving North Korea and other "rogue states."

   A group of top HSBC officials appeared at a U.S. Senate hearing a day after the Senate released a 330-page report accusing the London-based bank of exposing the U.S. financial system to North Korea, Iran, and Cuba as well as terrorists groups and Mexican drug cartels.

   HSBC had transactions with North Korea in breach of U.S. sanctions rules, according to the report.

   A host of North Korean entities and officials have been subject to U.S. and U.N. sanctions for the regime's nuclear and ballistic missile developments.

   "I recognize that there have been some significant areas of failure," David Bagley, the head of group compliance for HSBC, said at the hearing of the Senate Homeland Security Subcommittee on Investigations. "HSBC has fallen short of our own expectations and the expectations of our regulators."

   Sen. Carl Levin (D-MI), who chaired the hearing, said HSBC "sets up a U.S. bank affiliate as its gateway into the U.S. financial system and lets its global network of affiliates abuse that gateway."

   He added problems arose when "some HSBC affiliates tried to circumvent the Treasury's Office of Foreign Assets Control (OFAC) filter to send potentially prohibited transactions involving other countries like Sudan or North Korea."

   The OFAC has the Specially Designated Nationals (SDN) List of individuals and entities that have been subject to sanctions under the range of sanctions programs.

   "These sanctions programs cover illicit actors like terrorist financiers, weapons proliferators, transnational organized criminal groups, narcotics traffickers as well as rogue regimes -- Iran, North Korea, Syria and others," Treasury Undersecretary for Terrorism and Financial Intelligence David Cohen told the subcommittee.

   lcd@yna.co.kr
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