WASHINGTON — The chief compliance officer of Britain’s HSBC says he is stepping down from that position after an investigation found that lax controls at the international bank allowed Mexican drug cartels to launder billions of dollars through its US operation and other illicit transactions.
But David Bagley, the head of compliance for London-based HSBC Holdings, told a Senate investigations panel that he will remain at HSBC.
Bagley and other current and former executives of the bank apologized for lapses but said they were not fully aware of illicit transactions flowing through the bank.
Senators expressed skepticism that they did not know about problems that persisted for seven years. A report by the panel, the Senate Permanent Subcommittee on Investigations, also found that US regulators knew the bank had a poor system to detect problems but failed to take action.
Bagley has been the head of compliance since 2002, during the period in which the Senate investigation found that HSBC’s lack of oversight allowed the bank to be used by drug traffickers and possible financiers of terrorist groups, and for other illicit purposes around the globe.
Bagley said he lacked full authority over the bank’s far-flung affiliates, which each had their own compliance officers. HSBC, with net income last year of $16.8 billion, operates in about 80 countries.
‘‘HSBC has fallen short of our own expectations and the expectations of our regulators,’’ Bagley testified.
He said he had told HSBC senior management ‘‘that now is the appropriate time — for me and for the bank — for someone new to serve as the head of group compliance.’’
The executive who headed HSBC’s Mexican affiliate in 2007 and 2008 said he tried to clean up deficiencies he found in the operation.
‘‘I believe that we made real progress at HSBC Mexico during my short tenure,’’ Paul Thurston told the panel. However, he added, ‘‘We know we should have done this better, sooner.’’
The executives said the bank has made deep changes to its policies and corporate culture to prevent illicit use of the bank. London-based HSBC, which is Europe’s largest bank, changed its senior management last year.
Senator Carl Levin, the Democrat of Michigan who is the subcommittee’s chairman, challenged Thurston. ‘‘This is something that people knew was going on at that bank,’’ Levin said. ‘‘Why did people allow it to continue?’’
Thurston said the Mexican bank, which HSBC had acquired in 2002, had been a ‘‘fast-growth’’ bank that lacked controls against money laundering.