Head of group compliance, David Bagley, said it was time for "someone new to serve as the head" of his division, after the panel described a "pervasively polluted" culture at the bank.
HSBC was found to have lax controls that enabled it to act as financier for clients seeking to launder suspected terror and drug money by the US Homeland Security and Governmental Affairs subcommittee.
Its (Euronext: ALITS.NX - news) report said shadowy funds from the world's most dangerous and secretive corners, including Mexico, Iran, the Cayman Islands, Saudi Arabia and Syria , sought access to the bank's US arm.
Mr Bagley, who had a 20 year career with the bank, said: "Despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators."
"The culture at HSBC was pervasively polluted for a long time," Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations, said.
Because of lax controls against laundering, HSBC Bank USA "exposed the United States to Mexican drug money" and other suspicious funds, Mr Levin said.
The subcommittee found that HSBC Bank Mexico transported $7bn (£4.5bn) in cash in armoured vehicles to the bank in 2007 to 2008 - and was judged to be a "low risk" client.
The report says the drug cartels laundered money through the US division from 2002 to 2009.
And it found that the bank has to close 20,000 bank accounts on the Cayman Islands.
In another case, HSBC and its US affiliate concealed more than $16bn of sensitive transactions to Iran, violating US transparency rules.
The congressional probe detailed just how sweeping the problems have been, both at the bank and at the top US bank regulator, said the Office of the Comptroller of the Currency (OCC).
It said the regulator failed to properly monitor HSBC.
The report is another damaging blow to the banking industry's reputation and comes just weeks after the Libor rate-fixing scandal exploded, with Barclays (LSE: BARC.L - news) admitting guilt and paying £290m in fines.
The year-long inquiry included a review of 1.4 million documents and interviews with 75 HSBC officials and bank regulators.
Seeking to stem bad PR for the bank, its group compliance head announced his resignation in front of the senate panel on Tuesday.
The bank and the regulator are expected to face tough questions at a hearing today about how the abuses were allowed to continue, even after the OCC took regulatory action against HSBC in 2010.
Reports indicated there were persistent and troubling lapses in the bank's anti-money laundering compliance since 2010.
In a statement, HSBC said the Senate report had provided "important lessons for the whole industry in seeking to prevent illicit actors entering the global financial system".
The bank said it is spending more money on compliance and has become more coordinated in policing high-risk transactions.
The report also contained strong criticism of the OCC, saying the regulator failed to crack down on the bank despite multiple red flags, allowing money laundering issues "to accumulate into a massive problem".
Newly appointed OCC head Thomas 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 programmes in place to effectively comply with these laws".
In condemning the actions of the bank and inaction of the watchdog, Mr Levin raised the issue of national security.
"In an age of international terrorism, drug violence in our streets and on our borders, and organised crime, stopping illicit money flows that support those atrocities is a national security imperative," Mr Levin said.
The bank said in its statement that it changed its senior management last year and agreed to strengthen its compliance with rules to prevent money laundering.
"We... recognise that our controls could and should have been stronger and more effective in order to spot and deal with unacceptable behaviour," the bank said in the statement.