The HSBC scandal shook Europe as a whole! Britain’s largest institutional bank was accused of a “drugs and gun-running” scandal. The bank failed to monitor a staggering ? 38trillion of money moving across borders from places that could have posed a risk, including the Cayman Islands, Switzerland, Iran, and Mexico. One of the highest noted disregards by the bank was their financial dealings with Al Rajhi, the Saudi Arabian bank that was linked with funding the 9/11 terrorist scheme.
Another report showed that the bank accepted ? 9. 6billion in cash over two years from subsidiaries without checking where the money came from, showing blunt disregard for the obviousness of the transactions. Mexican and US authorities warning HSBC that there was a volume limit (? 4. 5billion) in money sent to the US from its Mexican subsidiary that would exemplify “illegal drug proceeds”. A HSBC officer admitted that the accounts in the Cayman Islands were abused by “organized crime”, ? 1. 3billion total.
The bank became the subject of a US senate investigation, and they dropped a 335 page report that accused the bank of ignoring all of the warning and safeguards that should have stopped the laundering of money from Mexico, Iran and Syria. In December they agreed on a settlement to pay a penalty of ? 1. 2 billion that would further scorch their already diminished reputation. With the settlement of the fee, comes the bank admitting to violating US laws meant to prohibit money laundering including the Bank Secrecy Act and the Trading with the Enemy Act.
When presented with the 335 page senate report, the head of HSBC’s compliance division, David Bagley, quit in front of the Senate committee. Being at his post since 2002, one can understand why he resigned when pressed with these concerns. He felt guilty being with the bank for so long and did not want to take responsibility for the actions and accusations of the bank. The affair is also an embarrassment for David Cameron, because his trade envoy Stephen Green chaired HSBC during the period covered by the allegations.
Lord (Barron) Green is probably the person most to blame for these disregards for policy on money laundering and regulations. He was the chief executive and the executive chairman of HSBC. Being a trade minister, it was his duty to ensure that the issues brought to the senate’s attention would be regulated for legality concerns. In failing to successfully do so, the fault of the accusations falls on his lap. The regulators of money laundering actively, domestically, and internationally are the countries of the FATF. Forming in 1989, the FATF has 3 primary functions with regard to money laundering.
These 3 functions are monitoring member’s implementation of anit-money laundering measures, review and report trends and techniques of laundering, and promote standards globally. Combined with a unified effort within these countries, the US being one of the main ones, money laundering activities will be noted quickly before large scale transactions may go through unnoticed and through the means of illegal activities. The US promotes the most laws against these sorts of offensives. HSBC needs to come to a complete “retake”.
All historical transactions, accounts, and services need to be reviewed and mended to meet the golden standard of banking that they have held themselves to ever since becoming the primary bank of Europe. With the removal and replacement of key executive level positions, they may bring in new, fresh minds and with that comes a new approach to the regulating of the activities of the bank. In short, re-staffing the bank with new executives over the previous ones shows the public that the bank takes serious note to what has happened and a serious effort to mend and fix it. Shipman, T. & Davies, R. (2012, July 7). Hsbc let drug gangs launder millions: First barclays, now britain. Retrieved from http://www. dailymail. co. uk/news/article-2174785/HSBC-scandal-Britains-biggest-bank-let-drug-gangs-launder-millions--faces-640million-fine. html (n. d. ). Retrieved from http://www. guardian. co. uk/business/2012/dec/10/standard-chartered-settle-iran-sanctions Yost, P. , & Pylas, P. (2012, December 11). Hsbc to pay $1. 9 billion to settle money-laundering scandal. Retrieved from http://www. salon. com/2012/12/11/hsbc_to_pay_1_9bn_to_settle_money_laundering_scandal/
