When Banks help Drug Dealers – How HSBC lost its Customers’ Confidence

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The Hong Kong and Shanghai Banking Corporation or HSBC is the sixth largest public company and the seventh largest bank in the world. It is listed in the London Stock Exchange and the Hong Kong Stock Exchange and is the second largest company on the LSE. It is a major financial and industrial corporation with offices all across the globe. Its customers range from individuals to large multinational companies. HSBC started off as a company in the then British colony of Hong Kong. That is also where it gets its name from.

Unfortunately, in spite of being such a major force and name, HSBC has been marred by scandal time and again. One of its biggest such scandals came to the limelight in 2012 after a detailed yearlong investigation by US authorities into the banks dealing in America. In one case, the bank was involved in 25,000 transactions worth $19.4 billion dollars that were linked to Iran. They did not disclose this connection in spite of sanctions placed by the US on Iran at the time. They also provided services and financing to banks in Saudi Arabia and Bangladesh that were linked to terrorist organizations. Not only this, HSBC was also involved $290 million worth of suspicious travelers’ cheques from Russia. The investigation also showed how the banks regulator failed to monitor these suspect and illegal transactions and allowed them to continue financing terrorists and money launderers.

The Office of the Comptroller of the Currency or OCC was the regulator of the HSBC. It allowed a backlog of 17,000 unreviewed account alerts and did not properly monitor $60 trillion worth of wire transfers. Although the anti-money laundering policies were supposed to be set by the bank itself, its oversight was not caught by the OCC and that was also part of why the scandal was such a big deal. In the event of such gross oversight the OCC should have reviewed the banks privileges of conducting transactions on US territory and revoked their access if found suspect or lacking. Apart from this major scandal it is unfortunate that a similar case of lax anti-money laundering policies were found by US authorities against the bank in 2003 and 2010. The bank was also found to allegedly violate security compliances in India and were caught by undercover media agents to agree to launder black money. The identified employees were put on leave by the bank after this expose. Additional such instances were also found in the British dependency of Jersey and also allegations were made by Argentina’s main taxing authority.

It is a shame that a company so renowned and prestigious has allowed such suspect and illegal policies to flourish inside it. It is also clear that despite repeated such actions it has failed to deliver promising results and has repeated its previous misdemeanors. What should have been a case of an ideal example of banking to follow by the rest of the world turned into a source of embarrassment. It is high time the people in charge at HSBC take a long hard look at why such policies have continued under them.

 

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