HSBC Case Study

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The past few years have been a turbulent time for the international bank causing unparalleled financial and reputational damage as a result of a number of events of severe divergence and fraud on the CSR framework at HSBC and the global standards that HSBC abide by. HSBC was a case study for the United States Senate Permanent Subcommittee on Investigations (PSI) looking at U.S. Vulnerabilities to Money Laundering and Terrorist financing. Described by chairman Douglas Flint as the toughest in HSBC’s history the PSI concluded that HSBC, and its U.S. affiliate, exposed the U.S. financial system to a “wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls” (United States Senate 2012). The events caused many to question the role that HSBC, and the banking system in general, plays in society.

The investigation highlighted events where the existing AML policies in place were not sufficient, nor abided by, subsequently exposing U.S. communities to dubious personnel, entities and activities from known high-risk locations. The investigation identified that in 2010 HSBC was cited by the federal regulator, the Office of the Comptroller of the Currency (OCC), for a number of severe AML deficiencies, including a failure to monitor $60 trillion in wire transfer and account activity, a backlog of 17,000 unreviewed account alerts regarding potentially suspicious activity, and a failure to conduct AML due diligence before opening accounts for HSBC affiliates (United States Senate 2012). The PSI also found that the OCC had failed to take a single enforcement action against the bank over the previous six years, despite strong evidence of AML problems (United States Senate 201...

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...nvestment (UNPRI), and the Wolfsberg Principals, which include Know Your Customer, Counter Terrorist Financing and Anti Money Laundering policies.

These principals are designed to ensure that (add in paragraph)

As a result of the PSI findings the U.S. Department of Justice and HSBC entered into a Deferred Prosecution Agreement (DPA) and will make $1.256bn in payments for violations of the Bank Secrecy Act (BSA), the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) (United States Department of Justice 2012).

Described by Group Chairman, Douglas Flint, as a “wake-up call” HSBC is restructuring for economical reasons but equally important it is aligning accountabilities and responsibilities to ensure banking is “fair, transparent, sustainable and meeting its core objective of serving society” (HSBC 2012a).
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