HSBC: Time To Say "Goodbye"

What The Investigation Found

The United States Senate Committee recently (July 2012) investigated HSBC, one of the world's largest banks.

The Senate investigation found an astonishing situation.. There is a worldwide clamp down on cash transactions because cash is often associated with drugs, terrorism, tax evasion or other crime. Yet HSBC took in $15 billion in cash in places like Mexico and Russia and other countries where there is a high risk that cash is generated from criminal activity.

From mid 2006 until mid 2009 there was no monitoring of these cash receipts by HSBC management.

A Saudi bank known to be involved with terrorism ordered and received $1 billion in cash. A fairly obvious question is why anyone would have a legitimate use for $1 billion in cash.

Iran of course is one of Reagan's "axis of evil" countries. For years it has been under international financial and trade sanctions because of its failures to co-operate with the world community over its nuclear developments. HSBC helped 25,000 transactions with Iran, totalling $19 billion. The Iran link was concealed by HSBC in 80% of the transactions.

A recent audit found that 41% of bank accounts in HSBC's Cayman Islands branch had no customer information recorded.

Bearer shares are an effective way of transferring assets with no paper or electronic record. HSBC opened more than 2,550 bearer share companies in various suspicious locations.

Did HSBC Know?

The emails and letters flying about in HSBC make it clear that HSBC did know. The Mexican Government twice warned HSBC that HSBC Mexico was being used for moving drugs money.

The Head of Compliance emailed the Chief Executive and Chairman Lord Green some years ago to express his concerns about the general compliance situation. Everyone at the top knew or chose not to know.

What Is To Be Done?

HSBC are expecting a world record compliance fine of $1 billion. They say they will investigate internally to find out how this happened and make sure it does not happen again.

No-one believes this is an adequate solution to the problem. The "blind eye" culture will remain. When one looks at the profit HSBC made on the $19 billion to Iran and the profits HSBC makes on the many millions of dollars in shady HSBC accounts, a $1 billion fine is simply not enough.

Of course HSBC is not the only shady bank. There is a culture across all the large banks to do as much as they can get away with. Eventually someone gets fired and there are fines to pay, but the culture of dishonesty is just too profitable.

With children, "Mummy Means It" sometimes has to be backed up with a significant action. The USA and UK and other countries have a right to expect our laws to be upheld. So the regulators should give HSBC one month to close down their operations in the USA and Britain. After 10 years HSBC will be able to re-apply, but they will have to show they are clean.

Other banks will get the message that the licence to operate really does mean that a bank has to obey the law. Until action of this nature is taken banks will continue to believe they can get away with it.

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Comments 4 comments

FitnezzJim profile image

FitnezzJim 4 years ago from Fredericksburg, Virginia

It seems likely that the Brits would take action before the Americans do. Americans tend to coddle their criminals.

Charles James profile image

Charles James 4 years ago from Yorkshire, UK Author

Our Conservative Trade Minister is an ex Chairman and CEO of HSBC. Don't hold your breath!

Amanda Severn profile image

Amanda Severn 4 years ago from UK

The astonishing thing is that ordinary, every day people continue to use these banks, despite all the adverse publicity. They say that people are afr more likely to get divorced or move house than they are to move their bank account. It's time for a culture change!

Terri Meredith profile image

Terri Meredith 4 years ago from Pennsylvania

Well, in defense of some who choose not to change banks...let's face it: changing banks can bring on so much headache that we end up punishing ourselves while the bank in question doesn't really miss our little accounts compared to the billion$ at their fingertips from doing shady business. I agree with Charles..close the banks down and put them on a "time out". I also agree with him that it's not likely to happen anytime soon. Our world is ruled by the wealthy elite, who have become wealthy by means that certainly are not all above board.

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