HSBC Money Laundering Case, Essay Example

The problem that has become a greater challenge as companies are transforming into multi-million dollar corporations, are that they are becoming too powerful to control. In the past decade, there have been several banking institutions that have taken part in publically scrutinized and illegal scandals that have been detrimental to trust that consumers have entrusted into them. The biggest losers are the employees and the stakeholders who have taken the brunt of banking institutions lying and scheming behind doors. The criminal prosecutions that have become a norm in the media have negatively affected the global economy. The ethical dilemma is the ideal of publically prosecuting the companies, when the effects could have a global impact on the economy? Other ethical problems include the ethics of the leaders, and how it effects the business as a whole?

HSBC is one of the most powerful money establishments within the world. Coming in at number six, and considered by Forbes in 2012, as the largest bank in the world in terms of assets (Forbes 2013). HSBC is a British multinational financial institution with over $2.6 trillion in assets, over 90 million customers, 400,000 staffs, and 2013 profits of nearly $45 billion. HSBC has operations in over eighty countries, with many affiliates spanning the world. The U.S. affiliate is HSBC Bank USA N.A. operates in over 470 bank branches throughout the U. S., and manages assets totaling over $200 billion, and serving almost 38 million customers. Even though HSBC is one of the most prominent and most powerful banks within the world, it was a part of substantial legal and moral dilemma that led to severe legal consequences. HSBC lacked adequate management processes in compliance and anti-money lavation. One of the biggest problems was the corporation’s lack of business ethics, in which they thought of others within the company. It had been additionally concerned in felonious money transfers from terrorist groups and other criminals, which helped many purchase laundered cash into thousands of accounts in Jersey (Davies 2012). The deficiencies highlighted the degree of negligent controls within HSBC. The scandal enclosed the corporation’s inability to properly monitor $15 billion in money transactions between 2006 and 2009, and outlined the poor staffing and high turnover within the bank’s compliance units. These problems were in part instigated by its widespread operations of the affiliate units. This gradation of independence that left chief bank officers with less authority and management. Every affiliate had its own officer to manage compliance with laws to forestall hiding.

At the end of 2012, HSBC was fined a record $1.92 billion by the U.S for violating laws designed to forestall concealing unlawful money activity. HSBC was under consistent suspicion and doubly given warnings and orders in 2003 and 2010 to reinforce its U.S anti-money laundering programs. However, HSBC did not make the correct changes. The $1.92 billion penalty, issued below the Bank Secrecy Act, was handed down. It was reported after a resultant investigation that confirmed the bank had created offshore accounts for drug cartels and suspected criminals in Jersey. HSBC banking executives admitted to laundering the maximum amount as $881 billion (Viswanatha 2012). From 2003-2006, HSBC Bank was under significant suspicion by US regulators. They were supposed to operate under an official document to correct the deficiencies of their operational practices. HSBC Bank specifically united to reinforce its anti-money laundering program, to realize adequate compliance with the Bank Secrecy Act. According to Reuters, “the bank acknowledged it failed to maintain an effective program against money laundering and failed to conduct basic due diligence on some of its account holders” (Viswanatha 2012).

Between 2006 and 2010, HSBC Bank USA desecrated many parts of the BSA: concealing risks related to doing business with Mexican cartels, neglected laws, had compliance problems at HSBC United Mexican States, and the BSA-adequate anti-money laundering program was not enforced (Ross 2013). Lacking in these instances may well be a corporation culture that prizes integrity. This enabled the business to overlook drug running, and terrorist activities in the pursuit of profit, that led dire social consequences. Blame is additionally placed at the foot of the banks and regulators alike, at intervals the previous instance, inadequate anti-money laundering (AML) controls were primarily guilty. In the case of HSBC, as a part of a wide-ranging restructuring of the banking through commerce, HSBC is not alone in its indiscretion. Commonplace Chartered, ING, Credit Suisse, Royal Bank of European country, Lloyds Banking cluster, and Barclays over the past many years. They have had to stump up fines for facilitating transactions with countries such as countries in Asia, Libya, Sudan and other nations in violation of the workplace of Foreign quality management (OFAC) sanctions (Worstall 2013) With HSBC, Mexico’s involvement entailed providing money-laundering services to numerous drug cartels. In doing this together with bulk movements of money from the banks that housed the Mexican’s unit to the U.S., it outlined the lack of  remarkably little or no oversight of the transactions.

The U.S. government decided not to pursue legal action of HSBC by claiming that the prosecution of such giant establishments incorporates a negative impact on the financial system. HSBC is a part of the global economy, and a change in the financial stance could lead to dire consequences. The notion that the biggest firms, deemed adequate to folks underneath the law by the U.S. Supreme Court within the case in 2010, are currently afforded freedom from legal action likewise. One factor is evident: The Department of Justice appears to carry all the cards when deciding the fate of HSBC’s ability to continue operations within the U.S. This is based on the effects on the market if the company was prosecuted, would have global impact, which would have been worse than the 2002 and 2008 financial crises. In looking that the business social responsibility, the utilitarianism approach can be taken. Utilitarianism, additionally referred to as the “greatest happiness principle” holds that choices and actions area unit correct as long as they promote proportional utility, by constant accord improper as they manufacture an overall negative utility. A utilitarian approach, then, would advocate an act if a larger profit would be afforded to a bigger variety of people in society. This principle supports the Department of Justice call to not prosecute HSBC. A a result of not prosecuting HSBC edges a larger variety of people in society through protective the economy from hurt, even at the expense of material possession criminal activity go for the most part unreproved. Using a social approach, a bigger portion of society edges from HSBC maintaining operations and keeping the economy from any suffering in already troublesome money times.

The record-setting financial penalty and therefore, the provisional watching amount are presumptively aimed toward deterring future wrongdoing by HSBC and alternative giant money establishments. The immediate result of prosecution might adversely have an effect on a good variety of people in society by suggests that of a blow to the economy and therefore, the loss of jobs, the long run effects of permitting a banking establishment like HSBC to interact in criminal activity with no risk of legal action, jail time, or maybe the loss of its banking license, presents an ethical danger.  HSBC’s $1.92 billion fee for laundering $881 billion, scarcely sounds like an incentive to exercise due diligence in future practices. In fact, the result of HSBC’s case will truly offer incentive for alternative banks to be additional lax with their anti-money washing practices. Among the foremost dismaying effects the non-prosecution call produces is that the hurt done to the massive variety of people littered with the drug trade. That being the case, each justice and utility appear best served by legal action of HSBC executives.

References

Davies, Rob. (2012). HSBC held offshore accounts for criminals: Bank accused of helping customers launder money by opening thousands of accounts in Jersey. Daily Mail. Retrieved from http://www.dailymail.co.uk/news/article-2230349/HSBC-accused-setting-thousands-tax-evading-accounts-Jersey-including-drugs-arms-dealers.html

Ross, Marc L. (2013). HSBC’s Money Laundering Scandal. Investopedia. Retrieved from http://www.investopedia.com/stock-analysis/2013/investing-news-for-jan-29-hsbcs-money-laundering-scandal-hbc-scbff-ing-cs-rbs0129.aspx

The World’s Biggest Public Companies. (2013). Forbes. Retrieved from http://www.forbes.com/global2000/list/

Worstall, Tim.  (2013). HSBC’s $1.9 Billion Money Laundering Fine And the Somalian Cost Of Bank Regulation. Forbes. Retrieved from http://www.forbes.com/sites/timworstall/2013/08/08/hsbcs-1-9-billion-money-laundering-fine-and-the-somalian-cost-of-bank-regulation/

Viswanatha, Aruna. (2012). HSBC To Pay $1.9 Billion U.S. Fine in Money-Laundering Case. Reuters. Retrieved from http://www.reuters.com/article/2012/12/11/us-hsbc-probe-idUSBRE8BA05M20121211