HSBC is Spared, Despite Concerns

In the first of three brief posts today, in order to stay abreast of a busy day in the financial arena, we will begin by looking at news that is coming out of the Department of Justice in the U.S. The news, that the DoJ is changing course on its agreement put in place to deter further transgressions by the multinational bank, is excellent news for the bank but, perhaps, sends a message about the pro-business sentiments that are emerging all the time under the Trump Administration.

On two specific occasions here in Financial Regulation Matters, we have looked at HSBC in particular with reference to their almost infamous track record when it comes to financial crime, particularly money laundering. It is no secret that the large multinational bank has been involved in some particularly damaging news stories, including having to pay a £1.9 billion fine to U.S. authorities in 2012 for ‘exposing the U.S. financial system to money laundering, drug (and) terrorist financing risks’ and also the bank’s connection to the so-called ‘Global Laundromat’, which has seemingly been lost to the news cycles. However, today, the focus is on the first of these two instances, with the suggestion emerging today that the DoJ will be filing a motion in New York that will see the ‘sword of Damocles’ – the charges attached to the Deferred Prosecution Agreement (DPA) that forced through the fine in 2012 – removed from over the head of HSBC. Many news outlets are carrying this story, and the Financial Times makes quite a point of indicating just how happy Stuart Gulliver (outgoing CEO), John Flint (incoming CEO), and Mark Tucker (non-Executive Chairman) will be with this result, with Gulliver proudly declaring that ‘HSBC is able to combat financial crime much more effectively today as the result of the significant reforms we have implemented over the last five years’. So, it would appear that Gulliver’s jubilance is deserved, given that it is surely the case that he is right because, quite frankly, the removal of the DPA must surely indicate the accuracy of the statement; regular readers of Financial Regulation Matters will know that we cannot be so fast to accept what we see, and the same principle unfortunately applies here.

It was only at the beginning of this year when the FCA were investigating HSBC over its Anti-Money Laundering (AML) procedures over concerns relating to the bank’s thoroughness in this all-important sector, and it was only in 2016 that the lawyer appointed to HSBC to monitor its compliance with regulations as part of the DPA expressed ‘significant concerns’ over its ability, and willingness, to comply with a range of regulations like AML regulations. Yet, this is seemingly not enough evidence to remain vigilant, and if the DoJ does indeed decide to lift the sword of Damocles, then it is essentially releasing HSBC from the continued restraint that the DPA brings – if it was showing concerning levels of compliance with a DPA-associated Lawyer on board, what will it do without the continued presence of a 3rd party overseer? The optimist will agree with Gulliver, that improvements have been made, but the pessimist will argue that there is little evidence of that; the continued transgressions make the optimist’s argument almost null and void. However, this ignorance of evidence is a common theme in the post-2016 political environment, and the willingness of the DoJ to intervene will be a clear signal that the U.S. is open for business and does not seek to operate conservatively based upon recent damage. It is, unfortunately, a signal that the marketplace will respond to, and not in a socially-positive manner.


Keywords – HSBC, Banking, Politics, Money Laundering, Financial Crime, @finregmatters

Comments

Post a Comment

Popular posts from this blog

Lloyds Bank and the PPI Scandal: The Premature ‘Out of the Woods’ Rhetoric

Image
Today’s very short post focuses upon the news that the Financial Conduct Authority (FCA) has recently extended the deadline to claim compensation for mis-sold ‘Payment Protection Insurance’ (PPI). Whilst a lot of financial institutions will have to prepare to offset the extended deadline, it is Lloyds that has grabbed the business headlines by apportioning an extra £350 million to offset any further claims that may be made of it – however, this comes only a week or two after the Bank posted its best performance figures in over a decade, as was previously discussed in Financial Regulation Matters . This post will therefore argue that the rhetoric being advanced recently regarding Lloyds – rhetoric like Lloyds represents ‘ a modern day success story ’ is wide of the mark and creates a false sense of security that we simply cannot afford to believe in. The ‘ robust recovery ’ was heralded far and wide upon the publication of Lloyds Bank’s financial performance for the previous fi...
Read more

The Analytical Credit Rating Agency: A New Entrant That Will Further Enhance Russia’s Isolation

Image
This short post is based upon a forthcoming article by this author that examines the viability of the latest entrant into the credit rating arena, the Analytical Credit Rating Agency (ACRA). The article, which is due to be published in the European Company Law Journal (and is available here in a pre-published version), looks at the chances of the ACRA succeeding when viewed within the parameters of perception , an aspect that underpins the credit rating sector. For this post, the focus will be upon introducing the ACRA, and then on examining the effect it may have upon the wider political issues affecting the Russian Federation. The Analytical Credit Rating Agency was established in November 2015 and comprises of 27 major Russian companies and financial institutions that serve as its shareholders. The agency, which became the first rating agency to receive accreditation from the Russian Central Bank under the new N 222-FZ Law which was designed to protect investors, has a re...
Read more

British McDonald’s Workers To Go On Strike: The Enduring Legacy of Corporate Greed and Political Irresponsibility

Image
Today’s post reacts to the news that next week, in the UK, workers will make history by staging a strike at two McDonald’s restaurants – one in London and one in Cambridge. The first strike of its kind in McDonald’s British history is a result of poor working conditions, the use of the infamous ‘zero-hour’ contracts, and a demand for an increase in the minimum wage paid to McDonald’s employees. In this post this particular story will be used a vehicle to cover an aspect that has almost become accepted in the mainstream media, unfortunately, and that is the concept of austerity and its repulsive effects. Whilst onlookers hope that the strike will see a revolution-of-sorts amongst the fast-food industry with regards to working conditions, the reality it is that the underlying causes of the grievances aired by the staff will remain whatever the outcome of the strike, as the problem is a systemic problem. The proposed strike, which is scheduled to take place on Monday 4 th Septembe...
Read more