The UK’s biggest bank is front and centre in the so-called “FinCEN files” - leaks published by the International Consortium of Investigative Journalists (ICIJ), which allege that some of the biggest names in international banking allowed criminals and fraudsters to move dirty money across the globe.
Back in 2012, HSBC paid a $1.9bn (£1.46bn) fine to avoid prosecution for handling at least $881m in proceeds from the sale of illegal drugs by Mexican and Colombian cartels. The ‘World’s Bank’ probably got off lightly considering that US federal investigators found evidence that HSBC officials were complicit in the illegal activities.
This time around, the leaked financial dossiers charge that the bank allowed $80m in proceeds from a Ponzi scheme to move to accounts in Hong Kong in 2013/14 through its US business. HSBC continued to engage in the practice despite being warned by regulators, even though it was carried out in the wake of the deferred prosecution agreement with US authorities. You would think this would act as a strong deterrent, but the ICIJ makes the point that “US agencies responsible for enforcing money laundering laws rarely prosecute megabanks that break the law”.
The sums linked to the Ponzi scheme are piffling in comparison to the funds obtained unlawfully that are slushing around the international financial system, but given the roll call — JPMorgan (NYSE: JPM), HSBC, Standard Chartered (STAN), Deutsche Bank (ETR: DBK) and Bank of New York Mellon (NYSE: BK) — regulators may be forced to overhaul existing anti-money laundering procedures.
The FinCEN Files set out over 2,000 suspicious activity reports, or SARs, which banks send out to authorities if they suspect their clients are engaged in questionable activities.
We should not feign shock at these revelations. The estimated amount of money laundered annually ranges from 2-5 per cent of global GDP. (Miami's skyline is largely the result of cocaine trafficking). At the same time, the unprecedented spread of fintech and digital communications allow money to move anywhere in the world at the flick of a switch, to say nothing of the gathering challenge posed by cryptocurrencies. The reality is that under-funded and over-stretched regulators are struggling to get ahead of events. Short of a coordinated response by national governments, that is unlikely to change anytime soon.
