Hsbc Money Laundering Scandal: the Issue of Ethics in Mexico, Iran, Saudi Arabia and Syria


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The article I chose regarding an ethics problem is from NBC news, and it details the recent HSBC money laundering scandal. Mexico, Iran, Saudi Arabia and Syria are some of the places that HSBC had allowed its clients move money through, as told by a U.S. senate report. One of the major concerns about this issue is that the bank is responsible for large amounts of Mexican drug cartel money passing through it. In Saudi Arabia and Bangladesh, HSBC’s U.S. division provided funds and services to possibly fund al-Qaida and other terrorist groups.

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It has been known that there were issues at HSBC for some time, but the recent senate report explains for the first time just how deep the scandal goes. Also in hot water is the Office of the Comptroller of the Currency, the bank regulator who is tasked with monitoring HSBC. HSBC is not the only bank to get into trouble recently. Another British bank, Barclays, had to pay $453 million due to a U.S.-British probe into the rigging of the London interbank offered rate, or Libor. And in 2010, Wachovia paid $160 million for a Justice Department probe which examined Mexican transactions. A BBC report said that ING also paid $619 million to settle allegations that it violated the U.S. sanctions against Iran and Cuba.

The report said that HSBC ignored the risks of doing business with countries such as Mexico, a country known for its problems with drug trafficking. Between 2007 and 2008, HSBC’s Mexican operations moved $7 billion into the bank’s U.S. operations. According to the report, both Mexican and U.S. authorities warned HSBC that the amount of money could only have reached such a level if it was tied to illegal narcotics proceeds. In 2007 and 2008, HSBC moved 7 billion dollars from Mexico to the U.S., even after they were warned that the level of money could only have come from illegal drug trade. HSBC finally closed the account in November 2007, when they received a seizure warrant by the Mexican attorney general seeking money related to the exchange dealer.

More than 28,000 transactions were discovered by an auditor that may have broken laws that prevent transactions with sanctioned countries between 2001 and 2007. Most of them, 25,000 to be exact, involved Iran. These kinds of transactions are be prohibited by U.S. law.

The report states that the banks problems came from the compliance division, which was not able to battle suspect money. There was high turnover of compliance officials, so reforms were not able to take place. The employees were overwhelmed by the number of suspicious transactions.

HSBC has apologized publically, sending this message to NBC News: “We will apologize, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong. We believe that this case history will provide important lessons for the whole industry in seeking to prevent illicit actors entering the global financial system.”

HSBC clearly crossed lines, both ethical and legal, several times. When moving money through Mexico, they had been warned by both the U.S. and Mexican officials that they were likely dealing with traffickers. Despite the warning, they moved the money anyway. According to the narrow view of corporate responsibility, the bank did the right thing, which was to maximize profits. However, the broader view states that corporations have a responsibility to consumers, employees, suppliers, contractors, and communities. With all the violence that results from drug trafficking in Mexico, it would be difficult for anyone to defend HSBC’s actions. The fact that they only closed the account after being the attorney general sought money from them shows that HSBC was solely focused on making as much money as possible, regardless of who was being hurt.

HSBC also moved money through such countries as Iran, Syria, Saudi Arabia, and Bangladesh. In doing this, they violated U.S. law, and the money they moved is suspected to have helped terrorist groups such as Al Qaeda. Egoism suggests that one should behave in whatever way best serves oneself, and at first it appears that HSBC was doing just that. However, egoism also takes into account how ones actions will affect the future. Considering this, HSBC still made poor ethical choices; they directly or indirectly helped support terrorists, who could potentially attack the places that HSBC does business. The bank was clearly only considering the narrow view of corporate responsibility.

HSBC’s vague apology places no blame on anyone in the company, showing a diffusion of responsibility; meaning that there are so many people involved in the wrong-doing that nobody has to stand up and take blame. Realistically, it’s likely there are many people within the company who acted unethically, and it would be next to impossible to find and punish them all. Hopefully they are right about the scandal providing an example to the industry, so it is less likely to occur again.

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