HSBC Scandal: Short Term Effects

HSBC’s lengthy scandal resulted in several short term effects. Although the regulators from the Office of the Comptroller of the Currency failed to take action upon discovering lax control over money wire transfers in 2007, little was done to penalize HSBC. Because of this slow start to the appropriate punishment, I think it is safe to say the crisis did not actually explode until 2010 when the United States Senate and media became most involved and exposing the banking giant’s money laundering scandal to its true audacity.

Net Income Increasing from 2010 to 2011

Share Price from July 2010 to 2011

One of the most important stakeholders, the investors, were shaken by the onset of the media exposing HSBC’s money laundering. The share price steadily declined from July 2010 to July 2011, resulting in a dip of more than $20.

However, the income statement of HSBC says otherwise showing an increase of total revenue from 2010 to 2012. According to CNN Money, HSBC’s CEO made a whopping $11 million in the 2012. It seems the bank is doing quite well despite having paid “$1.9 billion last December [2012] to settle money laundering allegations with U.S. authorities”.  Yahoo Finance reports that a noticeable cost incurred by HSBC is for legal purposes amounting up to $1.15 billion. Overall, the company itself is performing up to par.

Thankfully, our last major player as a stakeholder, is beginning to take action. The U.S., regulators are starting to pay more attention to the financial side of the operation.  According to Forbes, “in total, HSBC is now subject to investigations from the U.S. Justice Department, the district attorney’s office in Manhattan, the U.S. Federal Reserve, and two separate departments of the U.S. Treasury”. I might add that the fines imposed as of now are solely for the inadequate checking system for wire transfers. Because of the corporate veil, HSBC officials are not being tried individually in criminal court for the wrongdoings of essentially funding institutions that undermine the American spirit such as corrupt drug cartels and terrorism.

All of these responses cast light in what is a very subtle and comparably low key reaction to the HSBC money laundering scandal. Many other corporations, enormous in size and power, undergo crises and must face the consequences. Apparently, HSBC is a company that has evaded such consequences, and getting away with a slap on the wrist. As part of the US Senate, I believe this is unacceptable and more should be done to the officials of HSBC that are responsible for such crimes. As a host country, we deserve the respect and due diligence of other companies headquartered elsewhere.