It’s interesting to see how a company as colossal as HSBC reacts to their own scandal. You would assume most big corporations turn a cold shoulder to their own misbehavior. Looking through their 2012 Annual Report, I found that the bank surprisingly speaks out about their incident even establishing committees in attempts to regain their reputation. In the Group Chairman’s statement “A Challenging Year in Banking,” he begins by stating…
Their efforts to restore their image mainly include establishing ‘transparency’ for society but most importantly for their stakeholders. During Chairman Douglas Flint’s section within the annual report under section “Enforcing Global Standards,” he begins by stating the Board’s approach in enforcing the highest behavioral and compliance standards.
With this they have established a new Board committee to foster a stronger governance over there banking ventures abroad. Titled the Financial System Vulnerabiltities Committee created on January 30 2013. This committee is responsible for overseeing and governing all controls and activities identified areas where HSBC may be exposed to high risk financial crime or system abuse. Five subject matter experts retrieved from the highest levels of public service will support this committee in determining this behavior. Their speciality comes from background fighting organized crime, terrorist financing, narcotics trafficking, tax evasion and money laundering including knowledge in intelligence gathering as well as international payment systems. Their two primary goals are 1) Identify areas where HSBC may become exposed to financial crime or system abuse and 2) Ensure the continuing obligations to regulatory and law enforcement agencies are met.
The CEO Stuart Gulliver speaks of the company’s adoption of the highest Compliance standards and other functions which he plans to strengthen dramatically. The compliance function has more than 3,500 employees working globally doubling the cost of this function since 2010 to more than US $500 million.
Two new compliance executive roles have been determined, Global Head of Regulatory Compliance and Head of Group Financial Crime Compliance. A subsection of ‘Know Your Customer’ is in process of being passed acting as a global sanctions policy ensuring business with illicit customers is prohibited anywhere by anyone. HSBC is further being protected from the risks associated with bearer shares by limiting the ability of customers using these share companies to start new accounts or transactions with HSBC. A bearer share is an equity security that is wholly owned by whoever holds the physical stock certificate. It will be interesting to see how visibly effective these initiatives are?
Source: HSBC Holding PLC Annual Review 2012 from the HSBC Website