The top executives including the CEO of
HSBC Holdings plc
) are set to face a tough inquiry by the congressional committee
for their alleged involvement in money laundering during the period
Moreover, the representatives of the regulatory authority -
Comptroller of the Currency - are also summoned for the judicial
inquiry for their negligence. This reflects the U.S. government's
constant efforts to restrain funding that were made available for
After year-long investigation into bank's compliance with
anti-money laundering rules, the subcommittee has accused the bank
of failing to meet those rules. This could possibly result in hefty
penalties, amounting around a billion, for HSBC. Apart from the
senatorial committee, the Department of Justice and the Office of
Foreign Asset Control are also investigating the bank regarding the
The investigation revealed substantial lapses in the bank's
anti-money laundering compliance. This resulted into a worldwide
displacement of funds from riskier nations through the bank.
Controversial transactions pertaining to its Iranian clientele and
the illegal narcotics trade in Mexico have drawn maximum attention.
The U.S. and the European Union is seeking to curb Iran's various
contentious projects. As a result, it has been trying to stop
funding made available to the Iranian government by keeping a tab
on the country's banking activities.
Moreover, the U.S. is trying to curb drugs trade in Mexico.
Consequently, HSBC's carelessness regarding the money laundering
rules has not gone down very well with the American government.
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HSBC is already facing a probe related to rigging of the London
Interbank Offered Rate, or the LIBOR. Although the bank is
not officially charged for any wrongdoing, such news and
investigations will surely dent the goodwill of the company.
Other Banks Involved in the Scandal
Earlier this year, the U.S. government held Netherlands-based
ING Groep NV
) responsible for transferring billions of dollars through the
American financial system to nations that were economically
restricted by the U.S. As a result, ING bank ended up paying $619
million in penalties.
Moreover, Wachovia bank, acquired by
Wells Fargo & Company
) in 2008, was accused of facilitating funds transfer related to
Mexican Drug cartel. It ended up paying $160 million as
HSBC should be praised extending full-fledged support to the U.S.
regulators and law enforcement bodies in conducting the
investigation. However, it must be mentioned that negligence
relating to such critical rules is not inevitable since it exposes
the entire world to dangers with dire consequences.
Shares of HSBC currently retain a Zacks #2 Rank, which translates
into a short-term Buy rating. Considering the fundamentals, we also
maintain a long-term Neutral recommendation on the stock.