<div>Introduction

The Hong Kong
Shanghai Banking Corporation is a premier institution in the world of financial
banking. Nevertheless, it has recently been affected by a series of scandals
that threaten the integrity of its operations. HSBC has come under sharp
criticism that has led to heavy fines owing to its lax control over its
operations that allowed it to be used for money laundering purposes. The financial
giant failed to take the necessary steps needed to prevent drug traffickers
from using its systems to launder huge sums of illicit funds. Nevertheless,
there are effective steps that can be taken at the moment to ensure that such
an incident does not occur in the near future. 

The evolution of
the money laundering scandal

HSBC had
repeatedly failed to input better practices to ensure that it was not being
used as a conduit to launder money from any of the organizations or countries
that had been blacklisted by the United States government. However, the program
that was in place in the bank was too lax to detect any significant money
laundering activity that made the bank an ideal choice for illegal enterprises
seeking to clean their funds. One of the problems that was present within the
bank was the high number of backlogs that existed in the system (BCCL: Banking Control Commission of Lebanon BDL Banque
Du Liban Official Lebanese Central Bank Website).
There were about 17,000 alerts that needed to be analyzed. These suspicious
activities were nonetheless not being handled effectively to ensure that the
bank was on top of the matter. The issues extended to factors such as the bank
being unable to look into the risk assessment. Furthermore, it failed to inform
its partners of any such suspicious activities thus allowing the practice to
carry on further.

The bank itself
was aware that Mexico represented a huge risk concerning money-laundering
cases. However, HSBC made a choice to place the country in its lowest risk
category. This allowed a significant proportion of the transactions to go
through it without being analyzed. As a result, a total of $670 billion from
the country was never assessed to determine whether it was being laundered.
Effectively, the bank itself was the one that made a mistake when it did not
look into its own internal warnings indicating the possibility that drug money
was being laundered through its branches (HSBC
to Pay $1.9 Billion U.S. Fine in Money-laundering Case, 2012).
The monitoring systems were not viable enough to account for the huge
transactions being made which made to a lot of serious lapses. 

The anti-money
laundering controls that were in place within the bank were not meeting the
compliance system set by US standards. The truth is that there was a blatant
failure on the part of the bank, as it appeared to make no significant effort
to change its systems. Therefore, the actions of the banks went against the
sanctions placed by the American government on these drug cartels. There was no
oversight of the anti-money laundering control to ensure that outside
individuals could not exploit it as well. 

A huge challenge
that was present within the financial institution’s structure was the lack of
enough staff to handle any flagged issues. The compliance department was thus
not capable of dealing with the huge numbers that would routinely come its way
(Home |Homeland Security &amp; Governmental Affairs
Committee). The fact that only one or two of
their employees was tasked with checking the authenticity of any wire transfers
that was flagged meant that many of the illegal activities went unnoticed. The
bulk cash that was being processed through the bank was also left to a few
individuals who would not be able to prevent the system from being exploited.
HSBC had left a number of open loopholes which meant that it was not meeting
its obligations are required by the American government.

Action plant to
prevent money laundering within HSBC

1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Suspicious
Activity Reports department

HSBC should
ensure that its compliance department is able to handle the number of flagged
suspicious activity with regards to money laundering. To begin with, the
institution should have enough staff members who are able to cater to the bulk
of reports that come along its way. It should have the capability to scrutinize
every aspect of the transactions that go through its branches each day.
Essentially, the bank should work on introducing measures that enhance the
disclosure of such information when there is significant evidence that the
funds are being laundered. The system reports department has to have a strong
anti-money laundering regime that reduces the vulnerability of the department
as well. HSBC has to disrupt the existing network that allows such finances to
go through as well as reporting employees who willingly accept and participate
in the illegal action (Singh, 2015).

2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Improved
Investigative capabilities 

The
investigative department that handled the cases of money laundering within HSBC
was relatively weak. However, such forms of organized crime tend to include
other factors such as bribery and corruption. This form of high-end money
laundering activity tends to have a complex system that allows for its
exploitation. The bank has to build upon its investigative abilities to track
the accountancy services that are being used to provide legitimacy to these
funds (Pramod,
Jinghua, and Ping 2012). The bank should
review its existing financial investigation capabilities to ensure that such
problems do not come about. Proper analytical, investigative and legal skills
can help to reveal the ownership of these funds. The core financial
intelligence of the bank should be strengthened and develop to fulfil its goal
of pursuing cases of money laundering. 

3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;Improving the efficacy of the supervisory
department

The American
government has maintained an important role when it comes to helping the
financial institution to comply with the law. HSBC has to work with the United
States OCC to comply with the standards that have been set by the regulators.
The bank has previously circumvented sanctions that were placed by the American
government to do business with blacklisted entities. However, the diversity of
the statutory regulators can oversee the process of the bank developing the
appropriate approach for identification and assessment of common risks in money
laundering (Singh, 2015).
The methodology that can be employed in this situation is only able to work on
a supervisory regime as it is up to the bank to ensure that it meets the
standards of the financial sector. The benefit for the bank comes from the
large number of professional supervisors that can determine areas that are
non-compliant with the law such that a common risk assessment methodology is
put in place. 

4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Money
Laundering Intelligence Taskforce

The collective
anti-money laundering effort that combines the efforts of the public and
private sector can help to prevent, detect and cut off any flow of finances
within HSBC. The use of tactical intelligence to raise awareness about existing
threats that such drug cartels use to launder their income should fit well into
the legal framework of the United States (Gordon 2010). Thus, the policy of the bank towards Mexico
should increase the level of risk that is expected from its financial
transactions. Heightened monitoring of funds flowing in the bank does help to
deal with these threats especially the ones connected to criminal activities.
An operational perspective from the bank. HSBC will be at a better position to
build its analytical capabilities when the taskforce has a permanent footing
that allows it to understand the risks involved in money laundering .

5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; engaging
law enforcement response

the funds that
are being laundered through HSBC by the drug cartels represent high priority
threats that should be dealt with. The federal law enforcement agencies have to
be made aware to engage and pursue the individuals involved in the process (Pramod, Jinghua, and Ping 2012).
This will maintain the integrity of the system by ensuring that the bank has
not engaged in any illegality or failed to disclose such information. The
information provided by the bank is a necessary step towards building a strong
intelligence picture that can pursue the criminal entities using the
appropriate legal powers. These forms of economic crimes involve high-end
techniques that can be stopped with the emerging threats. This disruption and
reassessment of the system helps build the investigative process. 

 </div><div> </div><div> </div><div></div>


&nbsp;

Works
Cited

BCCL: Banking Control
Commission of Lebanon BDL Banque Du Liban Official Lebanese Central Bank
Website, <a href="http://www.bccl.gov.lb/pdf_files/seminars_pdf_files/integrated-risk-management/Case%20Study%20HSBC.pdf" title="Link: http://www.bccl.gov.lb/pdf_files/seminars_pdf_files/integrated-risk-management/Case%20Study%20HSBC.pdf">www.bccl.gov.lb/pdf_files/seminars_pdf_files/integrated-risk-management/Case%20Study%20HSBC.pdf</a>.

Home |Homeland
Security &amp; Governmental Affairs Committee,
<a href="http://www.hsgac.senate.gov/imo/media/doc/PSI%20REPORT-HSBC%20CASE%20HISTORY%20(9.6).pdf" title="Link: http://www.hsgac.senate.gov/imo/media/doc/PSI%20REPORT-HSBC%20CASE%20HISTORY%20(9.6).pdf">www.hsgac.senate.gov/imo/media/doc/PSI%20REPORT-HSBC%20CASE%20HISTORY%20(9.6).pdf</a>.

"HSBC to Pay
$1.9 Billion U.S. Fine in Money-laundering Case."&nbsp;U.S,
11&nbsp;Dec.&nbsp;2012,
<a href="http://www.reuters.com/article/us-hsbc-probe/hsbc-to-pay-1-9-billion-u-s-fine-in-money-laundering-case-idUSBRE8BA05M20121211" title="Link: http://www.reuters.com/article/us-hsbc-probe/hsbc-to-pay-1-9-billion-u-s-fine-in-money-laundering-case-idUSBRE8BA05M20121211">www.reuters.com/article/us-hsbc-probe/hsbc-to-pay-1-9-billion-u-s-fine-in-money-laundering-case-idUS...</a>.

Gordon,
Richard K. "Losing the war against dirty money: Rethinking global
standards on preventing money laundering and terrorism financing."&nbsp;Duke
J. Comp. &amp; Int'l L.&nbsp;21 (2010): 503. 

Pramod,
Vandana, Jinghua Li, and Ping Gao. "A framework for preventing money
laundering in banks."&nbsp;Information Management &amp; Computer
Security&nbsp;20.3 (2012): 170-183.

Singh, Kavid.
"The New Wild West: Preventing Money Laundering int he Bitcoin
Network." Nw. J. Tech. &amp; Intell. Prop. 13 (2015): iii.

&nbsp;

Money laundering crimes by the Hong Kong Shanghai Banking Corporation

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