The Next Chapter of the HSBC Story: GFI Calls For Regulators to Change the Incentives for the Financial Industry

July 19th, 2012

WASHINGTON, DC – Global Financial Integrity applauded the Senate Permanent Subcommittee on Investigations today on this week’s hearing, “U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History.” The hearing painted a picture of a bank that chose profit over protection, failing to apply legally mandated anti-money laundering protections to many of its accounts.

HSBC is just one of several banks to be cited in recent years for lapses in anti-money laundering controls. Two such banks, ING Bank and Wachovia, were sanctioned in recent years for failures remarkably similar to those described by the subcommittee with respect to HSBC. ING was fined last month for violating U.S. sanctions by hiding business it was transacting with Iran, and Wachovia allowed hundreds of billions of dollars from Mexican casas de cambio to pass through its U.S. branches without going through proper anti-money laundering procedures.

At a press conference following the hearing, Heather Lowe, Global Financial Integrity’s director of government affairs, commented on the new information about HSBC presented by the subcommittee, “It demonstrates how systemic the problem is. It would be a mistake to walk away from this hearing with the impression that HSBC is a unique case.”

Enforcement and Fines

Reports have surfaced that HSBC could face a $1 billion fine. While the headline number would be the largest such fine in history, Reuters notes that the fine would represents just 5% of the bank’s 2012 pretax profit.

Heather Lowe noted that it might not be a sufficient deterrent to similar action in the future for a bank the size of HSBC.  Ms. Lowe observed that, “Financial institutions respond to financial incentives, so fines have to be large enough that they make performing an illegal action uneconomical for a firm.”

She added “It is important to remember that individuals make these decisions, not banks, and we need to start holding them legally accountable for the decisions they have made that put people all over the world at risk.”

Lowe noted that after the Wachovia money laundering scandal, no one at the bank went to jail, despite the severity of the money laundering going on at the bank. “You worry when the worst thing that can happen to someone caught laundering money is that they could lose their job.”



E.J. Fagan
202-293-0740 ext. 227

Notes to Editors:

1. Download the report, “U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History” (PDF) here.


Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system.

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