A Congressional investigation has found that for ten years, HSBC violated U.S. laws and regulations aimed at preventing money laundering and the financing of terrorism.
Apparently HSBC transported $7 billion in cash from Mexico, benefiting drug cartels; financed illegal trade with Iran by up to $16 billion; and provided over $1 billion in cash for suspected terrorism, through Saudi Arabia. Identification of foreign parties to transactions was willfully removed from account records.
Meanwhile, HSBC has been divesting or whittling down its activities in the U.S.—branches, consumer finance, mortgages, "Premier" services. Let's help complete that process.
HSBC isn't needed here and has nothing to offer other than unique gigantism as a scofflaw. I'm not the first to place its U.S. charter at issue.
The Fed should require HSBC to divest promptly all remaining U.S. subsidiaries and operations. If "London" retaliates by excluding a U.S. bank, we can hope they'll choose to evict JPMorgan Chase's chief investment office – seemingly sited there to enjoy (I can't say profit from!) regulation even laxer than ours. But retaliation is unlikely. The U.K. has a floundering economy and is under multiple threats from the European Union attacking its status as financial hub.
The news about HSBC should amplify the growls about regulations which burden and disadvantage small institutions and businesses—and consumers—but from which the giants remain immune.
What's the USA Patriot Act about? What's FinCEN for? What's the cost vs. benefit of requiring lots of information, piles of reports on transactions and accounts—causing immense expense, delay and inconvenience for legitimate transactions? If there is persistent lack of will and means to enforce anti-money laundering laws against the greatest evildoer, then don't pay an ever-expanding bureaucracy to hunt mice with cannons.
Until we're rid of HSBC, put all the FinCEN and other AML absurdities on hold— a "bank holiday," as it were. Loading $200 on a new prepaid card, you'll get privacy rather than the third degree.
With the constantly increasing concentration of financial activity into a small number of incomprehensible and unmanageable institutions, why not just regulate from the top down? Put 85% of the rules and 85% of the examiners where 85% of the money is.
HSBC is unique. Until the 1990s it was headquartered in Hong Kong. Then it moved to London, when the British abandoned Hong Kong. HSBC proceeded to make foolish purchases of companies in Great Britain, the U.S. and elsewhere. It's been unsuccessful in major industrialized markets.
HSBC's slogan is "The World's Local Bank." That's the problem. It's local. The country manager is viceroy and the regional manager is king. That's why managers of HSBC "affiliates" (that is, HSBC-owned banks) in Arab and Latin countries could execute round trip and other U.S. transactions ignoring U.S. legal requirements. No lawyer or compliance officer in London could restrain them. HSBC values global compliance the same as global consumer finance or global credit card: important enough for lip service only. Change the slogan to "We're not globally connected."
What it lacks in competence, HSBC tries to make up for with intensive PR. Unique among the numerous institutions I've ever mentioned here, HSBC had a PR man contact me to question my facts. A short dialogue.