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Let's Invite HSBC to Leave U.S.

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. 

An HSBC executive announced his so-called resignation (apparently, only from a particular job title) at the Senate hearing—another spectacular PR coup. Only committing hara-kiri in the hearing room would get bigger headlines, while underscoring HSBC's exotic character.

Now it's moving its center of gravity back towards Hong Kong, so HSBC will become increasingly a Chinese bank—under the sway of the Chinese government, like all Chinese banks, no matter who owns them. HSBC already has become the largest international bank in China. 

China, like Russia, still lacks a domestic bank with international reach.  HSBC can be the first.  Get it out of here before that happens.

HSBC previously proclaimed that banks need to change their culture. Too bad it can't revert to its own historic culture.  After high school in Britain, its future CEO's took HSBC clerical jobs in Hong Kong.  And they were bankers, not traders: Sir "Willie" Purves and then Sir John Bond—who left HSBC only in 2006.  The bank was a simple colonial institution with no galactic ambitions, before executing its heedless acquisition strategy—similar to B of A's, but on a global scale.  With the colonies gone, let HSBC returns to its Chinese nucleus.  Good riddance.

Let's get and keep HSBC out of here.

Andrew Kahr is a principal in Credit Builders LLC, a financial product development company, and was the founding chief executive of First Deposit, later known as Providian.


(12) Comments



Comments (12)
Its a rainy start to the work day when you wake up to find out a system you once helped implement 10 years ago in Mexico( Bitel HSBC) is used for drug trafficing dollars. Are you kidding ?! Put that on a resume !
Posted by Mark_Gallagher | Thursday, August 02 2012 at 2:51PM ET
This is a truly evil institution - they are teaming with my mortgage servicer as alleged trustee of a trust I can prove has no more members or note holders to foreclose on my home - and I have never missed a payment! Their attorney shows up with NOTHING - no file no note, no proof of default because "we didn't think they would show up" SERIOUSLY? And the judge gives them a continuance. So I guess if I had filed to show I'd be in the street tonight. I cannot believe this is allowed to happen in America.
Posted by Rebecca Lynne Martin | Wednesday, August 01 2012 at 6:26PM ET
Repeat offender who fired every compliance officer who raised red flags? Seems like a no brainer to me.
Posted by Comfortably Numb | Wednesday, August 01 2012 at 8:58AM ET

With the Barclay's LIBOR manipulation added to Capital One's endemic consumer gouging and HSBC's money laundering for drug cartels and islamic terrorists, the question has to be asked: do we have a financial services industry or a mafia?

Wall Street and The City manipulated interest rates in a conspiracy worthy of RICO prosecution HSBC crossed the line to outright treason and Capital One is simply fraud with a logo. We don't need more, better, well-enforced financial regulation; we need felony prosecutions. Enough of the pretense that a few rogues are giving the industry a bad name. The financial industry is rogue from its core to its clerks and is structured to be so.

Capitalism is supposed to be amoral, favoring and fearing no institution or individual. Mercantilism, the nation-state centered structure that preceded global capitalism worked just fine to build the 16th century European national economies, as well as the economic miracles in post-war Asia, as it was intended to do. But it restricted the transfer of wealth and power upward to individuals and peoplecorporations (sic). Communism tripped over its belief in the perfectibility of humanity through wealth distribution and never got beyond state kleptocracy. So capitalism assumed the both the winner's mantle and the moral high ground. Which turned out to be a heap of dung.

We've always known this. The ancient Romans knew this, "caveat emptor".when will we learn? From the Tulip Frenzy to the Silver Corner to the LIBOR Conspiracy. Our collective inability to learn from our own experience with capitalism keeps us circling around the regulation paradigm when we could and should enforce the criminal code. Padlock the doors, confiscate the paperwork and march the Suits off to prison.

Posted by Beth3733 | Tuesday, July 31 2012 at 9:10PM ET
What do you expect from a company that was founded for the sole purpose of funding the British Opium Trade during the early 1800s.
Posted by Steve Dibert | Monday, July 30 2012 at 9:26PM ET
I don't comment on "ethics." My subject was violations of law--and their consequences. Why try to shoot the messenger? Go ahead and defend HSBC. And the British did abandon HK: their lease on the New Territories had not expired. Hey, try signing your name--as I sign mine.
Posted by andrewkahr | Monday, July 30 2012 at 6:23PM ET
Andrew Kahr has no business commenting about corporate ethics. How in the hell is he being given this forum to comment on anything?
Posted by stays72 | Monday, July 30 2012 at 5:06PM ET
There are so many factual inaccuracies in this article that it I first though it was April Fools day. You might want to start with a simple history lesson: the British didn't "abandon Hong Kong". Moreover I love the protectionist US centric myopic view of the world. What about the flagrant abuses by Wells / Wachovoia which were swept under the carpet. Laughable. I fear for our country with such articles as this.
Posted by Overland | Monday, July 30 2012 at 1:36PM ET
Respectfully disagree. Much of what has gone wrong in HSBC in the US was the result of the purchase of Republic and Household Finance. For decades HSBC ran a conservative US banking operation. Lets hope they have rediscovered the old religion.
Posted by Old School Banker | Monday, July 30 2012 at 1:04PM ET
Let the full weight (and I do mean in tons of paper) of all those Patriot Act/AML/FinCEN regulations fall on them.
Posted by pickle7 | Monday, July 30 2012 at 1:00PM ET
HSBC abused its position as a member of the US financial system. With access to the US payments system, it aided and abetted drug cartels and the terrorist networks that daily attempt to kill Americans and our allies. They should be punished for their wanton disregard of AML procedures and requirements. I agree. Require divestment or other penalties.
Posted by fingerin | Monday, July 30 2012 at 12:37PM ET
Finally, an opinion from Mr. Kahr with which I can agree.
Posted by barney | Monday, July 30 2012 at 12:10PM ET
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