Newsletter | Volume 1

How many are enough global financial scandals? That is the question the global oversight authorities are asking each other when the question pf regulatory overreach is discussed. A growing chorus of public outrage may prompt criminal prosecution of HSBC executives and spark a new wave of regulations in the financial sector. HSBC, the British multinational banking and financial services company and the world's second largest bank, has come under close scrutiny by American and European governments for a range of scandals, ranging from money laundering, to tax evasion, to violating international sanctions against Iran.

You name it; they did it
HSBC has been dogged by scandal across the world for years. Money laundering investigations have been launched against it by federal authorities in India and Argentina. However, despite the seriousness of the charges in these cases, it was a far-reaching investigation by the US Department of Justice in 2012 that resulted in the greatest harm to HSBC's reputation.

American investigators found that HSBC laundered at least $881 million in drugs proceeds through the U.S. financial system for international drug cartels and processed an additional $660 million for banks in US sanctioned countries such as Iran and Sudan.

Despite receiving the largest banking fine in US history, $1.9 billion US dollars, some decried the failure of the US government to launch criminal proceedings. Prosecutors admitted that their concern about the negative impact on financial markets if criminal charges were filed against HSBC executives influenced their decision to not pursue further legal sanctions against the bank.

While HSBC has so far avoided criminal prosecution a new set of scandals has raised its specter once again.
The oversight authorities has documentation which seems to show that HSBC has aided thousands of its customers in multiple countries with the creation of tax avoidance schemes.

The reaction across Europe and the United States has been swift. British MPs have called for the resignation of HSBC executives while French authorities have launched criminal proceedings. In the United States, the nomination of Loretta Lynch for Attorney General has been stalled as she was the chief federal negotiator during the 2012 settlement and failed to consider pursuing criminal charges against HSBC. The US Department of Justice has started another investigation of HSBC, with prominent lawmakers calling for criminal charges to be filed.

A successful criminal prosecution of HSBC in the United States would result in the revoking of its corporate charter, leaving the bank unable to operate in the country. The winding down of HSBC's American operations would have a massive impact upon the global financial system and would have to be managed extremely carefully by the US government. While this scenario is still unlikely, its probability has increased in light of the latest revelations of HSBC's conduct.

Far more likely than the shuttering of the bank's American operations, however, is further oversight and regulation of the banking sector as the public, unfavorably predisposed to banks since the 2008 global financial crisis, will demand consequences for their perceived malfeasance.
Under these circumstances, bank profits would be squeezed, and layoffs in the financial sector would accelerate. While American banks have enjoyed record profits in recent years, a growing storm of outrage over HSBC continual legal violations makes the continuation of this trend increasingly doubtful.

At the 9th annual European Summit in Stockholm on the 22-23rd September 2015 at The World Trade Center we have several experts who will speak on the regulatory compliance enforcements and what can all trades and businesses learn from the scandals.

CHANGING NATURE OF CAPITAL MARKETS

Creating Long-Term Corporate Value in a Short-Term Equity Market
Institutional Investors and Their Evolving Role in the Capital Markets
Activist Investors and Hedge Funds
Corporate communications with institutional investors
Focus on Engagement in the Shareholder Rights Directive

Dr. Cristina Ungureanu, Head of Corporate Governance Advisory, Sodali