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HONG KONG: Shares of HSBC and Standard Chartered Hong Kong fell on Monday after media reported that they and other banks moved large sums of allegedly illicit funds over nearly two decades despite red flags about the origin of the money.
BuzzFeed and other media articles were based on leaked Suspicious Activity Reports (SARs) filed by banks and other financial firms with the U.S. Department of the Treasury’s Financial Crime Enforcement Network (FinCen).
The disclosures underscore the challenges for regulatory and financial institutions trying to stem the flow of dirty money despite billions of dollars in investments and sanctions imposed on banks in the last decade.
Shares of HSBC in Hong Kong fell as much as 4.4% to HK $ 29.60 on Monday, their lowest level since May 1995. Shares have nearly halved since the beginning of the year.
StanChart fell as much as 3.8% to HK $ 35.80, the lowest level since May 25 this year. The Hang Seng Index was down nearly 1%.
HSBC and London-based StanChart, among other global banks, have paid billions of dollars in fines in recent years for violating US sanctions on Iran and anti-money laundering rules.
The media reports come at a difficult time for the two UK lenders, who make most of their profits in Asia and are reeling from the impact of the COVID-19 pandemic, US-China tensions and political uncertainty in Hong Kong. .
Bharath Vellore, APAC managing director at Accuity, a provider of financial crime and sanctions list detection software, said the leaked files, if true, demonstrate the need for banks to improve their due diligence with their customers.
“It also reinforces the recent regulatory focus on banks to identify their clients’ sources of funds and beneficial owners,” he added.
BuzzFeed News obtained more than 2,100 SARs, which in themselves are not necessarily proof of wrongdoing, and shared them with the International Consortium of Investigative Journalists (ICIJ) and other media organizations.
The files contained information on transactions worth more than $ 2 trillion between 1999 and 2017, which the internal compliance departments of financial institutions identified as suspicious.
The ICIJ reported that the leaked documents were a small fraction of the reports filed with FinCEN. HSBC and StanChart were among the five banks that appeared most frequently in the documents, the ICIJ reported.
FIGHT AGAINST FINANCIAL CRIME
SARs showed that banks often moved funds for companies that were registered in offshore havens, such as the British Virgin Islands, and did not know the ultimate owner of the account, according to the report.
Staff at major banks often used Google searches to find out who was behind large transactions, he said.
In some cases, banks continued to move illicit funds even after US officials warned them that they could face criminal prosecution if they continued to do business with criminals or corrupt regimes, he said.
In recent years, global banks have driven investments in technology and personnel to address stricter anti-money laundering regulatory requirements and sanctions around the world.
Thousands of clients were kicked out of bank accounts in major centers of wealth, including Hong Kong and Singapore, following a Malaysian money laundering scandal, exposure of the ‘Panama Papers’ and a global push for transparency fiscal.
In a statement to Reuters on Sunday, HSBC said that “all information provided by the ICIJ is historical.” The bank said that beginning in 2012 it had embarked on a “multi-year journey to review its ability to fight financial crime.”
StanChart said in a statement that it took its “responsibility to fight financial crime very seriously and has invested substantially in our compliance programs.”
FinCen said in a statement on its website Sept. 1 that it was aware that various news outlets intended to publish a series of illegally disclosed SAR-based articles, as well as other documents. – Reuters
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