On September 21, the equity market in Hong Kong logged a steep fall of stock of leading banks, including HSBC and Standard Chartered. The crash was triggered by media reports that they and other banks were involved in transactions of huge illicit funds over the recent two decades.
Such information was leaked from the Financial Crimes Enforcement Network (FinCEN) which is an agency inside the US Department of Treasury. The embarrassing materials were spotted and released by the International Consortium of Investigative Journalists (ICIJ). Some affluent Russians are mentioned in the report. Among the big names are tycoon and industrialist Oleg Deripaska as well as Arkady and Boris Rotenberg who are on friendly terms with Russian President Vladimir Putin. Journalists sniffed out suspicious transactions of large cash mainly through five well-known banks such as HSBC, Standard Chartered, Deutsche Bank, JP Morgan, and Barclays.
The allegations in money laundering badly affected stocks of leading banks. As a result, HSBC shares traded on the Hong Kong Exchange tumbled as much as 4.4% to HK$29.60, the lowest level recorded since May 1995. Standard Chartered stock dropped 3.8% to HK$35.80. When it comes to the Hang Seng index, it went down almost 1%.
According to the International Consortium of Investigative Journalists (ICIJ), some global influential financial institutions have paid multi-billion dollar fines over a few last years for breaching the US sanctions against Iran, investment scams, and money laundering.
BuzzFeed News obtained more than 2,100 suspicious activity reports filed by banks with the US Department of Treasury. The news agency shared them with the International Consortium of Investigative Journalists and other mass media. The materials shed light on illegal transactions worth over $2 trillion from 1999 until 2017.
The Consortium believes that they discovered just the tip of the iceberg reported to the Financial Crimes Enforcement Network. Interestingly, HSBC and Standard Chartered belong to the top five banks that most frequently deal with charges of cash siphoning. Nevertheless, some financial institutions carried on with suspicious transactions even after the US watchdogs had warned them of a criminal penalty.
HSBC made a statement that “HSBC embarked on a multi-year journey to overhaul its ability to combat financial crime across more than 60 jurisdictions.” “We take our responsibility to fight financial crime extremely seriously and have invested substantially in our compliance programs,” Standard Chartered followed suit.
Both banks increased investment in new technologies and training their personnel to comply with the requirements for money laundering countermeasures.