Risk of money laundering in the US: HSBC case study
Abstract
Purpose
This paper uses a case study approach using the Permanent Sub Committee on Investigations (PSI) report on HBUS to determine where gaps in anti-money laundering (AML) regulation and compliance are within the banking sector.
Design/methodology/approach
The PSI highlighted five areas of serious weakness and fundamental flaws in the HBUS AML risk assessment. This paper examines the governance response that led to these weaknesses and applies a rationale decision-making theoretical framework to explain it.
Findings
The report found that corporate culture and attitude at the governance level were key factors in the difficulties that HBUS faced.
Research limitations/implications
This paper focuses on one case, albeit one of the largest banks in the global banking sector. Although generalisations are limited, the report does highlight areas to consider with all banks.
Practical implications
The implications that are identified are aimed at banks and auditing firms that have to work alongside governance structure within banks. The role of internal audit is raised and has future implications for how risk assessment is undertaken and how AML compliance frameworks are devised and reported on.
Social implications
A stronger social corporate responsibility attitude is suggested that considers the wider social impacts of supporting criminal transactions, even inadvertently, by inappropriate and under-resourced AML risk-assessment frameworks.
Originality/value
The detailed analysis of one case that considers the governance response to AML regulation is new in this paper, and the detailed recommendations for improving and developing stronger AML risk-assessment frameworks apply to the banking, financial services and auditing professions.
Keywords
Acknowledgements
Please note that this paper was composed and submitted for review to this journal in October 2014. All the content was correct at that point of time (October 2014). The banking industry is constantly evolving, and new material from academic research is also emerging. Further disclosures in 2015 have since highlighted similar discrepancies in HSBC beneficial ownership in banks in Europe. All these points need to be taken into consideration when reading this paper.
The author is a specialist researcher and practitioner in the fields of trade-based money laundering and virtual currencies contracted to mayfair compliance (www.mayfaircompliance.com). The author acknowledges being a recipient of a research grant awarded by Princess Ālae as part of Seven Foundation’s “2020 Banking Vision – building banks of the future” and he thanks her for the continued support and motivation both to himself and other students who benefit through her generosity (www.sevenfoundation.ch). The author also thanks Professor Muhammad Jumàh (a leading economist of this era in the world today, based in Damascus) who has continued to provide valuable input both through his teaching of the science of economics and for his continued guidance.
Citation
Naheem, M.A. (2016), "Risk of money laundering in the US: HSBC case study", Journal of Money Laundering Control, Vol. 19 No. 3, pp. 225-237. https://doi.org/10.1108/JMLC-01-2015-0003
Publisher
:Emerald Group Publishing Limited
Copyright © 2016, Emerald Group Publishing Limited