Hsbc Scandal

1. What was the nature of the scandal, and which entities were laundering money?

HSBC Holdings Plc agreed to pay 1.92 billion dollars in fines to US authorities for allowing themselves to be used to launder money from Mexican drug trafficking and processing banned transactions on behalf of Iran, Libya, Sudan and Burma. It was stated by the US Justice Department that between Mexico’s Sinaloa cartel and Colombia’s Norte del Valle cartel $881 million was laundered. As to say what methods drug traffickers used to move U.S. dollars through HSBC and other banks remains unclear.

The investigation against HSBC began with the “bust” of several Colombian men who were indicted in January of 2012 on money laundering charges. One of the men was Julio Chaparro, a 48-year- old father of four who owned three factories that made children’s clothing in Colombia. The indictment seemed relatively on a small scale uncovering “small-time” operatives, but to U.S. authorities it seemed like much more. Turns out Chaparro acted as a “major player in terms of cleaning the money.” He helped run a money laundering ring for drug traffickers that took advantage of lax controls at UK- based international banking group HSBC Holding Plc. This was one of the most important leads that led U.S. investigators to build a case against the bank.

The settlement that took place in December of 2012 for $1.92 billion also included compliance with banking and oversight reforms and the appointment of an independent monitor. HSBC avoided criminal conviction on money laundering and other major charges. If HSBC fails to comply, Federal and state prosecutors have legal power to prosecute.

2. Who is responsible for this scandal?

HSBC is responsible for the scandal. Anyone that was involved in facilitating the transactions for the Mexican cartel in laundering their money is responsible, and that includes the teller to the CEO. Many bankers on different levels who may have been...