HSBC is one of the top wealth managing companies in the world. HSBC, therefore, is a hugely popular company and its dealings involve so many agents, banks and traders. As such monitoring of the company’s activity is always likely to raise eyebrows due to the large number of clientele and transactions involved. Bearing that in mind, HSBC has not had a good reputation as regards to its past activities dating up to more than a decade ago.
HSBC is facing new allegations of manipulation of transactions involving clients or accounts from other countries. The bank’s traders are being accused for making illegal profits by modifying markets over ten years ago at the expense of their clients. The ECU Group which is also located in the United Kingdom, took HSBC to the commercial court asking HSBC to reveal records on three foreign exchange orders from a decade ago. The worth of the three orders is estimated to be around $100 million each, and they were dubbed “stop loss” trades. HSBC is claimed to have sold currency at a certain price and buying another.
However, ECU’s complaint is a ‘pre-action disclosure’. This means that the attempt may eventually lead to a lawsuit. ECU asked for HSBC’s bank to bank dealing tickets, entry logs and messages relating to Bloomberg messages for the three transactions involving London and New York business fraternities.
Previously, ECU thought they were being extorted by HSBC traders and filed a complaint about the issue. This prompted a full internal inquiry. The inquiry did not find any mishaps and, therefore, ECU dropped complaints against HSBC.
However, this is not the first time HSBC has faced such allegations. In 2012, HSBC made a massive profit and gained high bonuses despite the British bank being fined a huge and record-breaking fine of $1.9 because of evidence of involving itself in dealings with Mexican drug lords. The “Panama Papers” which were brought about as a result of investigations done by the International Consortium of Investigative Journalists (ICIJ), exposed transactions involving politicians and prominent public figures such as people close to Russian President Vladimir Putin and the Prime Minister of Pakistan.
Stuart McWilliam, who was working for Global Witness at that time, claimed that such a fine does not affect the right people. He brought it to light that thousands of people lost their lives because of drug traffickers and yet HSBC commercially benefitted from the transactions. He also claimed that there was an obvious evidence that HSBC was involved in those illegal and socially unacceptable dealings.
HSBC was forced to pay 40 million Swiss francs in 2015, and the Geneva authorities warned the bank for a final time. This was after HSBC allegedly allowed laundering of money to happen at the HSBC branch in Switzerland. That instance meant that HSBC would not be sued but was warned not to use such an excuse in future. In addition, weaknesses in the Swiss Law surfaced and there was a public complaint from a number of politicians that reforms should be done. Nevertheless, the HSBC’s branch in Switzerland is still being investigated by the US, French, and Belgian authorities. Besides, Belgian authorities are expecting to recover funds from HSBC in skipped taxes and accounts that have no clear identities.
HSBC together with Credit Suisse denied allegations of using mechanisms to assist their customers to skip taxes in 2015. This was after the revelations from the “Panama Papers” in 2012. HSBC jumped to their defense by claiming that the allegations are relating to a past time and that reforms and substantial changes have occurred in their structure.
Judging from previous allegations, this fresh claims laid on HSBC may affect their stocks terribly. In the past – from data obtained from CMC Markets, we have seen their value decline because of lack of trust from investors.
It is still unclear whether HSBC will survive this turbulent weather. Besides, if there are any evidences of wrongdoing in this whole saga the fate of HSBC can serve as an example to other firms that deal in foreign exchange across world markets that fail to uphold ethical values. Having survived the previous mishaps, there is much to find out if the filed complaint at the commercial court results in a lawsuit.