HSBC, StanChart shares crash on $2 trillion 'dirty money' scandal

Dubai - HSBC shares in Hong Kong fell to a 25-year low of as much as 4.4 per cent, their lowest level since May 1995.

Shares of global banking giants HSBC and Standard Chartered Hong Kong plunged on Monday after official US financial crime data showed that the world's biggest banks have allowed criminals to move more than $2 trillion "dirty money" around the globe.

Files released by FinCEN, the US Financial Crimes Investigation Network, revealed that major global banks moved large sums of allegedly illicit funds over nearly two decades despite red flags about the origins of the money.

In total, these reports flagged more than $2 trillion in transactions between 1999 and 2017, according to BuzzFeed News.

FinCEN Files investigation shows that even after they were prosecuted or fined for financial misconduct, more banks such as JPMorgan Chase, Deutsche Bank, and Bank of New York Mellon continued to move money for suspected criminals.

The FinCEN files are more than 2,500 documents, most of which were files that banks sent to the US authorities between 2000 and 2017.

The FinCEN files expose an underlying truth of the modern era: The networks through which dirty money traverse the world have become vital arteries of the global economy. They enable a shadow financial system so wide-ranging and so unchecked that it has become inextricable from the so-called legitimate economy. Banks with household names have helped to make it so, financial analysts said.

The BBC reported that Russian oligarchs used banks to avoid sanctions and moved their money into the West.

FinCEN files revelations are the latest in a string of leaks over the past five years that have exposed secret deals, money laundering and financial crime, a BBC report said.

The revelations underscore challenges for regulatory and financial institutions trying to stop the flow of dirty money despite billions of dollars of investments and penalties imposed on banks in the past decade.

HSBC shares in Hong Kong fell to a 25-year low of as much as 4.4 per cent to HK$29.60 on Monday, their lowest level since May 1995. The stock has now nearly halved since the start of the year.

HSBC has seen its share price more than halve so far this year, hit by the pandemic - net profit slumped 69 per cent in the first six months - and China-US tensions.

"Current tensions between China and the US inevitably create challenging situations for an organisation with HSBC's footprint," HSBC Chief executive Noel Quinn said last month.

StanChart dropped as much as 3.8 per cent to HK$35.80, the lowest since May 25 this year. The Hang Seng Index was down nearly 1.0 per cent.

London-headquartered HSBC and 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.

Bharath Vellore, APAC managing director at Accuity, a financial crime and sanctions lists screening software provider, said the leaked files, if true, demonstrated the need for banks to enhance their due diligence on their customers.

"It also strengthens the recent regulatory focus on the banks to identify sources of funds and beneficial owners of their customers," he added.

Thousands of clients were booted out of bank accounts in major wealth hubs including Hong Kong and Singapore after a money laundering scandal in Malaysia, the 'Panama Papers' expose, and a global push for tax transparency.

StanChart said in a statement it took its "responsibility to fight financial crime extremely seriously and have invested substantially in our compliance programmes."

issacjohn@khaleejtimes.com