Financial Crime: Business As Usual?

September 22, 2020

DarkCyber noted “HSBC Moved Vast Sums of Dirty Money after Paying Record Laundering Fine.” The article makes clear that banks do what banks do: Move money. Why? To make money, earn bonuses, and become a master of the banking universe.

Is anyone surprised? The authors of the write up seem to be. We noted this passage:

The FinCEN Files investigation found that HSBC’s highly profitable branch in Hong Kong played a key role in keeping the dirty money flowing. Although providing only a partial view of HSBC’s suspicious activity reports, the records show that between 2013 and 2017, HSBC’s U.S. compliance staff, who are charged with monitoring customer activity, filed reports lacking crucial customer information on 16 shell companies that had processed nearly $1.5 billion in more than 6,800 transactions through the bank’s Hong Kong operations alone. More than $900 million of that total involved shell companies linked to alleged criminal networks…

Institutions have processes. Once processes kick in, the paper pushing and the employees keep the wheels turning. The “work” is following the “rules” in order to complete tasks. Changing work processes in a large organization is difficult, often impossible. Quibi makes videos few watch. Facebook sells targeted ads across borders based on free flowing data. Successful organizations are successful because individuals find ways to generate profit from tasks others find giant money losers.

The write up hits the problem right between the eyes, stating:

Compliance officers said that the bank did not give them enough time to meaningfully investigate suspicious transactions and that branches outside the U.S. often ignored requests for crucial customer information. They said they were treated as a second-class workforce within the bank, with little power to shut down problematic accounts.

The exposition about the HSBC big bank is a reminder that institutions are, supercharged with online systems, smart software, and people who follow prescribed work procedures. In these efficient organizations, making money is the driver.

Regulators, compliance officers, and employees are unable to take meaningful action. Is it a surprise that “The Risk Makers: Viral Hate, Election Interference, and Hacked Accounts: Inside the Tech Industry’s Decades-Long Failure to Reckon with Risk” reaches an obvious conclusion: Money is the driver.

Consider the question, “What’s gone wrong?”

The answer is, “Nothing.” The system is what regulators, employees, and people want it seems.

Observations:

  1. A new definition of “crime” may be needed to embrace the reality of institutional behavior
  2. Regulatory authorities struggle to deal with corporate entities which are more impactful than governments
  3. Individuals appear willing to skirt social norms in order to feather their nest and craft a life outside of certain institutions.

Intriguing challenges for the institutions, their employees, and the governments charged with enforcing rules, laws, and mandated behaviors.

Stephen E Arnold, September 23, 2020

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