JOIN USThe report that HSBC Holdings, which is among the top international banks and has operations in most countries, may be forced to pay a fine of $1.8 billion to the US government for money-laundering operations should be eye-opener to authorities in all countries, especially India.
The US enforcement agencies, after extensive investigations, have found evidence of serious financial wrong-doing on the part of the bank which allowed illicit and tainted funds to be moved from many countries including Mexico, the Cayman Islands, Iran and Saudi Arabia.
It is facing similar charges in other countries too, including the UK. Its head of operations had to quit after the Mexico branch moved billions of dollars despite suspicions that client accounts were being used to launder drug cartel funds. HSBC has admitted to many violations of laws and has set aside $ 1.5 billion to cover the likely fine.
The US action against the bank is expected to be in the form of a deferred prosecution agreement whereby the enforcement agencies delay or waive prosecution if the bank admits that it has violated the laws, pays a fine, agrees to put up a better compliance machinery and promises not to repeat the offences. This is being criticised in the US because the company will then not have to face all the consequences of the illegalities committed.
A fine would hit the finances of the bank and would hurt the shareholders but the bank officials who acted wrongly may be spared. They too have to be indicted and punished for their actions which seriously compromised the financial and national security of governments. A settlement therefore is not the most satisfactory action, though it is legally valid.
But even this second best option is unlikely in India where the HSBC has faced equally serious charges. Only recently there were charges that the bank was running a hawala racket in India, making the country vulnerable to terrorism, drug trafficking and similar activities. The names of top business and political leaders were also mentioned in the context.
But there is only very loud silence on the follow-up action taken by the government. There has for long been a demand that the country should enact a law that forces foreign banks to provide a list of their Indian account holders to the government. But there is no sign of this. The government has not in fact acted even on the information that it has.