HSBC & StanChart hit 22-year lows on reports of moving illicit funds

Daniel Fowler
September 22, 2020

Shares of HSBC and Standard Chartered in Hong Kong plummeted almost 3 per cent on Monday morning after reports suggested that they along with other banks allegedly moved large sums of illicit funds for almost two decades.

The SARs showed that banks often moved funds for companies that were registered in offshore havens, such as the British Virgin Islands, and did not know the ultimate owner of the account, the report said.

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Shares in major banks took a beating on Monday after the FinCEN leak revealed several institutions may have handled more than $2 trillion (€1.7 trillion) worth of dirty money between 1999 and 2017.

"The question is whether or not the residue of that impacts the performance of regional financials", said CommSec market analyst Tom Piotrowski in Sydney.

The FinCEN papers, which included more than 2,000 suspicious activity reports (SARs), were released following an investigation b Buzzfeed News and the International Consortium of Investigative Journalists (ICIJ). In the last decade, the banks paid billions of dollars in fines and agreed to deferred prosecution agreements over failures in their anti-money-laundering programs.

The troubled lender tanked more than 4% to HK$29.60 (RM15.70) at one point - a level not seen since mid-1995 - as investors fret over its ability to continue doing business in China and Hong Kong, which make up a crucial portion of its growth.

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The two banks tumbled about 3.6% in the stock market on media reports on Monday.

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

Standard Chartered PLC, which was also mentioned in the ICIJ report, declined as much as 6.2 percent in Hong Kong and 5.8 percent in London. The bank is the worst performer on the benchmark Hang Seng index so far this year.

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.

"We have devoted significant resources to strengthening our controls and we are very focused on meeting our responsibilities and obligations", a spokesperson for the bank said.

"We have played a leadership role in anti-money laundering reform that will modernize how the government and law enforcement combat money laundering, terrorism financing and other financial crimes", the bank said in a statement.

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