HSBC's shares slide to 25-year low amid money laundering claims

The bank was named in 'FinCen Files' report on illicit fund movements by leading financial institutions

epa08685873 A woman walks past a Hong Kong and Shanghai Bank, (HSBC), branch in Hong Kong, China, 21 September 2020. According to media reports, HSBC Holding's shares dropped to its lowest level in more than a decade in Hong Kong trading after alleged claims of suspicious money transfer.  EPA/JEROME FAVRE

HSBC’s shares fell to their lowest level in 25 years on Monday as the bank faced allegations of money laundering and concerns about its ability to expand in Asia amid the fallout from the Covid-19 pandemic.

The London-based bank’s Hong Kong shares slid 5.33 per cent to 29.30 Hong Kong dollars at market close on Monday and plunged 6.23 per cent in London to £285.05 at 11.22am UK time. The stock has nearly halved since the start of the year.

On Sunday, the bank was among five global financial institutions named in a report by the International Consortium of Investigative Journalists that defied money laundering crackdowns by moving “staggering sums of illicit cash” in transactions that were flagged as suspicious. This happened even after US authorities fined the institution for “earlier failures to stem flows of dirty money”, the ICIJ report said.

"All of the information provided by the ICIJ is historical and predates the conclusion of our Deferred Prosecution Agreement (DPA) in 2017," HSBC said in a statement sent to The National. "Starting in 2012, HSBC embarked on a multi-year journey to overhaul its ability to combat financial crime across more than 60 jurisdictions ... HSBC is a much safer institution than it was in 2012."

The leaked documents, which are known as the FinCen Files, include more than 2,100 suspicious activity reports filed by banks and other financial firms with the US Department of Treasury’s Financial Crimes Enforcement Network.

The documents identified more than $2 trillion (Dh7.34tn) in transactions between 1999 and 2017 that were flagged by financial institutions’ internal compliance officers as possible money laundering or other criminal activity, the report said. The top two banks are Deutsche Bank, which disclosed $1.3tn of suspicious money in the files, and JPMorgan, which disclosed $514 billion, the analysis found. Other lenders include Standard Chartered and Bank of New York Mellon, the report found, with HSBC disclosing $4.48bn in transactions.

The ICIJ report is another blow for HSBC, which is also a possible candidate for China’s “unreliable entity list” that looks to penalise firms, organisations or individuals that damage national security, according to the Communist Party’s Global Times newspaper.

HSBC declined to comment on the Global Times report.

Last month, HSBC reported a 65 per cent drop in pre-tax profits to $4.3bn for the first half of the year - a much steeper fall than analysts expected - with the bank's chief executive blaming a series of triggers.

“Our first half performance was impacted by the Covid-19 pandemic, falling interest rates, increased geopolitical risk and heightened levels of market volatility,” HSBC’s group chief executive Noel Quinn said in a statement on August 3.

“Despite this, our Asia franchise showed resilience, and our Global Markets business delivered strong growth compared with last year’s first half. Having paused parts of our transformation programme in response to the Covid-19 outbreak, we now intend to accelerate implementation of the plans we announced in February.”

While HSBC is based in London, more than half of its profits come from Hong Kong. Europe's biggest bank also set aside between $8bn to $13bn this year for bad loans as it expects more people and businesses to default on repayments amid the fallout from the Covid-19 outbreak.

The bank is also rolling out cost-cutting measures across its global banking operations, with Mr Quinn, who officially took over in March, saying the bank would expand further into Asia as its European operations lose money and accelerate an earlier restructuring plan which includes cutting 35,000 jobs.