Sample Critical Thinking On Scope And Organization Of Report

Type of paper: Critical Thinking

Topic: Money, Banking, Taxes, Business, Ethics, Information, Mexico, World

Pages: 3

Words: 825

Published: 2020/12/07

Critical Thinking Analysis of HSBC’s Unethical Practices

Context and Purpose of Report
Banking is an industry that is connected with the development of all other industries, government and economies. Many countries have a closed financial system totally run by the government, but increasingly almost all countries in the world are coming under a private and public hybrid financial system. In fact, private banking and financial system is one of the largest industries in the world. This is an industry that requires outstanding standards in terms of ethical behavior as it dictates the flow of money. Money in wrong hands supplied by the banks can create problems for many in this world. This report will critically analyze how financial institutions influence the economy through ethical and unethical practices and why HSBC should improve its internal ethical standards to grow its business sustainably.

HSBC has received several accolades from different parts of the world. However, the bank has time and again come under the scanner for its malpractices. In 2005, it was revealed that HSBC helped the Mexican drug lords and the Iranian terrorist organizations to transfer money from one country to another through improper channel (Fontevecchia 2013). It again came under the radar for money laundering cases. Finally, through Swiss Leaks the company has come under serious tax evasion charges from over 30 countries (Leigh 2015). In these cases, they either evaded tax or they have helped individuals evade tax in their home country through illegal means. On one hand, HSBC is the most valuable banking brand in the world; on the other hand, the brand is seriously challenged numerous times for its unethical practices. This report will highlight a few cases where HSBC came to the news for financial practices that it should not have done and how it managed to contain the situation. This report will also provide some recommendation to HSBC on keeping its internal practices ethical so that it remains as one of the most respected financial banks in the world.


Publications and Cases
HSBC has come under the media scanner quite a few times. It is important to highlight a few cases of HSBC’s infraction before getting into the analysis of why it happened.
Owned by Forbes Inc., Forbes is one of the largest business magazines in the world. Forbes is known for its data integrity and truthful reporting of facts and figures. Only Fortune and Bloomberg are the two business magazines that close to the status of Forbes. Forbes has a history of revealing high-profile frauds with proper evidence. In 1998, it famously revealed Stephen Glass journalistic fraud case. In 2005, some magazines and data leaks suggested the involvement of HSBC in money laundering connecting its managers with the Mexican drug lords. However, Forbes came up with a comprehensive report titled “HSBC Helped Terrorists, Iran, Mexican Drug Cartels Launder Money” written by Agustino Fontevecchia, providing evidences of HSBC helping customers illegally to transfer money not only between Mexico and Iran, but also from Bangladesh, Saudi Arabia and Iran. In 2005, Forbes reported that HSBC was helping the Mexican drug lords to send and receive money from the USA through illegitimate means (Fontevecchia 2013). HSBC vehemently opposed the report. However, further investigation by the US authorities disclosed that HSBC indeed played a role in money laundering for drug lords and terrorists. It actually had sent $19 billion from Mexico to the USA via bank notes without informing the US treasury or federal banks, the source of which was traced back to the Mexican drug mafia (Sleigh 2012). It was also learnt during the investigation that HSBC has also helped Iranian terrorist organizations in money laundering of about $24 billion (Fontevecchia 2013).
The Independent is a regular morning daily with a strong point of view on everything. Although The Independent is not known for publishing sensational news of covert operations or grey journalism, but in 2007, it got a lead that some of the UK citizens are evading tax and a big bank is helping then in the process. It began publishing headlines on big scandal of tax evasion, which ultimately resulted in tracing the link of HSBC in the fraudulent dealings. In fact, when HSBC understood that it may end up being caught, HSBC misplaced and deleted much information from its system. The report of further investigation by The Independent was published in the headline “ HSBC Facing Probe” written by Alan Rusbridger, which revealed that HSBC had lost a disc containing details of close to 370,000 customers in the UK (Rusbridger 2008). The disc was couriered from the HSBC office to a reinsurer using an external courier service and it got lost. HSBC never reported the loss of the disc until it was reported by the media. Once media came to know about the incident, HSBC was quick to launch a report with the Financial Services Authority. The Independent reported that the disc contained information of customer’s date of birth, name and insurance cover details (Rusbridger 2008). It may also have contained other sensitive data like address and benefit information that HSBC denied. Following this report published by The Independent, HSBC was issued a penalty by the British authorities.
Finally, in 2008, International Consortium of Investigative Journalists (ICIJ) published a report on HSBC’s huge tax evasion practices in its website. This was a pure journalistic investigation and therefore, had no legal backing. However, the base of the investigation was an HSBC software engineer who gave away crucial information to the journalists as regards more than 100,000 clients and over 20,000 companies that passed almost $250 billion through a subsidiary of HSBC in Switzerland illegally for tax evasion purpose (Leigh 2015). ICIJ, based on that information, has done thorough investigation and published publicly documents, video and images of illegal transactions in its website. Although ICIJ as an organization may not be a reliable source like others but the amount of proof they gathered was overwhelming. This is the biggest leak in the Swiss banking industry. In February 2015, the International Consortium of Investigative Journalists website released information about the bank accounts in Switzerland wing of HSBC. The investigation was conducted by 130 journalists in Paris, Geneva, Washington and 46 other countries before the list was published (Leigh 2015). The report not only furnished details on the tax evasion techniques used by HSBC and similar banking companies, but it also produced evidence regarding HSBC’s complicity with the dealers of blood diamonds and arm dealers in Africa and several other countries. Even HSBC was accused of working with autocratic leaders in money laundering and corruption cases.

Analysis, Evaluation, and Potential Impact(s)

HSBC over the years has done business efficiently and by the turn of the century, it became one of the most profitable, respected and robust banking organizations in the world. HSBC as a brand generated trust among the investors and retail customers alike. In the history of corporate world, there are instances galore of companies that as soon as started doing well became greedy. Enron is a big example of that. HSBC had no good ethical policy guideline for its managers across the globe. The US managers or managers siting in some other countries may have been following some good practices, but the same was not true for managers sitting in the HSBC office of Mexico or China as there was no uniform global business code of ethics in place for HSBC. This gave flexibility to the managers to involve in wrongdoing. To maximize profit for the company, they took advantage of this loophole to violate the business ethics. Once one starts crossing the boundary, there is no stopping. HSBC saw huge opportunity to grow and make quick money by facilitating the money laundering process for the drug lords, blood diamond dealers and arm dealers (Sleigh 2012). HSBC not only bagged a huge commission from those deals, but as the amount of money laundered was not declared, it was able to evade taxes as well.
HSBC grew so big and was such a high performing company that they thought they could get away with anything. This gave the company a confidence to help customers and business houses evade taxes using unique techniques like credit card cash in a foreign country. They thought they would be able to bypass the system security forever.
HSBC for its misdeed lost a case in the US and gave settlement money worth $1.2 billion, the largest settlement money in the history of banking (Leigh 2015). It is also facing changes for tax evasion and money laundering in 30 other countries. HSBC, which was a big brand even until 2011-2012, is now facing a huge crisis in terms of its reputation. The media exposures and the recent scandals have severely dented the HSBC image. As a result, HSBC’s revenue is not growing and the profitability has come down substantially. In fact, it may face billions of dollars’ worth compensation charges in the coming days, and the company may face severe penalties in some economies (Fontevecchia 2013).


Business is something that should be of utmost importance for any company. HSBC, which is one of the most recognized brands in the industry, has severely violated ethical standards not only once, but multiple times over the last 20 years. They have violated business codes in areas where drug lords, terrorists, autocratic rules and corrupt business organizations benefitted. HSBC helped the underworld people in Mexico in 2005, Iranian terrorist groups during 2000-2005, blood diamond dealers and slave dealers in the first decade of the century (Leigh 2015). HSBC has also helped more than 100,000 people in evading a huge amount of tax in 60 different countries. HSBC got penalized for doing all of these in the US, and there are several other cases pending against them in many countries. HSBC has also lost its clean brand image after these scandals surfaced.


After the 2005 scandals surfaced, HSBC claims that it was tightening its processes to prevent such incidents from happening again in the future. However, similar incidents took place repeatedly afterwards as well. It seems that the unethical work culture is deep rooted. It needs severe revamping of the organization, especially at the management level to start a fresh culture. Along with fresh culture and fresh mindsets, HSBC also needs a strong corporate ethical and audit group that should work independently from the management so that they are not influenced by them.

Future Action Steps

HSBC’s past cases should act as an eye opener for the HSBC top management, other financial institutions and head of the states. HSBC was able to do what it has done because there were loop holes in the inter-country transactions, tax declaration laws and the sharing of information and there was no ethical standard for work practices globally for HSBC. After the recession of 2008, which was caused by poor asset management by the financial firms; these unethical transactions by HSBC created an environment of mistrust among the investors. HSBC should create its global standard of ethics of doing business so that the lost confidence of the customers and investors will be back. It should come up with some exemplary ethical steps and exemplary punishments for any unethical practice so that its image is somewhat restored.

Works Cited

Leigh, David. “Catalogue Of Malpractice Endorsed By Bankers Laid Bare In HSBC Files”. The Guardian. 8 Feb 2015. Web. 13 Feb 2015. <>
Sleigh, Matt. “HSBC Gets Small Fine For Terrorist Transactions”. Huffington Post. 18 Dec 2012. Web. 13 Feb 2015. <>
Rusbridger, Alan. “HSBC Facing Probe Over Lost Customer Data Disc”. The Independent. 7 Apr 2008. Web. 13 Feb 2015 <>
Fontevecchia, Agustino. “HSBC Helped Terrorists, Iran, Mexican Drug Cartels Launder Money, Senate Report Says”. Forbes. 16 Jul 2013. Web. 13 Feb 2015 <>

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