21st September 2020, while the majority of the world was sleeping, whistles were blown against the HSBC group, exposing them for indulging and running a Ponzi scheme/scandal considered to be involving around $80M. Following the spread of the news, the London-based bank share price saw a 51% plunge. This was the lowest price ever recorded for the stock in the last 25 years. The same price was recorded last in March 2009. Subsequently, almost all global markets and indices showed an outrageous fall. The fall ranged anywhere between 2-5%, led by the UK and Asian markets.
Europian markets were the most hit as the news added to the pain of expected second lockdown in the UK given the rising COVID cases. The UK indices closed around 4% down. The new lockdown rules are expected to be implemented from Tuesday, that is 22nd of September 2020.
What is the scandal all about?
The scandal is linked to transactions worth $80M which is currently being considered to be laundered money. The money is flowing in from un-named and shell companies, majorly from the different parts of the world. Earlier US officials forced the bank to pay $1.9 billion for allowing suspicious transactions which were considered to be involving illegal-black money. The money was coming from illegal sources like drug trafficking. The current $80 Million scandal is suspected to be a part of the earlier $881 Million transactions for which the bank had to pay $1.9 billion penalties. There could be possibilities for further exposures.
How was this scandal spotted?
The whole story came into the light after a document named FinCEN (as per HSBC) was leaked. It contained around 2657 banking documents out of which around 2100 documents are considered to be suspicious in nature. The documents focus on a few transactions in Hong Kong between 2013 to 2014 which were allowed by the bank and further declared fraudulent by the authorities.
What could be the potential outcomes?
The scandal is considered to be humongous in nature, involving several parties and many major banks such as JPMorgan, Standard Chartered, Bank of New York and many more. As the investigation proceeds, there could be heavy penalties and extreme measures taken against these banks and parties involved. For HSBC bank, this could be a major impact on their credibility in the market. There could be actions taken against their management and heavy penalties could be imposed on the group.
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Interesting insights. Keep this word express rolling 😎😎