Too big to fail, too big to jail: restoring liability a lesson from HSBC case

Pages513-519
DOIhttps://doi.org/10.1108/JFC-09-2016-0061
Date02 October 2017
Published date02 October 2017
AuthorPatrick Hardouin
Subject MatterAccounting & Finance,Financial risk/company failure,Financial crime
Too big to fail, too big to jail:
restoring liability a lesson
from HSBC case
Patrick Hardouin
Independent Researcher, Paris, France
Abstract
Purpose This paper aimsto highlight the shift of impunity from institutions to individualswithin the too
big to fail, toobig to jailparadigm and to restore individual liabilityin the nancial industry.
Design/methodology/approach The paper is based on the analysis of HSBC deferred prosecution
agreement concluded on December 10, 2012 and of a report by the US House of Representatives Financial
Committeereleased in July 2016.
Findings Too big to fail, too big to jailisa paradigm which contains justice. It leads to the impunity of
individuals involved due to the absence of trial. Containment of justice is denial of justice. However, the
systemic riskis attached to institutions, not to individuals.Therefore, it should not hamper the prosecution of
individuals.
Practical implications Setting sanctions applicable to individuals and proportionate to the crime
would contributeto deter nancial misconducts.
Originality/value The value of the paper is the demonstration that there is no basis for a limited
personalliability in the nancial industry.
Keywords Anti-money laundering, Compliance, Banks, HSBC, Liability, Sanctions
Paper type Conceptual paper
In December 2012, HSBC, a UK corporation and a major global bank, reached agreement
with the US authorities includinga Deferred Prosecution Agreement with the Department of
Justice and others agreements leading to a resolution with all US Government agencies in
relation to investigations regarding non-compliance with anti-money laundering and
sanctions laws. HSBC agreed to pay nes totaling nearly US$2bn, to enhance compliance
and to install an independentcompliance monitor for a period of ve years.
Questions were raised at that time whether it would not have been preferable to
prosecute HSBC and or individuals involved. A report by the House of Representatives
issued in July 2016 lightens the circumstances of the US authoritiesdecision. This story
leads to the question whether authoritiesshould focus on and prosecute individuals.
What was HSBC misconduct?
HSBC has admitted that it violated the Bank Secrecy Act (BSA), the International
Emergency Economic Powers Act (IEEPA) and the Tradingwith the Enemy Act (TWEA).
HSBC Bank USA violatedthe BSA by failing to maintain an effective anti-money laundering
program and to conduct appropriate due diligence on its foreign correspondent account
holders. The HSBC Group violated IEEPAand TWEA by illegally conducting transactions
on behalf of customers in Cuba, Iran, Libya, Sudan and Burma all countries that were
subject to sanctions enforced by the Ofce of Foreign AssetsControl (OFAC) at the time of
the transactions[1].
Restoring
liability
513
Journalof Financial Crime
Vol.24 No. 4, 2017
pp. 513-519
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-09-2016-0061
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm

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