The UK was caught in yet another banking scandal this week as HSBC was subjected to a grilling by US Senators over its role in a hat-trick of misdemeanours: money laundering, dealing with pariah states and managing money for terrorist organisations. Europe’s largest bank, with a head office in London, HSBC had been under investigation for nearly a decade – and, as the chickens came home to roost, head of compliance David Bagley resigned on the spot in front of investigators. Most of the lapses happened in Mexico, and while the bank was consistently warned of problems, it still enabled a reported “60% to 70% of laundered proceeds” in the country to go through its books, mainly through a Cayman Islands subsidiary.
In one, straight-out-of-a-film scenario, Mexican drug lords were able to snap up fleets of aeroplanes using the laundered cash. In the Senate, the bank was also heavily criticised for its dealings in Burma, Iran, Cuba, Syria and a number of other states on the US sanctions list – plus organisations with terrorist links which, astonishingly, included an early Al-Qaida financier. In yet another image blow for David Cameron’s beleaguered government, Trade minister Lord Green is now expected to field Senators’ questions on his potential involvement. Green was chief executive of the bank between 2003 and 2006, and chairman until 2010.
Senators allege that, during that time, compliance was fragmented and oversight poor, with an overall “pervasively polluted” culture, a damning indictment of Green’s leadership. Green has managed to evade questioning for the time being, as parliament is in recess. But he is merely delaying the inevitable scrutiny that will fall upon someone who is a government advisor on banking – and who was also chairman of the British Bankers’ Association while the LIBOR rate-fixing scandal at Barclays was taking place. Meanwhile, HSBC can expect a fine and sanctions – albeit perhaps reduced, given that they have complied fully with the investigation.
As the public continues to recoil from such tales of corporate greed and mismanagement, perhaps there is a glimmer of social responsibility at the end of the tunnel. In an unexpected move, Coca-Cola and McDonald’s have bowed to pressure and agreed to forego their allotted tax breaks during the forthcoming London Olympics. Under special Games legislation, corporations sponsoring London 2012 are entitled to breaks on revenues earned during the event. However, after HMRC drew attention to this and an online petition was set up on the 38 Degrees website, pressure has grown on the multinationals to pay their fair share.
McDonalds relented first, followed shortly by Coca-Cola: no doubt after their PR teams realised that, after the huge amounts of criticism they have endured for snaring the best seats in the stadium, executives denying local heroes the chance to carry the Olympic torch, and the banning of any rivals within (literally) spitting distance of Olympic turf, that this was a battle they could afford to concede in order to generate some much-needed positive column inches. A cynical outlook, perhaps – but McDonalds themselves admitted that revenue from the Games would make up a mere 0.1% of annual sales in the UK, so it will hardly dent their bottom line too much.
A similar PR clean-up exercise is underway at O2 following their communications blackout last week. The network collapse only lasted a day, and did not affect all customers, but it did lead to the usual storm of over-the-top complaints (many of which were hilariously dealt with on the O2 Twitter account). O2 has taken pre-emptive measures to placate customers by automatically refunding 10% of a month’s subscription to Pay Monthly users, and 10% off pay-as-you-go customers’ next top-up. The move is a smart one by O2: unlike McDonalds and Coca-Cola, they have gone for the populist option without being asked and, since the outage was its first major one in recent memory – nothing like as serious as Blackberry’s meltdown last year – customers are expected to remain with the mobile giant.