Theoretical Framework for Analysing the Money Laundering Issue of HSBC

Running Head: CULTURE AND ORGANIZATION 0
Culture and Organization

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Contents
Introduction about the focus organization named HSBC..........................................................2
Money laundering issue of HSBC..............................................................................................3
Theoretical framework for analysing the money laundering issue............................................4
Analysis of theoretical framework.............................................................................................6
Conclusion and recommendations.............................................................................................6
References..................................................................................................................................8

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Introduction about the focus organization named HSBC
HSBC Holding Pls is a British multinational financial and banking service company.
It was the largest bank in the Europe and number 7 banks across the World. The full form of
HSBC is Hongkong and Shanghai Banking Corporation. In the recent time, HSBC has
approx. 3900 offices in over 67 countries including Asia, Europe, Oceania, South America,
North America and many others. By expanding its wings, it has around 38 million of
customers. The company is organised within four business groups that are global banking,
commercial banking, Global private banking, and wealth management and retail banking.
The aim of HSBC is to bring the growth in the economy by helping the people in realising as
well as fulfilling their ambitions. It also provides a wide range of economic services to the
customers, organisations as well as trades by ensuring the global network. For meeting the
requirements of the customers, it has different workers. HSBC target market are those
customers who tends to belong with the age group of 18 to 30 years.
It tends to recognise the wider commitment in the communities where it operates. The
sustainability approach of HSBC give emphasis on the three main areas: that is sustainable
supply chain, sustainable finance, and financial capability (O’Sullivan, 2016). In every area,
it takes the genuine effort. It has also taken the pledge of long-term support in order to help
the people to access training and education. By ensuring the partnership with the NGOs, it
fulfils the corporate social responsibility. Customers as well as key stakeholders, it tends to
encourage the responsible business.
HSBC exist in order to serve the customers. The culture of HSBC also reflects the
sense of responsibility. The values of HSBC are also at the heart of its culture. It is open,
dependable, and connected (Naheem, 2016). The employees of HSBC are also able to speak
around 100 different languages. The diversified environment therefore helps it in better
serving the communities where it operates its business. It believes that the culture means
providing the skilled people several ways to fulfil their potential in the environment. due to
this, it wants to offer its employees long term career with several opportunities. HSBC has
although spent millions of dollars in order to overhaul the system f anti money laundering. In
the 153 years history of HSBC, money laundering issue is one of the darkest hour.

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Money laundering issue of HSBC
Money laundering includes the criminal activities such as smuggling, trafficking,
corruption, human trafficking, as well as any other illegal thing in order to generate the huge
amount of profit. Money laundering has become the serious issue in many banks. They are
trying to conceal the unlawful origin of the assets. Employees of the organisation are also
included in these kinds of activities in order to gain more benefit (Neheem, 2016). Drug
traffickers as well as numerous other criminals throughout the world make use of the
effective banking system to channel the proceeds of illegal transactions into the economy in
such a manner that makes them appear to have been honestly. By ensuring the illegal
activities, banks in recent time just want to grab the profit without considering the interest
and welfare of people across the world.
IN December 2012, HSBC banking institution has been penalised for the $1.92 billion
by the United States. It was done for the violation of law that is designed to remove the
money laundering as well as any other illegal financing activity. It has also given the warning
many times as well as given the orders to strength the program of anti-money. The further
investigations done on the bank has confirmed that it has set up the offshore accounts for the
suspected criminals and drug cartels in Jersey. HSBC has the long history at the past time
such as money laundering, payment failures, Forex scandal, charity programmes, as well as
community partnership programme. By considering these events, it can be seen that the
HSBC is still proved to be the successful multinational banking service company (Hardouin,
2018).
This issue has been chosen because it is directly linked with the Utilitarian approach.
The approach of utilitarian is also known as the greatest happiness principle. It also holds that
the actions and decisions are proper as they promote the promotional utility. The principle
also supports the decision of the department for the justice (Banks, 2018).The decision of
justice department regarding not to prosecute the HSBC seems sound but it tends to suffer the
economy in its difficult financial time. I spite of the highest imposing penalty on HSBC, it
does not reflect such amount that can effectively deter the financial institution. Therefore, if
HSBC or any other bank do not keep its operation effectively from the regular unethical and
illegal financial practices. At some point, the outcome of utilitarian in terms of laundering
money becomes the adverse for several people in the society.

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Theoretical framework for analysing the money laundering issue
The analysis has been done by using the organisational culture theory that tends to
include the Schien three levels given in 2010 for the company culture exploration. The theory
is based on the culture of the organisation. As per Schein, company do not adopt the culture
in one day. Rather than, it goes with the regular flow where employees have to go through
several changes.
Organisational culture in this way is the beliefs, values, as well as rituals that further
serve every aspect of the organisation. Besides this, it also involves the team dynamics,
leadership development as well as strategic. Proper fulfilment of the effective code of
conduct assists the company in establishing the effective culture. As a result, it helps in
improving the communication at the organisation (Favaretto, Dihl, Barreto & Musse, 2016,
September).
Hofstede cultural framework is also suited best to the HSBC. The main speciality of
the Hofstede cultural framework in comparison to others is that it explains and defines that
organisational and national culture are different. Several other frameworks such as Halls and
Halls and Schein that calculate the differences in culture but framework in this area of
research is the Hofstede culture (Kahlf, 2016). Hofstede clearly states that the organisational
and national culture is very different. By using the Hofstede Framework, it is easy to identify
the several differences related to the motivation pattern, management patterns, as well as
organisational preferences. This framework also clearly states that how the managers from
several cultural backgrounds perform for their duties. It also describes how the difference in
culture tends to affect the individual as well as group performance.
As compare to the cultural framework of Hofstede, Harrison model is not suitable in
analysing the cross cultural issue of HSBC. It is because several weaknesses are present in
Harrison’s model. The entire dimensions of the Harrison model is given in short by Charles
Handy that has four categories including role, power, task and person culture. Organisation
tends to give focus on the formal rules and regulations. In the HSBC culture, several job
description are essential than the personal characteristics and culture (Ross & Hannan, 2007).
As compare to this, power culture tend to be autocratic toward each process of the
organisation. Hofstede has proved to be the best model in order to identify the issues of any
multinational organisation. Due to this, Harrison model was not chosen for the culture of
multinational organization.

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In addition to this, utilitarian approach can also be applied. It is also known as the
greatest happiness principle that holds that the actions and decisions are proper when they
tend to promote the proportional utility (Bakir, Blodgett, Vitell & Rose, 2015). The view of
utilitarian also advocates the act that the greater benefit will afford to the large number of
people in the society. This principle also supports the justice regarding not to prosecute
HSBC. Under the traditional view also, the department of justice do not criminally prosecute
HSBC because the large portion of the society get benefits from the HSBC. Due to the money
laundering issue, it has to face the fine that is handed by the US.
Analysis of theoretical framework
The organisational culture of HSBC is characterised by the production, as well as
ensuring the quality services. It is true that the enabling of business as well as terrorism in
the pursuit of profit sometimes lead to the societal consequences (Masciandaro, 2017). It is
true that the utilitarian approach clearly applies to the HSBC. It states that if HSBC or other
big banks do not effectively dissuaded from the regular unethical and illegal financial
practices. At the same time, utilitarian outcome of the money laundering for the unethical
outcome becomes harmful for the higher number of people in the society (Velasquez, 2015).
After ensuring the deeper analysis, it can be stated that the criminal prosecution of the HSBC
will get the higher utilitarian outcome in the longer period of time. the regular effect of the
prosecution will also adversely affect the higher number of people in the society by means of
the loss of job as well as blow to the economy. the longer time effect of allowing the banking
firms such as HSBC in the engagement of illegal activity with no jail time, as well as the
banking license tend to present the moral hazards. Among the several alarming effects of the
decisions of non-prosecution tends to harm the several number of people.
Hofstede and utilitarian approach has proved to be effective because it is directly
related to the ethical issues of the organisation.
Several regulatory authorities, tax administration, across the world have conducted the
reviews and investigations of HSBC related to the allegations of tax fraud, as well as money
laundering. Similarly, HSBC has also cooperated with the Argentina authorities in relation to
the money laundering issues and tax evasion. After this issue, tax authority has started the
criminal action in the year 2014 against several current as well as formed employees of

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HSBC. HSBC has also ignored the warning related to the big transfer related to cash. Money
laundering is however considered to be the biggest crime because the passing of the illegal
fund through the ban transfers is unethical.
The investigation of US Senate has stated that HSBC is responsible for the following:
 It has operated it’s another account for the financial institution with the longstanding.
It has also included the dysfunctional AML system of monitoring for the account as
well as the activity of wire transfer (Huang, 2015).
 It has also failed in assessing the risks of AML that are associated with the HSBC
affiliates.
 In the less four years, HSBC has cleared around $290 million by signing the illegal
cheques, that could not even explain its client why they are continuously depositing
around $5,00,000 each in the dollars traveller cheque. In the last decades, it has also
opened around the 2000 high risk share corporate account with no proper record.
 It has also failed in ensuring the timely use of the informal and formal enforcement
actions in compelling the reforms of AML at bank. For the several years, it has even
ignored the sings of warning that Mexico drug cartels were using in its own branch
for laundering the million of dollars. In this way, money laundering has become the
serious issue for HSBC.
Conclusion and recommendations
In the limelight of above discussion, it can be stated that the drug tracking as well as money
laundering are happening across the world. HSBC is standing for what is right, delivering
commitments, communicating honestly, transparently as well as learning from the mistakes.
It is also recommended to HSBC for ensuring the proper management which will ensure the
smooth functioning of every department. It will also help it in improving the mistakes
properly that it has done in the past, It can also ensure the making of some effective business
groups that will handle the issue effectively. In order to ensure the smooth functioning of its
bank, it can also ask the retail customers to must disclose how the accounts of them are being
used by providing several information such as address, employment, contact details, income
and employment history. This will definitely ensure the proper working of its banking
system. However, the company is also grounded by the business environment, which includes

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the challenges or threats as well. The threats of the company can include anyone like
employee’s effectiveness downturn, competitors as well as the negative effect of global rules
and regulations. The success of the company can also be measured due to the employees,
which are working effectively as a team.
HSBC should also give more emphasis on the succession of leadership by ensuring
the effective leaders for future. It can also manage the several career development programs
that will help the employees in several ways. Money laundering has become the serious risk
for the banks in affecting its reputation as well.
The proper and effective programmes can be started by HSBC that will ensure the anti
money laundering. In the recent time, every bank has made the anti-money laundering
programmes. It is however essential to follow the same. Training should also be provided to
the employees in the effective manner (Colladon & Remondi, 2017). In the training,
employees should be given the proper guidance regarding how to conduct business legally.
The negative outcomes of breach of policies can also be taught to the employees so that they
work in more effective manner. If employees will be taught the legal way to work at the time
of hiring only, they will work in proper manner at the organisation. It is also recommended
to the HSBC in order to effective ensure the introducing of cash handling and accounting
procedures at the workplace. it will ensure the proper functioning of the organisation in legal
and proper way. as a multinational firm, it should also start the new approach related to the
use of such models that will help it in assessing the risk of clients who all are involved. The
adoption of several innovative measures will definitely help it in reducing the issue to a larger
extent.

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References
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Banks, C. (2018). Criminal justice ethics: Theory and practice. Sage Publications.
Colladon, A. F., & Remondi, E. (2017). Using social network analysis to prevent money
laundering. Expert Systems with Applications, 67, 49-58.
Favaretto, R. M., Dihl, L., Barreto, R., & Musse, S. R. (2016, September). Using group
behaviors to detect hofstede cultural dimensions. In 2016 IEEE International
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case. Journal of Financial Crime.
Huang, J. Y. (2015). Effectiveness of US anti-money laundering regulations and HSBC case
study. Journal of Money Laundering Control, 18(4), 525-532.
Khlif, H. (2016). Hofstede’s cultural dimensions in accounting research: a review. Meditari
Accountancy Research, 24(4), 545-573.
Masciandaro, D. (Ed.). (2017). Global financial crime: terrorism, money laundering and
offshore centres. Taylor & Francis.

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