HR0372: Culture and Organisation

Running head: MONEY LAUNDERING CASE OF HSBC
MONEY LAUNDERING CASE OF HSBC
Name of the Student:
Name of the University:
Author note

1MONEY LAUNDERING CASE OF HSBC
Table of Contents
Background................................................................................................................................2
Introduction................................................................................................................................3
Applying Charles Handy Theory and rejecting Hofstede’s Model............................................4
Theory of Charles Handy in Organizational Culture.................................................................5
Power......................................................................................................................................6
Task Culture...........................................................................................................................6
Person Culture........................................................................................................................7
Role Culture............................................................................................................................7
An Analysis of the Issues which Uses the Chosen Theoretical Framework and Concepts.......8
Recommendations....................................................................................................................10
Conclusion................................................................................................................................11
References................................................................................................................................12

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A brief background of the organisation
Established in the year 1886, HSBC (Hong Kong Shanghai Banking Corporation)
Holdings is a multinational banking and financial services company that is established in
Britain but has its origin in Hong Kong. Headquartered in London the company is regarded as
the World's seventh largest bank (hsbc.co.in, 2017). The institution has around 4000 offices
in 70 countries. The company engages in four kinds of operations: Commercial banking;
Retail banking, Global Banking and Global Private Banking (Russo et al., 2013). HSBC is a
finance company that has set several benchmarks in terms of economic, employment
facilities; maintain the work-life balance, setting trends in the consumer behavior, updated
technology with a greater communication system (hsbc.co.in, 2017; Alvesson 2012).
In order to analyze the business environment of HSBC holdings, PEST analysis is
used. As a multinational company the organisation has to abide by several laws and
regulations depending on the country of operation.
Political: Because of the industry in which the company operates it has to keep up with the
rules and regulations of the country in order to strengthen the compliance and risk
management infrastructure as well as the culture.
Economic: The global operation of the company has helped the company recover from
several economic setbacks that the market has faced. For example: 2008 financial crisis.
Some of the economic factors that impact the organisation are variation in the foreign
exchange rates and fluctuation and the dynamic nature of the stock market worldwide,
inflation rates etc.
Societal: The Company has adopted the triple bottom line and considers climate and people
as important as the expansion and growth of the company. HSBC recognizes the role it has to

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play in the society and the responsibility the company has. The organisation has a
benchmarking CSR profile; the company hosts various programs and events for the
betterment of community, education and the environment as the organisation perceives these
factors as the basis for the overall development of the community.
Technological: the organisation is more than 150 years old but it has changed its operation
and business approaches with the changing dynamics in the market. Technology has been
always welcome in the company and the company is always looking forwards to incorporate
innovation in the process of operation on a daily basis. (hsbc.co.in, 2017).
Overview of the report
The purpose of the assignment is to state about the issue that is being faced by
HSBC in the context of money laundering. In 2012, HSBC suffered a loss of 1.9 billion
Euros for not having adequate controls of money laundering. According to the report,
published by the United States Senate, HSBC has supplied banking and financial services to
launder huge amount of drug money flowing out of Mexico and other banking lapses (Liss &
Sharman, 2015). HSBC in the process of trial recognized that it failed to preserve an efficient
against money laundering and failed to conduct basic due diligence on some of its account
holders. The risk management for Mexico was not efficient, even though the country has a
significant role in the problem with money laundering and drug trafficking. The company
was not able to enter the agreement of five-year deferred prosecution this is a situation that
can be explained as being in probation. If the US government presses charges against HSBC,
the company would lose the US dollar license and that would rack havoc in the finance world
as HSBC is a world leader in banking and finance.
In order to take the discussion forwards Charles Handy Organizational theory will be
used. This theory will be discussed with the issue of money laundering that was faced by

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HSBC. This report would discuss the importance of the theory and the reason it should be
applied in order to explain this problem. The justification would further elaborate the reason
Charles Handy Organizational theory has been chosen instead of Hofstede theory of
organizational culture (Liss & Sharman, 2015). Finally, the recommendations will be
provided for the development of the policies and effective implementation of rules and
regulations on an international level.
Applying Charles Handy Theory and rejecting Schein Model
Organisation culture is the values, traditions and principles that are prevalent in the
organisation that helps in the smooth operation of the daily business. The organizational
cultural theory recommended by Charles Handy talks about the power culture, task culture,
person culture and role culture (Russo et al., 2013). The root of the organizational culture
starts with the people who are in the higher position of the organization. The Charles Handy
theory provides certain important aspects which can be taken into consideration while
explaining the issue of money laundering, as the theory deals with the possible issues in terms
of employees’ mindset, the self- control and the behavior of the person which affect the
environment of the organization. The four divisions clearly explain the possibility of the
organisational culture of any organisation irrespective of the nature and scale of operation. In
this case HSBC is a large multinational company that implements the role culture in the
organization (Alvesson & Sveningsson 2015). The theory further helped to elaborate the
humanitarian style management and it is a more purpose-driven or visionary on the
methodology of the organization. The role of the risk management and crisis management
section of the organisation was insufficient to meet the needs and hence the issues increased
to such a massive extent.

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On the other hand, the idea of the model developed by Edger Schein is to
make the culture of an organisation more appropriate, he stated that there are direct and
indirect mechanisms within organizations that impact the culture prevalent in the
organisation. The direct aspects consist of exceptional behavioral pattern, opinions, status and
appointments. Whereas the indirect instruments includes the mission and vision stated by the
company, formal guidelines, corporate identity, design, traditions and rituals (White, 2016).
There are three stages discuss in this model the core or the assumptions, espoused values and
artifacts and symbols. Assumptions are the deep rooted basis of organisational culture these
are underlying and are aspects that cannot be recognized easily. Espoused values are the
principles guideline and standard of conducts that are used. The artifacts are the aspects that
are visible and easily recognizable by the people, this aspect includes logos, structure, and
dress code etc. The outer or the artifact is the layer which can be easily adapted and easily
changed by the management. As the process of changes goes deeper towards the cored the
difficult it becomes to incorporate (White, 2016).
This model has been rejected and Handy’s model has been taken because in the
Schein model the process of change, risk management and crisis management is not defined
clearly the model is more dependent on abstract theories that are not based on concrete cause
and effect process. On the other hand, in the Handy’s model each of the culture that is
identified by the author is described carefully with cause and effect process making the model
more concrete and relatable for the HSBC case. In Schein’s model the importance has been
given to the underlying assumption whereas the definition of these assumptions is vague and
does not give enough information of incorporation of the changes. This case deals with the
HSBC controversy, which is a complex institution and the aspects in the Schein model are
insufficient to define the HSBC structure. The dynamics in the organisation culture explained
by Handy is segregated according to the operations of the business which is where HSBC

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money laundering issue originated hence this theory can explain the gap in the operation
better than the Schein model.
Theory of Charles Handy in Organizational Culture
Charles handy was born in Ireland in 1932. He was a famous philosopher who
proposed theories in organizational culture. The theory proposes four types of cultures in an
organization, which relates to power, task, person and role (Clegg, Kornberger & Pitsis,
2015).
Power
Charles Handy talks about an organization where the power is concentrated among a
few people in the top level. These few people only have right in decision-making. They are
considered as the authority to take any major or minor decisions regarding the operations of
the organization. They enjoy special benefits and advantages in the workplace. The
organization is solely depended on them and considers them as the most important part of it
(O’Sullivan & O’Sullivan, 2016). The tasks are delegated by these few people and everyone
looks up to and abides by whatever these people have to say. In such organizational culture,
the subordinate employees have no right to questions the superiors and they have to follow
their instructions strictly. The views of the employees are not paid attention and are not even
recognized by the company (Levin et al 2016). They only have to follow their superior's
instructions and do not have any open forum or work culture where employees are liberated
to show their opinions (Senge, 2014). Power culture in an organisation may lead to an higher
rate of employee turnover and can also lead to some of other issues as employee satisfaction
level is considered to be low.

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Task Culture
Team is the most important aspect in the task culture as described by Handy. The
operations of the business depend on the teams and the tasks they are delegated with. The
teams are formed in the organization to meet the business goals and achieve the targets,
which follows task culture. The team is formed with the individuals with common
specializations or interests (McIntosh, 2016). Such culture in the organization encourages the
team members to contribute equally and should approach the tasks in most creative and
innovative methods (Watson, 2013).
Person Culture
There are some organizations where the employees perceive that they are the most
valuable and important resource of the organization (Yeoh, 2014). The commitment of the
employees towards the organization is relatively less in terms of the interest and objective of
the company is never identified by the employees rather they are more concerned about their
own interest. The loyalty of the people in this kind of culture is questionable as they are not
motivated by the higher management nor they are interested in the development of the
organisation. For an organisation to move towards development and growth and it imperative
to have the interest of the company is in sync with the interest of the employees (Senge,
2014).
Role Culture
Role culture shares a culture in the organization where everyone's role and
responsibility are determined based on the educational qualification and specialization, in this
way the efficiency and productivity can be maintained. In such culture, the employee gets a
chance to explore the best practice in the organizational situation (Palshikar, Apte &
Baskaran, 2014). The employees of the organisation are ready to accept the challenges based
on their job profile on a daily basis. Every individual is responsible for the task, which has

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been assigned to him and everyone has a fixed role to play which is clearly delegated to them.
The organisational structure that this culture follows is the hierarchal approach. This also
means that the power is not concentrated among a few people rather it is dispersed among the
management. Personal power should be rejected and expert power should stand out in the
proper manner (Cacciattolo, 2014). However, the role culture is efficient to provide
opportunity and security for accruing expertise.
The limitation of the Handy's approach is that it offers only four types of
organizational culture it doesn’t deal with the complexities and dynamics that are prevalent in
the business environment be it internal or external. There are tendencies to think that Handy's
model is the fixed model. However, the real situation shares a mixture of cultures, which has
no specificity (Branin, 2013). According to Handy, each of these cultures is suitable and
applicable to different circumstances depending on the nature and size of the business.
An Analysis of the Issues which Uses the Chosen Theoretical Framework and Concepts
The money laundering case of the HSBC holdings could be analyzed in the
frameworks of Handy’s model of the organizational culture. The issue is approach in the
context of the role culture that is observed to be prevalent in the organisation (Murphy &
Turek, 2015).
The power allocation in the organisation is in a hierarchal structure and hence there is
a dispersion of delegation and policy making decision in the organisation. The people who
work in the company know their job and also abide by the rules and regulations. The
organisation is observed to be corrupted at some level which is also a reason for the issue in
the organization occurred (Banerjee, 2015). The eventually this situation leads to money
laundering case. It is the responsibility of the management or authority to take charge of this
matter. The authority gave permission to its employees, which was found in the money

9MONEY LAUNDERING CASE OF HSBC
laundering case. Here the employees are the mere toy in the hands of the authority (Naheem
& Naheem, 2016). They do not have any views to express and the corrupted authority has
exploited the power.
The delegation of task and formulation of policies in order to make the process of
operation smooth is at fault for the issue that the company has faced. HSBC has a reputation
and goodwill among the stakeholders and do not have a very rigid risk and crisis management
system which is the prime reason for the company to face the issue of money laundering. The
lack of monitoring and strict guidelines has encouraged terrorist groups and drug dealers to
launder hefty amount of money through the bank. Money amounting to almost $881m has
been estimated in to be involved in drug trafficking throughout the bank's accounts (HSBC
US money-laundering accusations, 2017).
The banks that operated under HSBC are mostly identified to be understaffed, which
is regarded as one of the major reasons for such an incident (Naheem, 2015). The company is
deemed to have failed in implementing the anti-money laundering programme. There were
several instances that had shown the level of risk yet there were no steps taken to control the
risk rather there were hardly any people to take control in the banks.
The black market peso exchange (BMPE) was used to launder the cash in the bank it
is a complex scheme which transforms black money in to legal money, this helps the
criminals hide their dealings as well so that they do not leave traces of the illegal activities
(HSBC US money-laundering accusations, 2017).
The task and the assignment delegation among the employees of the bank were not
clear and also not monitored. The gap in the risk analysis and risk management is huge in this
case as the negligence of the organisation led to a massive loss for the company. in the role
culture the roles of one person should not overlap with another, when there is a problem with

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the institution being understaffed the roles are surely going to overlap (White, 2016).
Monitoring and control in the banks of Mexico were weak as there were less people and
hence the power was also concentrated among a few people. The money laundering could be
prevented checking all the details of the customers including name, nationality, birth,
telephone number and other important details. The employees are not clear about their role
and hence the company had faced such an incident which not only hit the reputation of the
company but has seen a setback financially.
The organizational culture should be strong enough, as this situation should not arrive
in any organization (Mei & Zhou, 2015). HSBC is a leading banking and financial service
hence it should be careful and responsible enough to understand the risks and issue that are
prevalent in the business environment. The management and the employees should be
assuring that such issues should not occur in the future.
Recommendations
HSBC should look after the interest of the employees and make sure that the
employees are working efficiently or not. In order to stop the laundering of the money, the
company needs to work on its administration culture by bringing changes in the culture of an
organization. The company can also incorporate CRM policy to enhance the value of
customer relationship of the company as it is required to closely understand the needs and
requirements of the company as well. It involves a gathering the information of customers
including name, nationality, birth, telephone number. Through this method, the detection can
be easily done about the background of the customers. This can also help in monitoring the
customers as the provision should be made in such a way that would make the customers
show their identification card or any kinds of the valid passport or ID card.

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HSBC must follow the rules and regulations adopted by Lands banking in terms of its
organizational culture and the money laundering system. To adopt this organizational culture,
the people in the administrative power must focus on creating an amicable relationship with
their employees and must let the employees speak up. For this, an effective communication
must be set up which would communicate the organization's values, mission, and vision
clearly to all the stakeholders. There has also been a communication gap which has given rise
to such an incident. Communication is the key to successful organisational development. The
collaboration with the employees are needed to take advises in terms of making the
organization develop. The most important point to be noted is that ethics are imperative for
the growth and development of the company and because HSBC accepted the fault and was
ready to face the consequence works favors on the behalf of the company and this value
should be maintained in order to keep up to the goodwill.
Conclusion
From the above findings, it can be concluded that HSBC, a US-based bank has been
channelizing for their rogue nation policies and Drug Kingpins. There was a huge laundering
penalty of 1.9bn and that seems to be the most uncontrollable situation for the bank. HSBC
has already spent $290m for the improving system of banking policy and to prevent money
laundering cases. For the settlement or fine cases the bank also has covered up to $1.5bn still
the processing of violation and violating the US section has persisted. He congressional
report has published over the issue and that process a warning against the bank for the
financial calamity in 2012.
In this assignment, the major part of the justification is imposed over the suspected
tax evasion and money laundering case in an unlawful and cross bordering banking
solicitation. In case of recommendation, a proper justification for the administration function

12MONEY LAUNDERING CASE OF HSBC
and culture of the organization has defined in a proper manner. HSBC money laundering and
the transaction cases are an important monetary aspect that provided the internal warning and
enforcement.

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