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| Type | Bachelor's Thesis |
| Scope | Discipline-based scholarship |
| Title | The HSBC Money Laundering Scandal - An Analysis of the Key Players from a Behavioural Ethics Perspective |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 54 |
| Date | 2020 |
| Zusammenfassung | Should you be caught with an ounce (28 g) of cocaine in the United States, you will most probably go to jail. If you are caught repeatedly, there is a very good chance that you will spend the rest of your life behind bars. If however you are a global financial institution, and are caught laundering millions of dollars for notorious drug cartels, you will simply have to pay a fine which will allow you to resume business as usual. That is in essence the message conveyed by U.S. regulatory and supervisory agencies to the horrified general public after it became evident that no one involved in one of the most infamous banking scandals of the 21st century – the HSBC money laundering scandal − would face any criminal charges (as Senator Elizabeth Warren remarked during a hearing into why HSBC was not prosecuted). HSBC is one of many global banks to have provoked a spate of discussions about the financial sector being out of control. This paper aims to highlight the different motives of the key players involved in the HSBC scandal as well as to draw attention to problematic conditions pertaining to the financial market and the financial environment which enhance and facilitate ethical misconduct. The key players include not only employees and senior officials at the bank, but also several members of the United States regulatory and supervisory agencies. We begin by providing a detailed account of the events leading up to the so-called HSBC money laundering scandal in 2012. Furthermore, we examine the consequential verdict that triggered a second wave of public outrage as well as the follow-up investigation into the regulatory agencies responsible for monitoring and regulating the bank. We will provide an overview of the complex regulatory system in the U.S. to better understand the decision not to bring criminal charges against HSBC. In a subsequent step, we will connect concepts from the field of behavioural ethics to the information presented about the case in order to analyse the behaviour displayed by our key players and offer explanations for the underlying cognitive mechanisms that enhance ethical misconduct. We will identify several frameworks that were in play. An obvious assumption about the underlying reasons for corporate crime − especially in the financial sector − is to blame greed. We do not contest the fact that financial incentives are strong motivators and triggers for unethical behaviour − on the contrary, we have found that financial incentives are in fact a central aspect of our analysis. However, our aim is to show that there are also many other reasons for and ways in which unethical behaviour can unfold that do not necessarily benefit the person who is acting unethically. The concepts we present can be divided into two categories. First, we illustrate mechanisms that enhance unethical behaviour without individuals even being aware of this happening. This highlights the fact that ethical misconduct can unfold unintentionally. The frameworks we present explain how certain conditions paired with psychological mechanisms can unknowingly influence our decisions and behaviour in a way that makes us overlook important information. This can result in the erosion of the ethical component of a decision and confirms that individuals do not necessarily act unethically wilfully. We will proceed to discuss whether financial incentives are one of the main triggers for rule and law-breaking. We demonstrate that financial incentives can also have a blinding effect, which is in keeping with the argument of crime not always being deliberate. We propose that individuals with certain personality traits are more prone to unethical behaviour than others and that fending off temptations regularly deplete our cognitive resources and lessen our willpower to act ethically. Counter to these unconscious biases, we introduce mechanisms that allow individuals to feel less shame or guilt after having consciously engaged in unethical behaviour. These coping strategies are made up of different ways of rationalizing our decisions which allow us to preserve a positive self-image and explain in part how people tend to think of themselves as moral agents even after they have engaged in unethical behaviour. We show that our key players are prone to shifting blame away from themselves, especially when responsibilities are not clear or are shared among employees of different ranks. By not linking a decision to a concrete harmful outcome, it becomes easier to dismiss it. Our findings show that conditions for unethical behaviour are facilitated by the complex hierarchy of HSBC and the intricate regulatory and supervisory system in the U.S. Our analysis concludes that if the right checks and balances are not in place, unethical behaviour will likely occur. It should be mentioned that the concepts we applied in order to offer explanations for how unethical behaviour can unfold are subjective and speculative in nature as we cannot verify whether these psychological processes did in fact impact the key players involved in the HSBC case. Numerous further approaches would be possible and further concepts could be applied. However, we have focussed on those concepts that in our opinion are most relevant to this case and we believe that they present valid interpretations, whilst simultaneously providing a different viewpoint to the general assumption that money is the root cause of corporate fraud and unethical behaviour. |
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