Effectiveness of US anti-money laundering regulations and HSBC case study

Author:Jimmy Yicheng Huang
Position:McGill University, Montreal, Canada
Pages:525-532
SUMMARY

Purpose - This paper aims to provide a macro analysis of the USA’s anti-money laundering (AML) legislation. In examining the context and consequences of these regulations, a general determination can be made on the effectiveness of the current US AML legislation. The major AML regulations in the USA are covered under the Bank Secrecy Act, USA Patriot Act and the Office of Foreign Assets Control. It is difficult to determine what constitutes as implementation and maintenance of effective AML Compliance... (see full summary)

 
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Effectiveness of US anti-money
laundering regulations and HSBC
case study
Jimmy Yicheng Huang
McGill University, Montreal, Canada
Abstract
Purpose – This paper aims to provide a macro analysis of the USA’s anti-money laundering (AML)
legislation. In examining the context and consequences of these regulations, a general determination
can be made on the effectiveness of the current US AML legislation. The major AML regulations in the
USA are covered under the Bank Secrecy Act, USA Patriot Act and the Ofce of Foreign Assets Control.
It is difcult to determine what constitutes as implementation and maintenance of effective AML
Compliance Programs because US federal AML requirements remain largely dynamic. This paper will
provide some context to why certain major AML regulations were established as well as the reasoning
behind their implementation. This paper will then attempt to determine the effectiveness of current
AML regulations, particularly on the banking sector, by looking at several cases of alleged failure to
maintain effective AML Compliance Programs. An examination will be conducted on HSBC’s $1.9
billion settlement in 2012 to the US government, as HSBC failed to establish a reasonable AML program
according to the US Department of Justice press releases.
Design/methodology/approach – A brief description of major US AML regulations pertaining to
the 2012 HSBC case is rst made. Also, a look into the frequency of suspicious activity report (SAR)
lings as well as initiated money laundering investigations is made. The paper critically analyzes the
Financial Action Task Force (FATF)’s evaluation of US AML regulations.
Findings – It is evident that the FATF held an accurate evaluation of US AML regulations being both
very comprehensive and severely enforced. The main criticism is with the implementation of these
regulations driving adverse economic and social effects. Financial institutions fear being charged with
not having a proper AML program; this causes banks to be more inclined to inate SARs as well as
engage in nancial exclusion. It is difcult to prevent these adverse effects, as they directly result from
having strict and comprehensive AML legislation, which is necessary to prevent and detect money
being laundered.
Practical implications – A determination as to whether US AML regulations need strengthening or
is too strict in that it causes adverse effects.
Originality/value – A macro analysis of America’s AML legislation is severely needed. Many papers
on the issue lack a thorough description of the large-scale socio-economic effects of the AML programs
of American nancial institutions.
Keywords USA, Regulations, Anti-money laundering
Paper type Research paper
Introduction
The major US anti-money laundering (AML) regulations are covered under the Bank
Secrecy Act, USA Patriot Act, Money Laundering Control Act and Money
Laundering Suppression Act. In examining the governing bodies responsible for
handling these regulations, a general determination can be made on the state of
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1368-5201.htm
HSBC case
study
525
Journalof Money Laundering
Control
Vol.18 No. 4, 2015
pp.525-532
©Emerald Group Publishing Limited
1368-5201
DOI 10.1108/JMLC-05-2015-0018

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