Source: Nicole Kirbach¸ PKF Malta
As published in the Malta today on the 21th November 2012
In the US ¸it comes as no surprise that with the collapse in September 2008 of the giant US bank Lehman Bros it signalled the first warning sign that regulation was not doing its job. The belated reform in banking regulation announced after discovery of so many banking scandals came not a moment too soon. In the US it is pertinent to mention the Dodd-Frank act – particularly the Volcker rule ¸ both designed to avert further financial crises as has previously hit the fan with the sub-prime mortgages debacle. Certainly the news of the resignation of both the chairman and CEO of Barclays has shocked the international media following the discovery of a scheme allegedly run by the bank which for over five years was involved in LIBOR rate rigging. Bob Diamond the CEO blamed a “series of unfortunate events” for his shock departure from Barclays yet all along he strongly denied he was personally culpable for Barclays Bank actions. On another instance Barclays was also in the news for allegedly resorting to tax evasion in UK. When PricewaterhouseCoopers (PWC ) its auditor raised concerns over two tax avoidance schemes created by the bank that were later branded by the tax authorities as “highly abusive”. PWC is understood to have raised concerns with the Barclays over the structure of the schemes that would have saved it from paying hundreds of millions of pounds in tax. Back to US only last month ¸we read how New York Attorney General Eric T. Schneiderman has filed a civil lawsuit against JPMorgan Chase & Co alleging that investment bank Bear Stearns – prior to its collapse and subsequent sale to JPMorgan in 2008 – perpetrated massive fraud in deals involving billions in residential mortgage-backed securities. Schneiderman is also a co-chairman of the task force¸ known as the Residential Mortgage-Backed Securities Working Group set up by President Obama to study the cause of the credit crunch. Quoting Gerald H Silk¸ a lawyer at Bernstein Litowitz Berger & Grossmann in New York¸ he said: “The government’s action represents a complete validation of the cases brought by investors who were duped by the fraudulent sale of mortgage-backed securities by JP Morgan and Bear Stearns. Hot on the heels of such scathing remarks came HSBC’s contrite submissions in connection with its admission of handling Mexican drug monies. In a statement¸ HSBC said: ‘We will apologise¸ acknowledge these mistakes¸ answer for our actions and give our absolute commitment to fixing what went wrong.’ The bank says it has sharpened up its controls and doubled spending on compliance to £255million. It also said it was closing 20¸000 accounts in the Cayman Islands as a result of the investigation. This could not come a moment too soon especially when HSBC is linked to drug cartels¸ money launderers from Mexico¸ suspect funds from Syria¸ Iran and Saudi Arabia – something went seriously wrong since an internationally reputable bank like HSBC will not be associated with such questionable transactions. But that is exactly what the U.S. Senate was questioning in the context of HSBC -proudly considered Britain’s biggest banking group. The Senators came to the conclusion that a “pervasively polluted” culture at HSBC Holdings Plc allowed the bank to act as financier to clients seeking to divert suspect funds from the world’s most dangerous and secretive corners¸ including Mexico¸ Iran¸ Saudi Ara