HSBC - A Case of Discrimination?

By Anonymous - 24 July 2012

In a recent news item the global bank HSBC was chastised by the US Senate for profiting from the  money laundering efforts of  'drug kingpins and rogue nations'. This article points out that while the efforts of the Senate are laudable, it will not solve the global problem of money laundering and capital flight since many nations, including the US, implement policies that encourage such activity.

Gary Becker, the Nobel winner in economics, some while ago proposed that countries should use the price mechanism to govern its immigration policy i.e. sell the right to immigrate to the highest bidder. In 1990 the US Congress legislated that foreigners who invested $500,000 would be fast tracked to citizenship. The market mantra for immigration caught on and the following table illustrates the price based immigration policies of a few nations:






Market Price for Citizenship


$500,000 investment that produces 10 jobs


£ 2000,000 available for investment


Canadian $ 800,000


Euro 71,000 in real estate allows citizenship of EU

St. Kitts and Nevis

$200,000 (Passport ensures visa free travel to Canada and the EU)


Euro 250,000 and create jobs


Income of $1200 pm (Passport will ensure visa free travel to the EU and many countries)


The following table reveals the number of individuals who have taken advantage of the price based immigration policy of the US under the EB 5 visa scheme.



Number of EB-5 visas issues













March 2012



During the above period the Chinese have received more than 50 % of the EB -5 visas. 'Get Rich then Get Out' appears to be the motto of Deng Xiao Ping's comrades in China. The Hurun report from China mentioned that 60 % of rich Chinese people intended to migrate from China.

The Arab spring which started in January 2011 has also seen the flight of billions of dollars of capital from these countries to safe havens abroad. The Al Arabiya newspaper estimates that $30 billion would have flown out in the first three months of the political unrest itself.

This author believes that the price based immigration policies of some countries has resulted in an increased demand for money laundering services and banks like HSBC are only meeting the needs of this niche market.

The impact of the flight of capital on developing countries is well documented. Their governments face a serious shortage of domestic resources for development activities. The capital flight also depresses economic activity and has a negative impact on long-term growth rates. Additionally, the governments will be forced into external borrowings which imposes a debt servicing burden and which impacts heavily on economic growth and social stability and attractiveness to investors. 

In his book, " Capital Flight And Capital Controls In Developing Countries", Gerald Epstein mentions the foresight of Harry Dexter White one of the architects of the Bretton Woods agreement. Back then, White had suggested that countries receiving fleeing capital  should refuse to accept it  altogether without the agreement of the sending country's government. Both of these proposals were strongly opposed by the U.S. financial community which had profited from the handling of flight capital.

In other words, if HSBC is the first in line of a cleanup of the global money markets then it is a welcome development. Else, if tax havens, price based immigration schemes etc. are allowed to function unabated then penalising HSBC will be unfair. After all HSBC is also catering to a need in the global money market. So long as the developed world and its financial institutions welcome fleeing capital, no questions asked, then punishing HSBC may even reek of discrimination. 

Disqus comments