Analysis of Financial Misconduct - Paper Example

Published: 2024-01-27
Analysis of Financial Misconduct - Paper Example
Type of paper:  Essay
Categories:  Finance Analysis Ethics Money
Pages: 4
Wordcount: 901 words
8 min read


Financial misconduct entails intentional, willingly, or gross negligence in handling the capital in the financial industries. Like in any organization, the financial sector is faced with dishonesty, misconduct, and fraud in financial operations. Misconduct can occur at an individual or corporate level where several individuals can plan to commit money laundering within the financial industry. Financial misconduct can lead to financial loss, impact the organizations' reputation, and damage the existing relationship with the contractors, suppliers, and employees. The paper focuses on money laundering as one of the financial misconducts about corporate governance in the face of strong incentives and weak controls. The essay particularly examines the corporate code of conduct in ethics.

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Financial Misconduct - Money Laundering

Money laundering is one of the financial misconducts that is prevalent in modern-day businesses. Financial misconduct relates to abusive practices when dealing with mortgage securities and commodities markets to undertake financial manipulation in interest rates and foreign exchange. There exists a wide gap that exists between the leaders in position and the bank. The variation exists due to the lack of a serious team to undertake the necessary action to prevent these banks' misconduct. The report indicates that a lack of good leadership in the top position can be a threat to any nation as it gives rise to an ethical crisis in the finance sector. The issues provide an awakening call to question the adequacy for a proper organization to ensure integrity is achieved in the banks and other financial organizations. The organization should stipulate the mandatory requirement listed in the New York Stock exchange (Cassano, 2017).

Generally, the financial organization should generate a code of ethics internally that aligns with its operation. These ethics are shaped appropriately to reflect the experience in operating capital markets. These conduct codes can be manipulated to specify particular sets of standards to oversee the fiduciary role of care that can be applied in monitoring the executives, accountability, and personal integrity (Ahsan, 2020). Through amending and re-generating new ethic codes, the financial organization can shape general misconduct in the entire organization. The officials at the top hierarchy of banks organization have adopted the model of selling mortgage securities to investors without their consent. These executives use the power they have to hide this misconduct whenever they want to commit it in the office. This executive can also be involved in wrongdoing in a non-financial market such as commodity futures. The leaders do not include this transaction in the book of records, resulting in money laundering in the banks to fulfill their requirements. The executive can also be involved in interest rate manipulation contrary to the London Inter-bank Offered Rate (LIBOR), which acts as a regulator (Ahsan, 2020). Forex trading's manipulative practices have also been a significant threat in conducting a business operation in this field. The forex probe operated for over a decade without peoples' knowledge. The forex company was said to have conspired to manipulate these rates for their gain. It was estimated that over $4.7trillion per day was confiscated by altering the rates making many investors lose (Ahsan, 2020).

In the attempt to shape codes of ethics, there has been so limited action taken against the wrongful conduct's executives. However, HSBC operating as a watchdog for money laundering has spearheaded the growth and co-existence of financial misconduct. The body allowed the Mexican drug lords to launder the money through recognized international banking, thus facilitating misconduct in this sector. The body is assigned to regulate the set anti-money laundering laws by ensuring all individuals operate under this law. The Anti-Money Laundering encompasses laws that are designed to control the banking laws. The HBSC bank began conducting unethical behavior back in 2003 when it failed to comply with the stipulated in AML that governs operation terms (Aragrande, 2020). The misconduct worsened when HBSC USA allowed investors from Mexico to invest in their country via an affiliate branch known as Groupo Financiero HSBC or rather HBSC Mexico. The investors did not obey the rules and the regulations that AML had laid out, hindering the bank from identifying any suspicious transaction (Harlin, 2012). HBSC failed to take the necessary action despite the prior knowledge of the story.


In conclusion, financial misconduct can result in an unremarkable loss to the organization and at the individual level. An ethical argument has to be made in every financial industry to initiate corporate benefit rather than benefitting single individuals. This ethical misconduct facing AML resulted in a loss of not less than $800 million through drug trafficking organized by the drug lord cartel of Sinaloa, Mexico, and Colombia. The deposits were made to allow the money from the cartels to launder using the bank as theirs—primary host to facilitate transactions for the cartels exporting drugs to the United States market. To promote healthy ethical conduct, honesty for the executive would be the most preferred remedy for financial misconduct.


Ahsan, M. (2020). Entrepreneurship and ethics in the sharing economy: A critical perspective. Journal of Business Ethics, 161(1), 19-33.

Aragrande, G. (2020). Case Study 3: The HSBC Scandal and Its Reporting Across Europe. In Fascinating Transitions in Multilingual Newscasts (pp. 165-183). Palgrave Macmillan, Cham.

Cassano, S. (2017). Money laundering: a case study about the HSBC Mexico scandal and its relevance to Malta (Bachelor's thesis, University of Malta).

Harlin, K. (2012, Dec 11). HSBC to pay record $1.92 bill money laundering fines. Investor's Business Daily. Retrieved from­necbnet/doc view/1236686455?accountid=33575

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