HSBC and Standard Chartered Hong Kong shares dropped on Monday after media reports that they and other banks moved large sums of allegedly illicit funds over nearly two decades despite red flags about the origins of the money.
Many media articles were based on leaked suspicious activity reports filed by banks and other financial firms with the U.S. Department of Treasury’s Financial Crimes Enforcement Network.
The files contained information about more than $2 trillion worth of transactions between 1999 and 2017, which were flagged by internal compliance departments of financial institutions as suspicious.
Suspicious activity reports showed that banks often moved funds for companies that were registered in offshore havens, such as the British Virgin Islands, and did not know the ultimate owner of the account, the report said.
Staff at major banks often used Google searches to learn who was behind large transactions, it said.
In some cases the banks kept moving illicit funds even after U.S. officials warned them they could face criminal prosecutions if they continued to do business with criminals or corrupt regimes, reports said.
The revelations underscore challenges for regulatory and financial institutions trying to stop the flow of dirty money despite billions of dollars of investments and penalties imposed on banks in the past decade.
HSBC shares in Hong Kong fell as much as 4.4% to HK$29.60 on Monday, their lowest level since May 1995. The stock has now nearly halved since the start of the year.
StanChart dropped as much as 3.8% to HK$35.80, the lowest since May 25 this year. The Hang Seng Index was down nearly 1%.
London-headquartered HSBC and StanChart, among other global banks, have paid billions of dollars in fines in recent years for violating U.S. sanctions on Iran and anti-money laundering rules.
The media reports come at a tough time for the two U.K. lenders, both of which make the bulk of their profits in Asia, and are reeling from the impact of the COVID-19 pandemic, U.S.-China tensions, and political uncertainty in Hong Kong.