HSBC 2012 Annual Report Download - page 16

HSBC HOLDINGS PLC
Report of the Directors: Overview (continued)
HSBC Values / Business and operating models
14
Ensuring our conduct matches our values
In line with our ambition to be recognised as the
world’s leading international bank, we aspire to
lead the industry in our standards of conduct. As
international markets become more interconnected
and complex and, as threats to the global financial
system grow, we are strengthening further the
policies and practices which govern how we do
business and with whom.
Like any business, we greatly value our
reputation. HSBC’s success over the years is due in
no small part to our reputation for trustworthiness
and integrity. In April 2012, as part of this effort, we
committed to adopting and enforcing the highest
compliance standards across HSBC. Doing so will
help us to achieve three key objectives:
• strengthen our capabilities to combat the
ongoing threat of financial crime;
• make consistent – and therefore simplify –
how we monitor and enforce high standards
at HSBC; and
• ensure that we consistently apply our values so as
to serve positively the customers and societies
who entrust their financial needs to HSBC.
Under the supervision of HSBC’s Global
Standards Steering Meetings of the Group
Management Board (‘GMB’), we are already
strengthening policies and processes in a number of
important areas, described on the right.
We are also reinforcing the status of compliance
and standards as an important element of how we
assess and reward senior executives, and rolling out
communication, training and assurance programmes
to ensure that our staff understand and meet their
responsibilities.
We have adopted the UK Code of Practice for
the Taxation of Banks and seeks to apply the spirit
as well as the letter of the law in all the territories in
which it operates. We deal with tax authorities in an
open and honest manner. We are strengthening our
policies and controls with the objective of ensuring
our services are not used by clients seeking to evade
their tax obligations.
A new committee of the HSBC Holdings Board,
the Financial System Vulnerabilities Committee, will
provide governance, oversight and policy guidance
over the framework of controls and procedures
designed to identify areas where HSBC may become
exposed and through that exposure, expose the
financial system more broadly to financial crime or
system abuse.
Global standards execution framework – priority
areas
Financial crime filter
Under the Group’s strategy described on page 17, we analyse
different markets against five financial filters to help
us determine where to do business and the type of business we
can do in line with our values and financial return objectives.
In 2012, we added a sixth filter under which we also analyse
all new and existing business to limit activity and client
acquisition in jurisdictions with a high risk of financial crime.
Tax transparency
We are strengthening our policies and controls with the
objective of ensuring that HSBC’s services are not used by
clients seeking to evade their tax obligations.
Sanctions
We have expanded our application of financial sanctions to
ensure that the most demanding standards are enforced for all
currencies and in all jurisdictions. Through application of these
standards, we screen clients and all cross-border payments to
prevent the use of HSBC’s banking services for the benefit of
blacklisted countries, companies and individuals.
Information sharing
We are extending the sharing of key compliance information
between different parts of HSBC, to the extent permitted by
law, for the purpose of managing our exposure to financial
crime.
Customer due diligence
We are applying a globally consistent approach to the
knowledge needed to accept or retain a customer relationship.
When any customer or potential customer is considered an
unacceptable reputational risk – or otherwise does not meet
our standards – that determination will be applied globally.
Affiliates’ due diligence
We are building a single central repository holding all required
due diligence information on each of our affiliates in order to
facilitate seamlessly cross-border transactions on behalf of our
clients.
Bearer shares
Shares not registered to any owner, but beneficially owned
by the person who has physical possession of the share
certificates, carry inherent risks relating to money laundering
and tax evasion. We have set out minimum, highly restrictive
standards, applicable in all markets, for dealing with customers
who utilise bearer shares.
Business and operating models
Our business model is based on an
international network connecting faster-
growing and developed markets.
Our businesses are organised to serve a cohesive
portfolio of markets, as tabulated below.
Business model
We take deposits from our customers and use these
funds to make loans, either directly or through the
capital markets. Our direct lending includes
residential and commercial mortgages and overdrafts,
and term loan facilities. We finance importers and
exporters engaged in international trade and provide