Tip of the Iceberg: HSBC Divests From Israeli Drone-Producer Elbit Systems

Campaigners have hailed the development as a major victory - but the bank remains embroiled and tarnished by a great many other scandals current and historic.

Global finance giant HSBC has fully divested from drone manufacturer Elbit Systems, one of Israel's largest arms manufacturers, controversially producing drones — sold internationally on the basis they're "combat proven" — white phosphorous and artillery systems used for cluster munitions.

In the past, its involvement in supplying surveillance systems and other technology to Israel's Separation Wall and settlements in the West Bank, and the US government for use on the country's border with Mexico, has led to it being excluded from pension and investment funds the world over. However, HSBC's investments in Elbit long went unacknowledged, until a 2017 War on Want report on UK banks' business dealings with companies selling military equipment and technology uncovered the connection.

Such investment was contrary to HSBC's 'Defense Equipment Sector Policy', which specifies the bank won't provide financial services to companies involved in the production or selling of cluster munitions — and the UN Guiding Principles on Business and Human Rights. As a result, War on Want — with support from the Palestine Solidarity Campaign, among other campaigning groups — launched a UK-wide effort to secure HSBC's divestment from the firm.  The effort saw over 24,000 campaigners write to HSBC and over 40 of the bank's UK branches picketed by protesters at monthly intervals for over a year.  

Ryvka Barnard, a senior campaigner at the charity, hailed the "positive first step", stating doing business with companies such as Elbit "means profiting from violence and human rights violation, which is both immoral and a contravention of international law."

Ben Jamal, director of the Palestine Solidarity Campaign, said the move was "proof positive" collective campainging works.

Iceberg Tip

HSBC's now-past investment in Elbit Systems is, however, just a single example of the bank's questionable practices. For one, it maintains business relations with over a dozen companies selling weapons and technology to the Israeli military, including Caterpillar — its bulldozers are used in the demolition of Palestinian homes and properties.

Moreover, the bank has frequently been compelled to pay vast fines in many countries for engaging in activity which, if  not outright criminal, significantly breached financial regulations in respect of tax evasion, money laundering and other major misdemeanors.

For example, in July 2012 the US Senate's Permanent Subcommittee on Investigations released a 300-page report detailing how HSBC's weak money laundering controls were exploited by drug traffickers and groups with terrorist connections. The bank was also accused of failing to observe the US Treasury's list of prohibited parties, clearing suspicious bulk quantities of travelers cheques, providing US correspondent accounts to some foreign banks despite evidence of links to terrorist financing, and other serious shortcomings.

The bank ended up paying a US$1.3 billion fine for violating the US Bank Secrecy Act, International Emergency Economic Powers Act and Trading with the Enemy Act "by failing to maintain an effective anti-money-laundering program and to conduct appropriate due diligence on its foreign correspondent account holders." It also paid US$665 million in civil penalties.

In March 2013 the government of Argentina filed criminal charges against HSBC for helping businesses evade taxes and launder money domestically — a precursor to the major 2015 scandal in which the International Consortium of Investigative Journalists released reports on HSBC's role in helping its Swiss private banking unit evade taxes.

The bank also remains in serious hot water over its role in the 2008 financial crisis — in October 2018 the US Justice Department announced HSBC would pay US$765 million over allegations it covered up risks associated with mortgage-backed securities.