Why did HSBC and Standard Chartered shares fall after the FinCEN leak?

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HSBC and Standard Chartered Shares Declined Following Reports of Alleged Illicit Fund Movements

HSBC and Standard Chartered experienced a significant drop in their Hong Kong-listed share prices subsequent to media reports detailing their alleged involvement in moving substantial sums of purportedly illicit funds over nearly two decades. These reports, which drew upon leaked Suspicious Activity Reports (SARs) filed with the US Department of Treasury's Financial Crimes Enforcement Network (FinCen), highlighted transactions flagged by internal compliance departments as suspicious. The revelations have underscored the persistent challenges in combating financial crime despite considerable investments and penalties imposed on financial institutions.
Reports Detail Over Two Trillion Dollars in Suspicious Transactions

The leaked SARs revealed information concerning more than US$2 trillion in transactions that occurred between 1999 and 2017. These transactions were identified by the internal compliance divisions of various financial institutions as warranting suspicion. The International Consortium of Investigative Journalists (ICIJ) indicated that these leaked documents represent a small portion of the total reports submitted to FinCen, suggesting the scale of potentially problematic financial activity could be much larger.
Banks Named Frequently in Leaked Documents

HSBC and Standard Chartered were identified as being among the five banks that appeared most frequently in the collection of leaked documents. This consistent appearance in reports flagging suspicious activity contributed to the market's negative reaction. The SARs indicated that these institutions, among others, often facilitated transactions for companies registered in offshore jurisdictions, such as the British Virgin Islands, without full knowledge of the ultimate account holders.
Historical Context and Bank Responses

The media reports focused on activity spanning a period from 1999 to 2017. In response, HSBC stated that the information was historical and that the bank had initiated a comprehensive overhaul of its financial crime-fighting capabilities across more than 60 jurisdictions since 2012. Standard Chartered similarly asserted its commitment to fighting financial crime and highlighted substantial investments in its compliance programmes. Despite these assurances, the market reaction reflected investor concerns stemming from the allegations.

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Why did HSBC and Standard Chartered shares fall after the FinCEN leak?

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