After a yearlong investigation, HSBC is being accused of several different crimes. HSBC has been accused of having lax anti-money laundering (AML) policies as well as violated several rules, which exposed the U.S. financial systems to a wide variety of threats like drug trafficking and terrorist financing (Fontevecchia, 2012). In late 2012, HSBC Holdings and HSBC Bank USA admitted to anti-money laundering and sanctions violations and they agreed to forfeit $1.256 billion and enter into a deferred prosecution agreement with the Justice Department (HSBC Holdings plc and HSBC Bank USA N.A. Admit to Anti-Money Laundering and Sanctions Violations, Forfeit $1.256 Billion in Deferred Prosecution Agreement, 2012). The bank violated
According to Clement (2006) unethical behavior in business is a growing concern. “In recent years, the business news in the United States has been rife with reports of misconduct by American corporations. The most widely publicized of these cases may be the accounting fraud at Enron and what was then MCI WorldCom; however, less trumpeted incidents of misconduct are troubling, as well. Examples of such lesser known events include consumer fraud at Prudential Financial, discriminatory practices at Morgan Stanley, and antitrust activity at DuPont. Given the recent misbehavior in the U.S. business world, a reasonable person might wonder just how unethical American business really is.
The purpose of the SOX Act in response to the fraudulent and misleading activities of large corporations such as Enron, Health South, Xerox, Global Crossing, and almost one thousand publicly traded companies. Fraud is defined as “a dishonest act by an employee that results in personal benefit to the employee at a cost to the employer” (Kimmel, Weygandt, & Kieso, 2011). The afore mentioned companies and many others committed fraud when they willingly published false and/or deceptive financial statements making their companies look like they were making huge profits, therefore causing their stock prices to soar and enticing the public to by more and more shares of their companies. Unfortunately, when the truth came out, the fraudulent actions of a few resulted in the loss of almost $5 trillion of stock market value and an undetermined amount for stockholders. Because of this fraudulent action, Congress had no choice but to intervene and pass legislation that would curtail this illegal
Pastan (2006) further noted, Ethical behavior in business is critical. When business firms are charged with infractions, and when employees of those firms come under legal investigation, there is a concern raised about moral behavior in business. Hence, the level of mutual trust, which is the foundation of our free-market economy, is threatened”. One of the cases where a business was charged with such unethical infractions is WorldCom. Scharff (2005) reported, “WorldCom, now named MCI, recently emerged from bankruptcy protection after reporting accounting irregularities of $11 billion”.
For example, the White House has seen its share of controversies, from Watergate to Bill Clinton and Monica Lewinski. Then there was the Enron Corporation scandal, which in 2001 revealed how executives hid billions of dollars in debt through deceit and loopholes. Most recently Tiger Woods admitted to the world that he had a “problem.” Initially he only admitted to bits and pieces of the truth, it wasn’t until confronted with other allegations did he admit to
Hiding accurate earnings, reporting inventory sold when it was not, and recording erroneous cash flows are just some of the ways that corporations have used to side step proper ethics. As citizens and government officials alike began to notice the increased frequency of these reports, legislation was based to combat corporations from using unethical business or financial practices. This legislation is called the Sarbanes-Oxley Act of 2002 (SOX), which dictates that standard practices and internal controls for financial reporting (Odom, 2012).
Sarbanes-Oxley Act Article Analysis Susana Hernandezvargas ACC/340 June 07, 2013 David De La Calzada Sarbanes-Oxley Act Article Analysis There have been multiple business scandals surrounding internal control such as those associated with WorldCom, Enron, and many others. These events led to Congress passing the Sarbanes-Oxley Act of 2002. The commonality in all of these cases was the false reporting of financial transactions. In addition, all these company’s shareholder’s experienced heavy losses as a result of transactions being misinterpreted. With the Sarbanes-Oxley Act in place investors are now protected through the improvement of reliability and accuracy of corporate disclosures made in accordance with the securities laws money (Bagranoff, Simkin, & Strand-Norman, 2008).
1. Describe three types of illegal business behavior alleged against Mr. Madoff and for each type of behavior, explain how the behavior is illegal or unethical in the conduct of business. Three types of illegal behavior alleged against Mr. Madoff are fraud, theft and making false statements which included wire and mail fraud. . Mr. Madoff ran the largest Ponzi scheme in the history of the United States when he pretended to make investments for his clients (Zambito, T. & Smith, G.B., 2008).
Professor Darlene Green-Connor ACC 403 November 27, 2012 Sarbanes-Oxley Act The Sarbanes-Oxley Act was put in place by Congress in 2002 in response to the financial fraud committed by multiple corporations. The main objective of the Act was to restore faith in investors whom experienced financial losses due to the financial fraud committed by the corporations. The Sarbanes-Oxley Act, also known as SOX, contains many laws and regulations that must be followed by small and large companies. Some of the results of the SOX are: external auditors gained more independence in reviewing corporate financial statements for accuracy, the board of directors’ oversight role was increased, upper management is required to certify the accuracy of financial
The act also requires in section 303 that the CFO and CEO both sign off all company financial statements. This is done so executives can be held accountable for any unethical activity on the financial statements ("A Guide to the Sarbanes-Oxley Act ", 2004). SOX has effected financial statements in many ways. SOX asks independent firms to audit financial statements in a way that the auditor’s positions are changed occasionally to prevent fraud. In conclusion, SOX has had a big impact on corporation’s financial statements forcing