HSBC fined £64m for eight years of anti-money laundering failures

Britain’s financial watchdog has fined HSBC Bank £63.9m for failings in its anti-money laundering processes in the eight-year period between 2010 and 2018, it said this morning.

The Financial Conduct Authority (FCA) said it had identified “serious weaknesses” in three key parts of the automated processes that the banking giant uses to monitor hundreds of millions of transactions a month to identify possible financial crime, over a period of eight years.

It said that HSBC failed to consider all relevant risks for transactions that could involve money laundering or terrorist financing until 2014, and then failed to carry out timely risk assessments for suspicious transactions after 2016.

The regulator found that this was in part caused by HSBC’s failure to appropriately test and update the parameters within its systems that were used to determine whether a transaction was indicative of potentially suspicious activity.

And it also said HSBC had failed to check the accuracy and completeness of the data being fed into, and contained within, monitoring systems.

Since the investigation, the FCA said HSBC has undertaken a large-scale remediation programme into its anti-money laundering processes, which was supervised by the regulator.

“HSBC’s transaction monitoring systems were not effective for a prolonged period despite the issue being highlighted on numerous occasions,” said Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA.

“These failings are unacceptable and exposed the bank and community to avoidable risks, especially as the remediation took such a long time. HSBC continued their remediation to address these weaknesses after the relevant period.”

The initial fine had been £91.4m, but HSBC did not dispute the FCA’s findings, which meant it qualified for a 30 per cent discount.

HSBC said in a statement: “We are pleased to resolve this matter, which relates to HSBC’s legacy anti-money laundering systems and controls in the UK.  As is well known, in 2012, HSBC initiated a large-scale remediation of its financial crime control capabilities. 

“More recently, as the FCA recognised, HSBC has made significant investments in new and market-leading technologies that go beyond the traditional approach to transaction monitoring.  HSBC is deeply committed to combatting financial crime and protecting the integrity of the global financial system.”

The watchdog’s fine comes just days after it issued a bumper £265m fine to NatWest for its failures to stop a money laundering scheme that involved millions of pounds being carried as cash in bin bags to be deposited across dozens of its branches.

“While the HSBC fine is a regulatory sanction rather than a criminal one – as the wrongdoing was not as egregious as it was with NatWest – it is yet another sign that the FCA is looking very closely at the issue of money laundering,” said Syed Rahman, a partner specialising in fraud at Rahman Ravelli.