HSBC HSBC -1.25% Holdings PLC was fined for inadequate anti-money-laundering controls that the London-based bank used to monitor hundreds of millions of dollars of transactions.
The U.K.’s Financial Conduct Authority fined HSBC £63.9 million, the equivalent of $85 million, for weak oversight at the bank between 2010 and 2018. HSBC didn’t dispute the regulator’s findings, which meant it got a 30% discount on the fine, the FCA said in a statement.
“HSBC’s transaction monitoring systems were not effective for a prolonged period despite the issue being highlighted on numerous occasions,” said Mark Steward, the FCA’s executive director of enforcement and market oversight. “These failings are unacceptable and exposed the bank and community to avoidable risks.”
HSBC has grappled for years to convince regulators that it can identify fraudulent transactions. In 2012, the bank agreed to pay $1.9 billion and enter into a five-year deferred-prosecution agreement with U.S. authorities to settle allegations including that it failed to catch at least $881 million in drug-trafficking proceeds laundered through its U.S. bank.
An HSBC spokeswoman said the latest fine relates to HSBC’s anti-money-laundering systems in the U.K. and the matter is now resolved. “HSBC has made significant investments in new and market-leading technologies that go beyond the traditional approach to transaction monitoring,” the spokeswoman said.
HSBC failed to maintain sufficiently risk-sensitive procedures to identify complex or large transactions, unusual patterns of transactions and other activity likely to be related to money laundering or terrorist financing, the FCA said.
For example, a director of a U.K. construction company with annual income of £40,000 received more than three times that amount in an HSBC account through 18 payments in one month in 2010, according to the FCA. The customer, who was part of a criminal gang that attempted to steal millions of pounds, pleaded guilty to tax fraud in 2014, the FCA said.
The systems HSBC installed to track payment flows at times failed to flag suspicious transactions that should have prompted further reviews. Over the four years until early 2017, 43 million transactions through HSBC’s correspondent banking business weren’t monitored properly, the FCA said.
Earlier this week, NatWest Group PLC was fined £264.7 million in a London court over anti-money-laundering offenses identified by the FCA involving the U.K. lender’s failure to follow up on red flags associated with the cash deposits of a customer. The case was the FCA’s first criminal prosecution of a bank for money-laundering breaches.
Write to Simon Clark at [email protected]
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Appeared in the December 18, 2021, print edition as ‘HSBC Cited Over Laundering Controls.’
