HSBC fined £64m for anti-money laundering failings

·Business Reporter, Yahoo Finance UK
·3-min read
HSBC fined £64m for anti-money laundering failings
HSBC did not dispute the findings and agreed to settle as soon as possible, meaning it qualified for a 30% discount. Photo: Gonzalo Fuentes/Reuters

HSBC (HSBA.L) has been slapped with a £63.9m ($85.2m) fine for failings in its anti-money laundering processes.

The Financial Conduct Authority (FCA) said the lender used automated processes to monitor hundreds of millions of transactions a month to identify possible financial crime.

However, the City watchdog found that three key parts of HSBC’s transaction monitoring systems showed “serious weaknesses” over a period of eight years from 31 March 2010 to 31 March 2018.

It revealed that HSBC failed to consider whether the scenarios used to identify indicators of money laundering or terrorist financing covered relevant risks until 2014 and carry out timely risk assessments for new scenarios after 2016.

It also did not appropriately test and update the parameters within the systems that were used to determine whether a transaction was indicative of potentially suspicious activity, nor did it check the accuracy and completeness of the data within monitoring systems.

The fine comes amid a renewed crackdown by the regulator on money laundering failures.

Shares were just 0.3% lower on the back of the news. Chart: Yahoo Finance
Shares were just 0.3% lower on the back of the news. Chart: Yahoo Finance

HSBC did not dispute the findings and agreed to settle as soon as possible, meaning it qualified for a 30% discount. Otherwise, the FCA would have imposed a financial penalty of £91.3m.

"We are pleased to resolve this matter, which relates to HSBC's legacy anti-money laundering systems and controls in the UK," a HSBC spokesperson said in a statement.

"HSBC is deeply committed to combating financial crime and protecting the integrity of the global financial system."

The bank added that it had undertaken a large-scale remediation programme into its anti-money laundering processes, which was supervised by the FCA.

In 2012 HSBC had to pay a $1.9bn (£1.4bn) fine to US regulators for serving as a middleman for Mexican drug cartels, and was monitored for five years.

The FCA confirmed on Friday that the fine did not relate to the US action.

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“HSBC’s transaction monitoring systems were not effective for a prolonged period despite the issue being highlighted on numerous occasions,” Mark Steward, executive director of enforcement and market oversight at the FCA, said.

“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.”

On Monday, rival bank NatWest (NWG.L) was fined £265m pounds by a British court for failing to prevent the laundering of nearly £400m.

The court case heard details of hundreds of thousands of pounds being couriered in black garbage bags and branch vaults overflowing with bank notes. The bank admitted to three criminal charges in October, accepting that it failed to prevent money laundering at an English gold dealer.

NatWest said in a statement that the cost of the fine will be met from existing provisions, with a small additional provision to be taken in NatWest’s fourth quarter.

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