17/12/2021
HSBC used automated processes to monitor hundreds of millions of transactions a month to identify possible financial crime. However, the FCA 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.
In particular, 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;
- appropriately test and update the parameters within the systems that were used to determine whether a transaction was indicative of potentially suspicious activity;
- check the accuracy and completeness of the data being fed into, and contained within, monitoring systems.
HSBC did not dispute the FCA’s findings and agreed to settle at the earliest possible opportunity, which meant it qualified for a 30% discount. Otherwise, the FCA would have imposed a financial penalty of £91,352,600.
HSBC has undertaken a large-scale remediation programme into its anti-money laundering processes, which was supervised by the FCA.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said: ‘HSBC’s transaction monitoring systems were not effective for a prolonged period despite the issue being highlighted on numerous occasions. 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 FCA’s action relates to HSBC’s compliance with UK laws and the matters addressed in our Notice were not part of the action taken by the U.S Department of Justice in 2012.
