HSBC Bank plc fined £63.9 million for deficient transaction monitoring controls

In particular, HSBC was found to have failed to:

*consider whether the scenarios used to identify indicators of money laundering or terrorist financing covered relevant risks until 2014

*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

Early settlement

HSBC did not dispute the FCA’s findings and agreed to settle at the earliest possible opportunity, which meant that the bank qualified for a 30% discount. Otherwise, the FCA would have imposed a financial penalty of £91,352,600.

HSBC has now 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 the community to avoidable risks, especially so as the remediation took such a long time. HSBC continued its 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 the former’s Notice were not part of the action taken by the US Department of Justice in 2012.

Money Laundering Regulations 2007

The Money Laundering Regulations 2007 were in force in respect of conduct concerning anti-money laundering controls for the period that was under investigation. The Money Laundering Regulations, Terrorist Financing and Transfer of Funds (Information on the Payer) 2017 came into force on 26 June 2017.

Under the Money Laundering Regulations 2007, HSBC was required to establish and maintain appropriate and risk-sensitive policies and procedures relating to ongoing monitoring. These are needed to identify complex or unusually large transactions, unusual patterns of transactions which have no apparent economic or visible lawful purpose and any other activity regarded as particularly likely by its nature to be related to money laundering or terrorist financing.

With hundreds of millions of transactions that needed to be monitored every month, HSBC used automated transaction monitoring systems as an anti-money laundering control to seek to comply with these requirements.