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The UK watchdog found that three key parts of HSBC’s transaction monitoring systems showed serious weaknesses between 31 March 2010 and 31 March 2018. The bank used automated processes to monitor hundreds of millions of transactions a month to identify possible financial crime but failed to consider whether the scenarios used to identify indicators of money laundering or terrorist financing covered relevant risks until 2014, and did not carry out timely risk assessments for new scenarios after 2016.
The bank also failed to appropriately test and update the parameters within the systems that were used to determine whether a transaction was indicative of potentially suspicious activity, and did not check the accuracy and completeness of the data being fed into, and contained within monitoring systems, the FCA said.
Europe's biggest bank did not dispute the watchdog's findings and agreed to settle at the earliest possible opportunity, qualifying for a 30 per cent discount on the original financial penalty of £91 million.
“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,” Mark Steward, executive director of enforcement and market oversight at the FCA, said.
In a statement, HSBC said it had “initiated a large-scale remediation of its financial crime control capabilities” in 2012. “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 bank said.
In 2012, it paid $1.9 billion (£1.4 billion) in fines after the
US Department of Justice found that it had failed to prevent
laundering by Mexican drug cartels. The bank agreed to be
monitored by US regulators for five years. The FCA said that its
fine did not relate to the US action.
Last week, NatWest was fined £264 million after admitting that it had failed to prevent money-laundering of nearly £400 million by one customer.