HSBC fined £64m for automated transaction monitoring failures


The Financial Conduct Authority (FCA) has slapped a £64m fine on HSBC because its automated systems for detecting suspicious transactions were weak.

Over an eight-year period from March 2010, HSBC’s transaction monitoring systems showed “serious weaknesses”, according to the FCA.

The regulator identified three key areas where the bank had failed: it did not ensure that the scenarios used to identify indicators of money laundering or terrorist activity were appropriate; failed to test and update systems; and did not check that data being put into the system was accurate or complete.

HSBC’s original fine of over £91m was reduced by 30% after it agreed to settle as early as possible.

“HSBC’s transaction monitoring systems were not effective for a prolonged period despite the issue being highlighted on numerous occasions,” said Mark Steward, executive director of enforcement and market oversight at the FCA. “These failings are unacceptable and exposed the bank and community to avoidable risks, especially as the remediation took such a long time. HSBC continued its remediation to address these weaknesses after the relevant period.”

HSBC has since undertaken a remediation programme into its anti-money laundering processes, which was supervised by the FCA.

Money laundering, and its links to organised crime, is a serious global problem that banks find themselves at the centre of. According to the UN, up to $2tn is moved illegally each year, with criminals using banks to hide money. In the UK, the National Crime Agency estimates that money laundering costs the country’s economy £24bn each year.

Last month, NatWest admitted operational failures, including weaknesses in automated monitoring systems, which meant it had failed to prevent the laundering of £400m.

The bank pleaded guilty at Westminster magistrates court to failing to comply with anti-money laundering regulations between 2012 and 2016. It has since been fined £265m.

According to research published in February 2021 by business-to-business information services company Kyckr, 28 financial institutions across the globe were fined for anti-money laundering-related violations in 2020, equating to about £2.6bn.

German neo bank N26 was recently fined €4.25m by the German financial services regulator for weak anti-money laundering practices related to the late filing of about 50 suspicious activity reports in 2019 and 2020. And there have been some much higher fines.

For example, Swedbank was fined €347m by regulators in Sweden and Estonia in 2020 for breaching money laundering laws, Dutch bank ING was fined €775m in 2018 for failing to prevent the laundering of hundreds of millions of euros between 2010 and 2016, and in 2017, Citigroup agreed to pay almost $100m and admitted criminal violations as it settled an investigation into breaches of anti-money laundering rules involving money transfers between the US and Mexico.



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