Eight Years of Anti-Money Laundering Failures from HSBC​

By BK​

What do you need to know this week?

HSBC UK has been fined £63.95 million by the Financial Conduct Authority (FCA) for failings in its anti-money laundering processes.

So, what went wrong? The FCA’s investigation revealed that HSBC had committed an “unacceptable” string of failings in its monitoring systems over a period of eight years from 31 March 2010 to 31 March 2018.

Put simply, HSBC had failed to investigate, stop and report years of potentially suspicious activities, including activities of customers who were under surveillance by the British police under an unexplained wealth order or for having possible links to a terrorist organisation.

HSBC did not contest the findings, resulting in a 30% discount on the original fine of over £91 million.

Why is this important for your interviews?

This fine exemplifies the growing regulatory scrutiny of financial institutions.

For example, in the UK, the Government strengthened the UK’s anti-money laundering regime in 2019 by incorporating more stringent international standards set under the Financial Action Task Force (FATF) and the EU’s 5th Money Laundering Directive. Since then, the FCA has been making a concerted effort to enforce money laundering regulations.

Plus, within the last week, there have been two high-profile fines. In the first criminal money laundering case against a British bank, Natwest was fined £265 million last week for failing to prevent the laundering of £400 million - of which hundreds of thousands were transported with black garbage bags. Meanwhile, in the US, JPMorgan has been ordered to pay $200 million to the US Securities and Exchange Commission for failing to archive employee messages about work-related matters.

International regulators are working closer together than ever before. The fine follows previous warnings HSBC received from the US Department of Justice about the failure of the bank’s US branch to monitor suspicious transactions out of Mexico. This prompted the FCA to comprehensively review its policies.

Finally, consider the reputation damage this will have on HSBC. Having the FCA issue such a whopping fine for years of “particularly serious” regulatory mismanagement will leave a sour taste for the banking giant in the next few years to come. Current and future clients may find it difficult to turn a blind eye to such an alarming regulatory blunder.

How is this topic relevant to law firms?

Law firms’ litigation and financial regulation departments will be involved when advising major clients such as HSBC. These departments will be involved in advising, for example, whether or not to contest the fine, how they should contest the fine (i.e. the litigation process), and following the fine, how to mitigate such risks going forwards.

In addition, as the regulatory landscape changes, law firms will have to work closely with their clients in the banking and finance sector to ensure that they remain compliant with ever-evolving regulations and best practice standards.


Image Credit: mundissima / Shutterstock.com
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