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HSBC fined US$85 million by UK regulator for anti-money-laundering lapses

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Britain's regulator has fined HSBC £63.95 million (US$85.16 million) for failing to follow anti-money-laundering processes.

The Financial Conduct Authority (FCA) found three key parts of HSBC's automatic monitoring system in the United Kingdom had serious weakness over an eight-year period until March 2018, the regulator said in a statement on Friday.

HSBC was given a 30 per cent discount on the £91.35 million fine as it did not dispute the findings and agreed to settle at the earliest, the FCA said.

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"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.

Mark Steward, executive director of enforcement and market oversight at the Financial Conduct Authority, pictured in August 2015. Photo: May Tse alt=Mark Steward, executive director of enforcement and market oversight at the Financial Conduct Authority, pictured in August 2015. Photo: May Tse>

"These failings are unacceptable and exposed the bank and the community to avoidable risks, especially as the remediation took such a long time," said Steward, a former head of enforcement at Hong Kong's Securities and Futures Commission. The bank has made improvements since 2018, he added.

Steward said the enforcement was related to HSBC's compliance with UK laws and was not related to the US Department of Justice decision in 2012.

Back then, HSBC paid a record fine of US$1.92 billion to resolve a lengthy criminal investigation by the US authorities on money laundering and other banking lapses.

HSBC has conducted large scale remediation of its control system since 2012 as part of its effort to protect the integrity of the global financial market, a spokeswoman for the bank said.

"More recently, as the FCA recognised, HSBC has made significant investments in new and market-leading technologies that go beyond the traditional approach to transactions monitoring," she said.

"We are pleased to resolve this matter, which relates to HSBC's legacy anti-money-laundering systems and controls in the UK."

According to the FCA, HSBC used automated processes to monitor millions of transactions to identify potential financial crime. However, the bank failed to make sure the scenarios used by the system to identify indicators of money laundering activities until 2014.

The bank also failed to test the parameters within the system to determine if a transactions was suspicious, while the lender also did not ensure the data fed in the system was accurate.

HSBC's shares fell 0.5 per cent to 446.10 pence on Friday in London after the announcement. In Hong Kong, the announcement had no impact on its shares as the market had already closed for the day. The shares rose 3 per cent to end the day at HK$46.40.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.