Bank Of England Tells HSBC To Tighten Fraud, Staff Compliance

BoE Tells HSBC To Tighten Fraud Compliance

The Bank of England has told HSBC to improve compliance controls for non-fiscal factors like fraud and staff conduct, according to a report by Reuters.

The shortcomings were pointed out by Prudential Regulation Authority regulators. HSBC said it is planning to get executives together to work on the problem.

Samir Assaf, HSBC head of global banking and markets, shared the news with other seniors bankers on Tuesday (Nov. 5), and said the shortcomings were uncovered in the midst of normal regulatory work.

This isn’t the first time HSBC has been saddled with complaints about compliance – the bank was involved in a massive scandal over money laundering with Mexican cartels, for which it paid almost $2 billion in a settlement with the U.S. in 2012. A deferred prosecution agreement between the Department of Justice and the bank ended half a decade later, with HSBC spending hundreds of millions to improve compliance.

HSBC interim CEO Noel Quinn, who is currently trying to restructure the bank in the wake of its relatively poor performance, will now have to deal with the compliance issues as well.

HSBC posted an 18 percent loss in pre-tax profits for the third quarter of 2019 compared to the same period last year, reports said. HSBC CFO Ewen Stevenson announced plans to restructure the U.K. and U.S. businesses, which had the greatest losses.

Combined, the assets make up one-third of the bank’s capital, according to Stevenson. “Returns are very, very weak across both of those businesses,” he said. “We need to get those returns up. We haven’t yet sized [up] what that means in terms of the restructuring.”

The quarter posted $4.8 billion in pre-tax profits, below analyst expectations, with revenue at $13.36 billion for the quarter. Shares dropped by as much as 2.8 percent following the report.

According to Stevenson, the bank’s operations in Hong Kong, where the bank is publicly listed, have remained “resilient,” although he noted some deterioration in credit portfolios, particularly among small businesses.

Peter Wong, the bank’s deputy chairman and chief executive of Asia Pacific operations, recently called for China to relax regulations to allow more foreign banks to enter the market and obtain banking licenses.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.