Following
HSBC’s announcement of an agreement to pay a record $1.92 billion to
settle rule breaches on US anti-money laundering regulations and
sanctions, the UK financial watchdog announced it has told the Hong Kong/London-listed bank to tighten up controls.

The Financial Services Authority set out requirements on the bank to ensure such breaches are not repeated.
In particular, the FSA said the bank must set up a committee of the HSBC
board to oversee all issues relating to anti-money laundering,
sanctions, terrorist financing and proliferation financing.

(To view the full story of HSBC's settlement with US authorities, click here.)

It must also make the following moves, the FSA said:

• Review relevant group policies and procedures to ensure that all
  parts of the HSBC Group are subject to standards equivalent to those
  required under UK requirements;
• Appoint a group money laundering reporting officer, an FSA-approved person, to ensure controls are in place; and
• Employ an independent monitor to oversee the group’s compliance with
  UK anti-money laundering, sanctions, terrorist financing and
  proliferation financing rules.

The FSA said the measures come on top of requirements of the Cease
and Desist order issued by the US Federal Reserve Board and the Deferred
Prosecution Agreement issued by the US Department of Justice yesterday.

In comments on the HSBC
settlement yesterday, Shane Gleghorn, head of the commercial disputes
group at Taylor Wessing, the law firm, said regulators in the UK will
continue to act harshly in such cases. 

“The era of additional oversight for
banks has come a step closer today. The US regulators are taking an
approach of saying that big banks who have systems and controls problems
can't just be trusted to sort it out with the hire of new compliance
heads but must be subject to ongoing audit process by the regulator that
they will have to pay for," he said.

"The UK regulators wish to follow suit and
introduce this measure, especially where there is a large institution
with a history of failings. Indeed, HSBC is in the process of trying to
finalise a deal with the FSA and there is some speculation that this
will include the appointment of an independent monitor to oversee HSBC's
compliance function, which, if correct, would be a significant change
in the UK regulatory landscape," Gleghorn added.