UK Regulator Demands HSBC Tightens Controls To Prevent Repeat Of AML Breaches

Tom Burroughes

12 December 2012

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 had told Europe’s largest bank to tighten up controls.

The Financial Services Authority set out requirements on the London/Hong Kong-listed 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.

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.