HSBC apologises; says it should have stronger controls

Reacting to the Senate sub-committee report, HSBC said in a statement that it would apologise for failing to meet regulatory and customer standards in the past.

The bank said it recognises that its "controls could and should have been stronger and more effective in order to spot and deal with unacceptable behavior."

''HSBC Holdings Plc will put itself at the mercy of the US Senate on Tuesday, acknowledging shortcomings in its anti-money laundering operations and promising to fix what a scathing report called a "pervasively polluted" culture at the bank.''

"We will acknowledge that, in the past, we have sometimes failed to meet the standards that regulators and customers expect," it said. "We will apologise, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong."

The Senate panel's report was also highly critical of the Office of the Comptroller of the Currency, a major US bank regulator. The Senate report faulted the office, whose top officials will testify later in the day, for its oversight of HSBC.

In prepared testimony released at the start of the hearing, the OCC acknowledged the need for changes the report called for in its oversight of anti-money laundering operations.

"We agree with the concerns reflected in each of the recommendations and will take actions in response," it said.

The OCC will also testify on the extent of the failings it found in HSBC's money laundering controls, and the orders it issued to the bank to correct them.

''We have learned a great deal working with the Subcommittee on this case history and also working with U.S. regulatory authorities, and recognize that our controls could and should have been stronger and more effective in order to spot and deal with unacceptable behaviour.'' HSBC said in a statement.

We believe that this case history will provide important lessons for the whole industry in seeking to prevent illicit actors entering the global financial system.

With a new senior leadership team and a new strategy in place since last year, HSBC has already taken concrete steps to augment the framework to address these issues including significant changes to strengthen compliance, risk management and culture.

These steps include:

  • Creation of a new global structure, which makes HSBC easier to manage and control with four global businesses and ten global functions, allowing a coordinated and consistent approach, including compliance and risk;
  • Substantial increase in resources, doubling of global expenditure and significant strengthening of compliance as a control function;
  • Adopting and enforcing a single standard globally determined by the highest regulatory standard we must apply anywhere.

This includes:

  •  Maximizing information sharing for risk management purposes across HSBC to the extent permitted by law;
  • Applying a globally consistent approach to knowing your customer regulations;
  • Requiring all HSBC affiliates to independently complete due diligence on other HSBC affiliates with which they have a correspondent banking relationship;
  • Introducing a global risk filter which will standardize the way we do business in high risk countries; and
  • Reinforcing a consistent global sanctions policy. Among other things, this will mean that we will be screening for all illicit actors designated by OFAC in all jurisdictions, in all currencies.

Success in detecting and preventing illicit actors' access to the global financial system calls for constant vigilance and HSBC will continue to work in close cooperation with all governments to achieve this, it added.