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HSBC has been hit with a £300,000 fine in the Isle of Man for continuing to process payments for a customer whose accounts were under a restraining order.
The island’s Financial Services Authority (FSA), announcing the decision, said the civil penalty was reduced by 30 percent due to HSBC’s “full cooperation” and “positive engagement” with the regulator.
The case concerns two related instances of misconduct, one of which was brought to the FSA’s attention voluntarily by HSBC.
In the first matter, HSBC discovered in August 2023 that it had made three recurring payments for a client who was subject to a restraining order under the Proceeds of Crime Act 2008.
The order restrained the client from accessing the funds in the relevant accounts, but permitted certain monthly payments to be made.
HSBC had controls in place to block the unlawful payments, but to process the permitted payments, these controls had to be lifted and manually re-applied each month.
In August 2023, three non-permitted payments were made due to HSBC’s failure to re-apply the controls.
However, the FSA credited HSBC for its “good detective controls” in identifying the breach, and for its “prompt notification” of the breach to the FSA and the Attorney General Chambers.
The funds were recovered in full, within two months of the notification, the regulator said.
In the second matter, in September 2023, the FSA became aware that HSBC had issued a cheque to a client without the required consent from the Financial Intelligence Unit (FIU).
Following a request from the FSA, HSBC subsequently submitted the relevant notification.
The bank also explained that, following a review of the customer relationship, its risk committee had decided to exit the relationship and close the customer’s account.
HSBC has proactively brought about operational changes to address the two instances of misconduct.
AML systems must be ‘robust’
In 2020, the Isle of Man government rated the anti-money laundering/counter-terrorism financing (AML/CTF) risks faced by the island's banking and corporate trust sector as “medium high”.
Announcing the decision against HSBC, the FSA said that firms in this sector are required to maintain a “very robust” control environment at all times.
“Any weaknesses in the design, implementation and operation of controls may expose a licenceholder to being exploited by persons who may wish to launder money or finance terrorism,” it said.
