HSBC Australia Faces ASIC Lawsuit over Alleged $23 Million Scam Losses

Monday, 16/12/2024 | 07:31 GMT by Damian Chmiel
  • ASIC sues HSBC Australia for allegedly failing to protect customers from scams.
  • The bank faces accusations of inadequate fraud controls and delays in investigating unauthorized transactions.
law

Australia's financial watchdog has launched legal proceedings against HSBC Bank Australia Limited (HSBC Australia), alleging the bank failed to adequately protect customers from scams resulting in millions of dollars in losses.

HSBC Australia Faces Legal Action over Alleged Scam Protection Failures

The Australian Securities and Investments Commission (ASIC) filed documents in the Federal Court today (Monday), claiming HSBC Australia lacked sufficient controls to prevent and detect unauthorized payments. The regulator also accuses the bank of failing to comply with its obligations to investigate customer reports of unauthorized transactions within required timeframes and to promptly reinstate banking services.

According to ASIC, HSBC Australia received approximately 950 reports of unauthorized transactions between January 2020 and August 2024, with customer losses totaling about $23 million. Nearly $16 million of these losses occurred in just six months, from October 2023 to March 2024.

ASIC Deputy Chairwoman, Sarah Court
ASIC Deputy Chairwoman, Sarah Court

"We allege HSBC Australia's failings were widespread and systemic, and the bank failed to protect its customers,” ASIC Deputy Chair Sarah Court stated. “We allege that from at least January 2023, HSBC Australia was aware of the risks of unauthorised transactions occurring and that there were gaps in their fraud controls. This resulted in some customers getting scammed out of $90,000 or more.”

The regulator claims HSBC Australia took an average of 145 days to investigate customers' scam reports and 95 days to restore full access to bank accounts. In one extreme case, a customer reportedly waited 542 days for full account access to be reinstated.

ASIC is seeking court declarations of contraventions, financial penalties, adverse publicity orders, and costs against HSBC Australia. The watchdog alleges the bank failed to ensure its financial services and credit activities were provided efficiently, honestly, and fairly, as required by Australian law.

This legal action comes amid increasing concern over the rise of scams in Australia. The Australian Competition and Consumer Commission reported that Australians lost $2.74 billion to scams in 2023. In response to this growing threat, legislation was introduced to Parliament on November 7, 2024, to establish a new Scams Prevention Framework.

HSBC’s History of Regulatory Scrutiny

This is not the first time HSBC has faced intense regulatory scrutiny over alleged misconduct. In 2017, the bank was fined $175 million by the U.S. Federal Reserve Board for a longstanding pattern of “unsafe and unsound practices” in the foreign exchange (FX) markets.

More recently, in 2023, the U.S. Commodity Futures Trading Commission (CFTC) penalized HSBC Bank USA $45 million. The fine stemmed from allegations of "manipulative and deceptive trading" by HSBC traders and a failure to maintain proper business call records. The CFTC confirmed a settlement with HSBC’s U.S. subsidiary as part of the resolution.

In 2024, HSBC faced significant penalties in the United Kingdom. The Prudential Regulation Authority (PRA) fined the bank £57.4 million ($73 million) for "serious failings" in safeguarding certain customer deposits as mandated by British banking rules.

Additionally, the Financial Conduct Authority (FCA) imposed a £6.28 million fine on HSBC UK Bank plc, HSBC Bank plc, and Marks and Spencer Financial Services plc for mishandling customers experiencing financial difficulties.

Australia's financial watchdog has launched legal proceedings against HSBC Bank Australia Limited (HSBC Australia), alleging the bank failed to adequately protect customers from scams resulting in millions of dollars in losses.

HSBC Australia Faces Legal Action over Alleged Scam Protection Failures

The Australian Securities and Investments Commission (ASIC) filed documents in the Federal Court today (Monday), claiming HSBC Australia lacked sufficient controls to prevent and detect unauthorized payments. The regulator also accuses the bank of failing to comply with its obligations to investigate customer reports of unauthorized transactions within required timeframes and to promptly reinstate banking services.

According to ASIC, HSBC Australia received approximately 950 reports of unauthorized transactions between January 2020 and August 2024, with customer losses totaling about $23 million. Nearly $16 million of these losses occurred in just six months, from October 2023 to March 2024.

ASIC Deputy Chairwoman, Sarah Court
ASIC Deputy Chairwoman, Sarah Court

"We allege HSBC Australia's failings were widespread and systemic, and the bank failed to protect its customers,” ASIC Deputy Chair Sarah Court stated. “We allege that from at least January 2023, HSBC Australia was aware of the risks of unauthorised transactions occurring and that there were gaps in their fraud controls. This resulted in some customers getting scammed out of $90,000 or more.”

The regulator claims HSBC Australia took an average of 145 days to investigate customers' scam reports and 95 days to restore full access to bank accounts. In one extreme case, a customer reportedly waited 542 days for full account access to be reinstated.

ASIC is seeking court declarations of contraventions, financial penalties, adverse publicity orders, and costs against HSBC Australia. The watchdog alleges the bank failed to ensure its financial services and credit activities were provided efficiently, honestly, and fairly, as required by Australian law.

This legal action comes amid increasing concern over the rise of scams in Australia. The Australian Competition and Consumer Commission reported that Australians lost $2.74 billion to scams in 2023. In response to this growing threat, legislation was introduced to Parliament on November 7, 2024, to establish a new Scams Prevention Framework.

HSBC’s History of Regulatory Scrutiny

This is not the first time HSBC has faced intense regulatory scrutiny over alleged misconduct. In 2017, the bank was fined $175 million by the U.S. Federal Reserve Board for a longstanding pattern of “unsafe and unsound practices” in the foreign exchange (FX) markets.

More recently, in 2023, the U.S. Commodity Futures Trading Commission (CFTC) penalized HSBC Bank USA $45 million. The fine stemmed from allegations of "manipulative and deceptive trading" by HSBC traders and a failure to maintain proper business call records. The CFTC confirmed a settlement with HSBC’s U.S. subsidiary as part of the resolution.

In 2024, HSBC faced significant penalties in the United Kingdom. The Prudential Regulation Authority (PRA) fined the bank £57.4 million ($73 million) for "serious failings" in safeguarding certain customer deposits as mandated by British banking rules.

Additionally, the Financial Conduct Authority (FCA) imposed a £6.28 million fine on HSBC UK Bank plc, HSBC Bank plc, and Marks and Spencer Financial Services plc for mishandling customers experiencing financial difficulties.

About the Author: Damian Chmiel
Damian Chmiel
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About the Author: Damian Chmiel
Damian's adventure with financial markets began at the Cracow University of Economics, where he obtained his MA in finance and accounting. Starting from the retail trader perspective, he collaborated with brokerage houses and financial portals in Poland as an independent editor and content manager. His adventure with Finance Magnates began in 2016, where he is working as a business intelligence analyst.
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