HSBC lacks integrated compliance IT following record money laundering fine

HSBC must do more to upgrade anti-money laundering systems in the wake of a multi-billion dollar fine from US authorities, with IT across its business ‘lacking integration’, according to a Department of Justice court filing.

The UK-based bank was given a record $1.9 billion (£1.2 billion) in 2012 for failing to prevent money laundering by Mexican drug cartels, and was compelled by regulators on both sides of the Atlantic to improve monitoring systems.

A court filing published by the DoJ on Tuesday highlighted concerns made by an independent compliance monitor assigned to the case, Michael Cherkasky, who said that systems used by the bank to monitor customer transactions were different across the organisation.

"The Monitor found that HSBC Group's IT and transaction monitoring systems lack integration, coordination, and standardisation," the court filing said, referring to a review Cherkasky filed in January.

According to the Wall Street Journal, Cherkasky has made a series of recommendations for the bank, including the development of a global strategy for its anti-money laundering (AML) efforts, and suggested that 100 percent of senior execs’ pay should be docked if it fails to develop an effective AML programme.

The bank claims to have already invested $290 million (£175m) on improving compliance systems since the settlement was agreed, and has added around 1,800 full-time employees last year to support its efforts.

Earlier this year a regulatory investigation into another UK-based lender, Standard Bank, a subsidiary of South Africa's Standard Bank Group, revealed “serious weaknesses” in its AML procedures. This included failure to carry out adequate due diligence measures before dealing with customers connected to clients with a high risk of money laundering. The bank subsequently confirmed it has invested in upgrading monitoring systems, after being fined £7 million by the Financial Conduct Authority.

According to a recent KPMG report, a third of senior banking executives believe that their anti-money laundering systems at their business are currently inadequate.

Copyright © 2014 IDG Communications, Inc.

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