HSBC reveals it's being probed over money laundering issues

HSBC revealed this morning it is being investigated by the City watchdog over potential shortcomings in its anti-money laundering controls.

The bank's 2016 results statement, in which it also revealed its reported profits before tax had slumped 62 per cent to $7.1bn (£5.7bn), said it was "the subject of an investigation by the Financial Conduct Authority (FCA) into its compliance with UK money laundering regulations and financial crime systems and controls requirements".

Chief executive Stuart Gulliver later revealed on a conference call that the bank would likely undergo a skilled persons report, or s.166 review as it is otherwise known, noting the bank was discovering more "bad actors" among its clients as it worked to improve its financial crime controls.

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The HSBC boss added it was too early to tell what scale of penalty, if any, the bank could be asked to cough up.

The banking giant entered into a deferred prosecution agreement in 2012 with the US Department of Justice. As part of that, the bank not only forked out a $1.9bn fine but also agreed to regular reviews into its anti-money laundering processes by a monitor.

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The monitor's review into the bank for 2016 discovered that, while it continued to make progress on strengthening its financial crime compliance checks, it was concerned about speed at which this progress was being made and had found instances where the controls might not be up to scratch.

HSBC spent $3bn on regulatory and compliance programmes throughout 2016, up 14 per cent, or $0.4bn, on the amount spent in 2015.

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However, the toll of poor compliance controls was already evident in the 2016 accounts. Potential bonuses for Gulliver, along with group finance director Iain Mackay and group risk chief Marc Moses, were capped partly for failing to meet compliance targets.

Gulliver was still awarded a bonus of £1.7m, out of a possible £2.7m, up from £1.1m the year before. His total pay for the year was £5.7m, down from £7.3m in 2015.

The FCA declined to comment on the investigation.

Full story: HSBC reveals it's being probed over money laundering issues: City A.M.

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