HSBC probed by regulator over money-laundering controls

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HSBC is being investigated by the UK watchdog for failings around money-laundering controls, the bank has disclosed.

The bank said as part of its 2016 financial results that it is “the subject of an investigation by the FCA into its compliance with UK money laundering regulations and financial crime systems and controls requirements”.

Stuart Gulliver, the chief executive, then told reporters that the bank was subject to a so-called Section 166 review. The revelation came as the bank disclosed on Tuesday that its 2016 profit slumped 62 per cent to $7.1bn, causing its shares to plummet by 6 per cent.

Section 166s, otherwise known as skilled persons reports, are not technically investigations: they are ordered by the Financial Conduct Authority but are carried out by an independent party such as an accountancy or law firm. They are part of the FCA’s supervisory, rather than enforcement, tools. However, such reviews can then be referred to the FCA’s enforcement division for its own investigation if there is evidence of wrongdoing.

The FCA declined to comment.

HSBC’s 166 inquiry is yet another regulatory burden on a long list for the bank, which paid $1.9bn to US authorities in 2012 to settle a litany of money-laundering breaches.

As part of that settlement, it signed a deferred prosecution agreement and installed a monitor to make sure that it overhauled its controls.

The mention of the FCA inquiry was just one detail in a long laundry list of continuing regulatory and litigation woes for HSBC, from a US Department of Justice investigation into allegedly suspicious transactions around Fifa, the international football body, to the continuing probes into the rigging of benchmarks.

The FCA has been cracking down on banks’ money-laundering and financial crimes controls recently. It found that Deutsche Bank had systematic failings following an in-depth review and ordered a 166 report last year, and it separately fined Barclays £72m in 2015 for shoddy controls around super-wealthy Qatari clients.

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