The Times - UK (2021-12-18)

the times | Saturday December 18 2021 K1 59

Business

Patrick Hosking Financial Editor

HSBC has been fined £63.9 million for
failings over eight years that may have
led to terrorist financiers, modern slav-
ers and fraudsters going undetected.
The Financial Conduct Authority
unearthed extraordinary flaws in
HSBC’s anti-money-laundering sys-
tems in the UK, including a glitch that
meant a client could increase their
spending activity by 500,000 per cent
without raising a red flag.
For a while in 2011 all reporting of
suspicious activity in Wales was
suppressed by its computer systems,
meaning that 89,000 unusual transac-
tions by retail customers were ignored.

The FCA found hard evidence that

HSBC failed to notice suspicious activi-

ty on the account of a company director

later imprisoned for VAT fraud and a

cigarette smuggler who was also jailed.

The catalogue of failings from 2010

to 2018 is embarrassing for HSBC as

they were found in the same system,

that led to its record $1.9 billion fine in

the US in 2012 for helping Mexican

drug gangsters to launder money.

For several years HSBC was on pro-

bation with the US Department of Jus-

tice. The deferred prosecution agree-

ment expired in December 2017.

The failings were particularly serious

as HSBC had been put on notice in 2012

about potential weaknesses, the FCA

said. The prolonged period of the fail-

ings was also an aggravating factor.

The fine comes days after NatWest

was fined £265 million for failing to stop

a money-laundering scheme involving

hundreds of millions of pounds, includ-

ing cash carried in bin bags, being de-

posited at dozens of branches.

The FCA said HSBC failed to proper-

ly monitor and update scenarios that its

automated systems used to identify in-

dicators of money laundering or terror-

ist financing. It failed to test and update

the parameters in those systems or to

check the accuracy and completeness

of the raw data fed into those systems.

The fine would have been £91.4 mil-

lion but for the bank’s co-operation.

Mark Steward, FCA director of en-

forcement, said: “HSBC’s transaction

monitoring systems were not effective

for a prolonged period despite the issue

being highlighted on numerous occa-

sions. These failings are unacceptable

and exposed the bank and community

to avoidable risks, especially as the re-

mediation took such a long time.”

HSBC said: “We are pleased to re-

solve this matter, which relates to

HSBC’s legacy anti-money-laundering

systems and controls in the UK. In 2012

HSBC initiated a large-scale remedia-

tion of its financial crime control capa-

bilities. More recently, HSBC has made

significant investments in new and

market-leading technologies that go

beyond the traditional approach to

transaction monitoring.”

HSBC is the UK’s biggest bank with a

market value of £87 billion and has 40

million customers. The fine is equiva-

lent to a day and a half’s profit, based on

its first-half performance this year.

Banks process such huge volumes of

transactions that they routinely use

computer programs to flag up unusual

deposits or spending patterns.

The HSBC system, Camp, or Cus-

tomer Activity Monitoring Program, in

use since 2002, was monitoring

272.6 million transactions per month in

the UK during the period of the failings.

Alistair Osborne, page 61

The missed red flags, page 65

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world markets (Change on the day)

Gold

$1,804.75 (+7.74) $

2,000

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Brent crude (6pm)

$73.61 (-1.49)

KPMG has ruled itself out of running
for lucrative government contracts
while it tries to get its house in order.
It comes weeks after the firm
received a letter from the Cabinet
Office seeking assurances that there
would be no repeat of the scandals
which have enveloped it.
KPMG, one of the Big Four account-
ancy groups, was the third-biggest

KPMG to stop bidding for government contracts after scandals

Tom Howard winner of consulting contracts from the
government in the year to the end of
March. It was awarded public-sector
work worth about £244 million over the
period, according to Tussell, the data
provider. This included advising on the
setting up of Nightingale hospitals.
It was criticised by the industry
watchdog for its role in a series of scan-
dals. KPMG was fined £13 million by the
Financial Reporting Council (FRC)
after the sale of Silentnight, the mat-

tress company, to a private equity firm.

It is the largest fine the FRC has

imposed for a non-audit case. It also

criticised the firm for “unacceptable”

failures in audits of banks and similar

financial companies.

Cabinet Office officials are investi-

gating whether to ban KPMG from

bidding for further government work.

A decision is expected in the new year.

However, KPMG has withdrawn

from trying to win more public sector

contracts for the time being. A spokes-

woman said: “We have been working

with the Cabinet Office to demonstrate

the significant work that has been done,

and is being done, to deal with the firm’s

legacy issues. All existing contractual

work for government continues.

“KPMG has stepped back from

pursuing new tenders for central gov-

ernment whilst these conversations are

ongoing. We believe this is the right

thing to do whilst the firm works with

the Cabinet Office.” The decision was

first reported by the Financial Times. It

caps off a chaotic year for KPMG UK,

which included the resignation of its

chairman, Bill Michael, who told staff

to “stop moaning” about their working

conditions during the pandemic.

In September, the group was accused

of providing “false and misleading

information” to the FRC as part of the

regulator’s quality checks of KPMG’s

audits of Carillion.

VERTICAL AEROSPACE; COURTNEY CROW/NYSE

A

British electric

flying taxi start-up

was welcomed to

Wall Street yesterday as

the New York Stock

Exchange rang the

opening bell in its honour

at the start of trading.

Vertical Aerospace,

which raised about

$300 million when it

merged with Broadstone

Acquisition, a special-

purpose acquisition

company, was founded by

Stephen Fitzpatrick, the

green energy billionaire

who also started Ovo

Energy, in 2016.

The Bristol-based

company intends to build

small, battery-powered,

vertical take-off aircraft.

It began this year with

100 staff and expects to

have about 290 people by

the end of the month and

another 100 next year.

Vertical, which trades

under the ticker EVTL,

said that the amount

raised would more than

cover the estimated

$250 million it needed to

complete the European

Union certification of its

four-passenger eVTOL

by 2024 and start

commercial operations in

“the mid-2020s”.

Last week it unveiled

the prototype of the VX4,

which is due to start

flight testing next year.

The shares closed up

19.5 per cent at $12.84.

Take-off for

flying taxi

start-up with

Wall St listing

Flaws in bank’s system may have left criminals undetected

HSBC’s £64m laundering fine

Vertical Aerospace hopes to start commercial operations this decade. Stephen

Fitzpatrick, the founder, standing over the gavel, rang the opening bell yesterday