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The Maltese Financial Intelligence Analysis Unit (FIAU) has issued a financial penalty to the UK-headquartered bank for failing to comply with money laundering laws.
The FIAU has fined HSBC €82,000 for violating local anti-money laundering (AML) rules.
The Mediterranean island’s regulator said that the financial institution had failed to document the justification for a €2m transaction by one of its clients.
“Through its representations, the bank provided more detailed information regarding the business operations of the customer in question, noting that since the particular transaction was deemed to be in line with the customer’s business and KYC, no further action was taken by the bank,” the FIAU noted in its online notice.
Although the bank had provided more context regarding the transaction in question, neither the invoices referred to in the compliance examination report nor any other supporting documentation were included as part of the representations.
“For this reason, the rationale for the payment received could not be further substantiated,” said the FIAU. “In addition, based on the review of the customer’s transactions list, the Committee observed that the value of the transaction in question is significantly larger when compared to the value of the other transactions that were passing through the accounts.”
In addition, during its inspection, the FIAU noted that the monetary thresholds for large-value transactions were too high to allow the bank to effectively monitor the same.
The compliance examination report referred to various high-value transactions pertaining to one customer file, which at times reached €800,000, but did not alert the bank’s transaction monitoring system.
Here, HSBC stated that although the rule in place at the time did not trigger any alerts relative to the transactions pertaining to this customer, following the performance of its tuning exercise and introduction of its revised thresholds, an alert would have now been triggered by the same rule.
The bank also stated that other controls in place did lead it to scrutinise the transactions involved.
However, this was not good enough, and the bank was told that its thresholds were too high to monitor suspicious activity.
“The committee emphasised that the previously established monetary thresholds to monitor large transactions passing through the accounts within a specific time period were too high, thus increasing the risk that certain large and anomalous transactions were not being captured and adequately scrutinised by the bank,” said the FIAU.
This risk would have been further exacerbated should there have been instances where such transactions were not alerted by other rules, it added.
The FIAU is incredibly active, and has issued 30 notices this year to a variety of players, including banks, gaming operators and advisors.
Its active role as a regulator is probably due to increased international scrutiny of the island, which landed it on the Financial Action Task Force’s increased monitoring list in 2021.
Prior to this, in 2018, it had only issued two notices, and in 2017 just one.
