HSBC issued with cease-and-desist order for AML failures

HSBC's North American arm accused of deficiencies in compliance

NEW YORK – The US Office of the Comptroller of the Currency (OCC) has served HSBC North America (HSBC NA) with a cease-and-desist order, demanding improvements in internal controls. The OCC claims the bank violated the Bank Secrecy Act, demanding immediate "comprehensive corrective actions".

According to a statement from the OCC, it found deficiencies in wide-ranging areas of HSBC NA's compliance programme, including suspicious activity reporting, monitoring of funds transfers and cash purchases, due diligence and risk assessments on "politically exposed persons".

The bank revealed in August it was subject to investigations over anti-money-laundering programmes and Bank Secrecy Act requirements, noting in an SEC filiing that it was "likely" it would face "some form of formal enforcement action".

The order from the OCC demands HSBC NA submit plans to strengthen oversight of compliance and regulation within 30 days of it being issued on October 4. The demand includes raising the status of the compliance function within the organisation and fully integrating compliance risk into the bank's existing framework.

The order also sets numerous targets for the bank to achieve within 10 days and 60 days. The bank is required to recruit an OCC-approved independent consultant to review the effectiveness of its AML plans within 10 days.

The OCC also noted that, in issuing the order to HSBC NA, it was not ruling out the possibility of issuing a monetary penalty at a later date.

Speaking to Operational Risk & Regulation, a spokesman for the bank said it was having "ongoing meetings" with the regulators, and continuing to co-operate with investigations. He was also keen to stress HSBC NA is "already taking action to address the regulator's concerns", including "investments in staff, systems and advisory services". He noted the bank had "roughly doubled the size of [its] compliance department since spring 2010".