Key Points
- The Australian Securities and Investments Commission (ASIC) has taken legal action against HSBC.
- ASIC claims failures at the big bank resulted in a loss of $23 million over four years.
- The lawsuit alleges that HSBC failed to protect its customers, including some who lost their entire savings.
Systemic and widespread failures at a major bank led to some customers having their savings stolen, the corporate regulator said as it launched landmark legal action.
Significant failings by HSBC Australia resulted in losses of around $23 million over a four-year period, the Australian Securities and Investments Commission (ASIC) said on Monday.
The regulator has launched its first prosecution against a bank for failing to protect its customers from scams in a Federal Court case that focuses on around 950 reports of unauthorized transactions allegedly received between January 2020 and August 2024.
ASIC said HSBC did not have adequate controls in place to prevent and detect unauthorized payments, and did not act quickly enough to respond to scam reports as soon as they were received.
“We consider HSBC Australia’s failure to comply with these obligations to be significant, widespread and systemic,” HSBC vice-chair Sarah Court told reporters.
“The bank failed to adequately protect its customers.”
The court did not specify what sanctions the regulator would seek from HSBC in court, but indicated that they would be very heavy.
“The maximum penalties are so high that they are almost theoretical,” she said.
Some customers are said to have lost their entire savings to the scams, while the sums taken included amounts of more than $90,000, the Court heard.
The regulator also alleges that there were significant delays in HSBC’s fraud investigation process and that it took an average of 145 days to respond to scam reports, instead of the required maximum of 45 days .
During this period, affected customers were reportedly locked out of their accounts for an average of 95 days, while one customer was unable to access their funds for 542 days.
“We are absolutely concerned that HSBC was informed as early as 2020 that its customers were suffering losses related to scams or unauthorized transactions,” Court said.
This trial constitutes a historic step for the regulator in its action aimed at curbing bank bankruptcies due to scams.
“This is the first time ever that we have held a financial institution accountable for what we consider to be widespread compliance failures,” the court said.
HSBC Australia has previously faced criticism over its handling of fraud claims from customers and advocacy groups, recently raising concerns about slow responses and poor communication.
The bank, which is a subsidiary of one of the world’s largest banking groups, has been contacted for comment.
Australians lost $2.74 billion to scams in 2023, according to the Australian Competition and Consumer Commission.
The vast majority of losses are borne by customers.
Legislation to establish a scam prevention framework was introduced to Parliament in November, providing for fines of up to $50 million if a business fails to take reasonable steps to prevent, respond to or report scams.
