HSBC defends checks on UK SMEs which have damaged businesses

hsbc tower

HSBC today defended a clampdown on money-laundering that has led to the closure of hundreds of small business accounts — but said it is being cautious after a £1.2 billion fine for trading with Mexican cocaine barons.

The bank reported a surge in third-quarter profits, up 448 per cent to £3.5 billion. But it was on the back foot over legal complaints from small business clients who have had accounts frozen over money-laundering concerns.

Finance director Iain Mackay said in most cases clients had not responded to requests for information.

“We go to our customers and ask them for information. We make decisions based on the information we get,” he said. “We contact them at least four times over a 2 to 3-month period…20 per cent of them don’t respond.”

Mackay added: “This is the law of the land. This is a regulatory requirement.” But he admitted: “Our risk appetite for this is informed by failings we have had in the past.”

In 2012 HSBC paid a record £1.2 billion fine for failing to spot that Mexican drug traffickers were using it to launder money in what prosecutors called “stunning failures of oversight”.

Mackay said some customers make the mistake of treating requests for information as “junk mail”. Hundreds of small firms are pondering a legal challenge led by Stewarts Law.

Clive Zietman at Stewarts told the FT: “It is clear that in some cases HSBC’s actions caused great harm to a large number of perfectly respectable and innocent businesses.”

HSBC shares rose 6.5p, to 741p, as analysts digested decent results. Chief executive Stuart Gulliver leaves next year to be replaced by insider John Flint, and Mark Tucker has started as chairman, replacing Douglas Flint.

Gulliver said its “pivot to Asia” strategy has worked. Asia is now more than 70% of group profits, with the UK arm around 10 per cent. Analysts say Flint will inherit a business looking for growth after years of cost-cutting.

Rebecca O’Keeffe at Interactive Investor: “Shifting to the East has reaped rewards for the bank, whose investors have been significantly rewarded over the past few months, even if today’s performance is relatively muted.”