HSBC Australia faces A$25m penalty over scam protection failures

HSBC Australia has admitted to failures in its scam prevention and fraud response systems, paving the way for a proposed A$25 million penalty, according to Bloomberg.

The Australian Securities and Investments Commission (ASIC) and HSBC will ask the Federal Court to approve the penalty and find that the bank breached its obligations to customers.

Thousands affected

The case centres on more than 1,000 reports of unauthorised transactions worth about A$35 million between January 2020 and August 2024.

Many incidents involved impersonation scams, where criminals posed as HSBC staff to gain access to customer accounts.

ASIC said HSBC lacked adequate controls over internal transfers and was slow to investigate fraud reports.

Customer losses

The regulator said some customers were forced to borrow money, work extra shifts or worried about meeting home loan repayments while waiting for their cases to be resolved.

Others suffered stress and anxiety after losing access to their funds.

"This is one of the first cases of its kind globally and sends a clear message that protecting customers from scams is a core responsibility of banks," ASIC Chair Sarah Court said.

He further added, "HSBC's alleged failures left customers more vulnerable to scams, tens of millions of dollars out of pocket and waiting months to find out what had happened to their money."

Compensation underway

HSBC has already paid around A$21.5 million in compensation and recovered a further A$6.5 million for affected customers. Additional payments are expected.

An HSBC spokesperson said the agreement remains subject to court approval.

"We apologise to our customers who were impacted by these events. We are pleased to have reached an agreement to resolve the proceedings with ASIC, which recognises our customer redress program and the significant enhancements made to our fraud and scam prevention, detection and response."

Sector warning

The case highlights growing regulatory scrutiny of banks as authorities push for stronger protections against scams and fraud.

The penalty also comes as HSBC explores options for its Australian retail banking business.