Australia's financial watchdog has launched legal proceedings against HSBC Bank Australia Limited (HSBC Australia). It alleges the bank failed to adequately protect customers from scams resulting in millions of dollars in losses.

HSBC Australia Faces Legal Action over Alleged Scam Protection Failures

The Australian Securities and Investments Commission (ASIC) filed documents in the Federal Court today (Monday). It claims HSBC Australia lacked sufficient controls to prevent and detect unauthorized payments. The regulator also accuses the bank of failing to comply with its obligations to investigate customer reports of unauthorized transactions within required timeframes and to promptly reinstate banking services.

HSBC Bank Australia Limited failed to adequately protect customers scammed out of millions of dollars, according to documents filed by ASIC in the Federal Court today https://t.co/LLy10PSn4v pic.twitter.com/U3sx7WbBYt

— ASIC Media (@asicmedia) December 15, 2024

According to ASIC, HSBC Australia received approximately 950 reports of unauthorized transactions between January 2020 and August 2024. Customer losses totaled about $23 million. Nearly $16 million of these losses occurred in just six months, from October 2023 to March 2024.

“We allege HSBC Australia's failings were widespread and systemic, and the bank failed to protect its customers,” ASIC Deputy Chair Sarah Court stated. “We allege that from at least January 2023, HSBC Australia was aware of the risks of unauthorised transactions occurring and that there were gaps in their fraud controls. This resulted in some customers getting scammed out of $90,000 or more.”

The regulator claims HSBC Australia took an average of 145 days to investigate customers' scam reports and 95 days to restore full access to bank accounts. In one extreme case, a customer reportedly waited 542 days for full account access to be reinstated.

ASIC is seeking court declarations of contraventions, financial penalties, adverse publicity orders, and costs against HSBC Australia. The watchdog alleges the bank failed to ensure its financial services and credit activities were provided efficiently, honestly, and fairly, as required by Australian law.

This legal action comes amid increasing concern over the rise of scams in Australia. The Australian Competition and Consumer Commission reported that Australians lost $2.74 billion to scams in 2023. In response to this growing threat, legislation was introduced to Parliament on November 7, 2024, to establish a new Scams Prevention Framework.

HSBC’s History of Regulatory Scrutiny

This is not the first time HSBC has faced intense regulatory scrutiny over alleged misconduct. In 2017, the bank was fined $175 million by the U.S. Federal Reserve Board for a longstanding pattern of “unsafe and unsound practices” in the foreign exchange (FX) markets.

More recently, in 2023, the U.S. Commodity Futures Trading Commission (CFTC) penalized HSBC Bank USA $45 million. The fine stemmed from allegations of “manipulative and deceptive trading” by HSBC traders and a failure to maintain proper business call records. The CFTC confirmed a settlement with HSBC’s U.S. subsidiary as part of the resolution.

In 2024, HSBC faced significant penalties in the United Kingdom. The Prudential Regulation Authority (PRA) fined the bank £57.4 million ($73 million) for “serious failings” in safeguarding certain customer deposits as mandated by British banking rules.

Additionally, the Financial Conduct Authority (FCA) imposed a £6.28 million fine on HSBC UK Bank plc, HSBC Bank plc, and Marks and Spencer Financial Services plc for mishandling customers experiencing financial difficulties.