The Australian Securities & Investments Commission (ASIC) has lodged a claim against HSBC's Australian arm in the federal court today, alleging the global banking giant dropped the ball after failing to adequately protect and prevent costing customers $23 million in lost funds.
ASIC says HSBC Australia had “failed to have adequate controls in place to prevent and detect unauthorised payments and failed to comply with its obligations to investigate customer reports of unauthorised transactions within the specified timeframes required and to promptly reinstate their banking services in a timely manner”.
The scams started ramping up from mid-2023, the watchdog says, often occurring after scammers had obtained access to their accounts by impersonating HSBC Australia staff.
Almost $16 million worth in the reports occurred during the six months from October 2023 to March 2024.
ASIC Deputy Chair Sarah Court says the watchdog alleges that HSBC Australia’s failings were widespread and systemic, and the bank failed to protect its customers.
“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 [resulting] in some customers getting scammed out of $90,000 or more,” Court says.
ASIC says the Hong Kong borne bank compounded the problem by failing to comply with its obligations under the ePayments Code, letting customers down when they needed help the most, on average taking 145 days to investigate customers’ reports that they had been scammed.
“We are also concerned that HSBC Australia failed to promptly restore customers’ full access to their bank accounts, on average taking 95 days to do so,” Court says.
“One customer did not have full access restored for 542 days.”
ASIC is seeking declarations of contraventions, pecuniary penalties, adverse publicity orders, and costs from the banking major.
Recent figures out of ASIC showed Australians made over 601,000 reports of scams in 2023, stealing around $2.7 billion - a whopping 18.5% rise compared to 2022.
Tougher penalties on banks
Banks are set to be hit with tougher penalties in the future, with an update to Australia’s Scams Prevention Framework requiring more oversight and action by the sector, with fines of up to $50 million for failures to adhere to the new set of rules designed to further protect customers.
The framework sets out clear responsibilities for regulated entities to take various steps to address scams with the endorsement of the Federal Government and regulators such as ASIC.
The legislation change was lobbed into Parliament on November 7 this year and is undergoing checks and balances.
Meanwhile, HSBC says it will "continue to make significant investments in our fraud and scam prevention, detection, and response, with specific efforts on preventing impersonation scams and 'spoofing' of phone numbers".