Australia’s financial watchdog, the Australian Securities and Investments Commission (ASIC), has filed a lawsuit against HSBC Bank Australia Limited (HSBC Australia), accusing the bank of systemic failures to protect customers from scams. The legal proceedings, lodged in the Federal Court on Monday, allege inadequate fraud controls, delayed investigations, and prolonged reinstatement of banking services for affected customers, leading to significant financial losses.
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$23 Million in Customer Losses
According to ASIC, between January 2020 and August 2024, HSBC Australia received approximately 950 reports of unauthorized transactions, with customer losses totaling around $23 million. A significant portion—nearly $16 million—was reported in just six months from October 2023 to March 2024.
The alleged lapses resulted in some customers losing upwards of $90,000, and many faced lengthy delays in resolving their cases. On average, ASIC claims HSBC took 145 days to investigate scam reports and 95 days to fully restore account access. In one extreme case, a customer waited a staggering 542 days to regain access to their account.
ASIC’s Allegations
ASIC Deputy Chairwoman Sarah Court outlined the regulator’s case against HSBC, describing the bank’s failings as “widespread and systemic”:
“We allege HSBC Australia’s fraud controls were insufficient, and despite being aware of the risks from at least January 2023, the bank failed to take adequate action. This resulted in devastating financial losses for customers.”
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ASIC is pursuing several penalties against HSBC Australia, including:
- Court declarations of contraventions
- Financial penalties
- Adverse publicity orders
- Reimbursement of costs
The regulator argues HSBC breached Australian laws requiring financial services to be provided efficiently, honestly, and fairly.
Broader Context: Rising Scam Concerns in Australia
This legal action comes amidst growing concern over a surge in scams across Australia. According to the Australian Competition and Consumer Commission (ACCC), Australians lost $2.74 billion to scams in 2023, highlighting the urgent need for stricter fraud prevention measures.
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In response, Parliament introduced a Scams Prevention Framework in November 2024, aiming to establish stronger protections for consumers and hold financial institutions accountable for safeguarding their customers.
HSBC’s Troubled Regulatory History
This isn’t the first time HSBC has faced regulatory scrutiny for alleged misconduct. Over the years, the bank has been penalized multiple times across jurisdictions for various failings:
- 2017 (United States):
- The U.S. Federal Reserve fined HSBC $175 million for a pattern of “unsafe and unsound practices” in foreign exchange markets.
- 2023 (United States):
- The Commodity Futures Trading Commission (CFTC) penalized HSBC Bank USA $45 million for allegations of “manipulative and deceptive trading” and failure to maintain proper business call records.
- 2024 (United Kingdom):
- The Prudential Regulation Authority (PRA) fined HSBC £57.4 million ($73 million) for failing to safeguard customer deposits in compliance with British banking rules.
- 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 hardship.
A Call for Accountability
The legal case against HSBC Australia underscores the increasing pressure on financial institutions to address the growing threat of scams. ASIC’s action highlights the need for proactive fraud prevention measures and swift responses to unauthorized transactions.
HSBC’s history of regulatory infractions globally further amplifies the stakes, as customers and regulators alike demand accountability from one of the world’s largest banking institutions.
Moving Forward
As the Federal Court prepares to hear the case, the outcome could set a precedent for how Australian banks handle fraud prevention and customer protection. Amidst rising scam losses nationwide, this case serves as a stark reminder of the responsibilities financial institutions bear in safeguarding their customers’ assets.
For HSBC, the lawsuit represents more than just financial penalties—it’s a moment of reckoning that could shape the bank’s reputation and its role in protecting customers in an increasingly digital world.
