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When complex rules lead to multi-million pound fines for the world’s biggest banks, what hope for small financial firms?

On 30 January 2024, HSBC was fined £57.4 million.

In case you missed the detail, the fine was imposed after the bank failed to correctly identify deposits that were eligible for protection under the Financial Services Compensation Scheme (FSCS) for seven years, between 2015 and 2022.

HSBC Bank – one of HSBC’s subsidiaries – was found to have incorrectly marked 99% of its eligible beneficiary deposits as “ineligible” for FSCS protection.

According to a report in the Financial Times, “HSBC had also ‘failed to be duly open and co-operative’ with the watchdog in not alerting it for about 15 months about problems it had identified”.

Though HSBC said it was pleased to have resolved the “historic matter”, this wasn’t the first large fine that the global bank have been dealt. In December 2021, the FCA issued a £64 million fine for “serious weaknesses” in its anti-money laundering controls.

While this most recent case shines a light on PRA fines, the FCA has also issued substantial fines to some of the world’s largest financial organisations.

Indeed, since the FCA took responsibility for financial conduct regulation in April 2013, they have handed out fines totalling £1 million or more every single year.

And the regulator made its presence felt from the start – during its first full year of regulation in 2014, the FCA issued fines for £1.47 billion.

Big boys, big fines – top 3 biggest fines issued by the FCA since 2013

1. Barclays Bank plc, fined £284 million in 2015

Barclays was fined for failing to control business practices concerning its foreign exchange (FX) business in London. The bank’s front office failed to identify obvious risks linked to confidentiality, conflicts of interest, and trader conduct.

The bank was also found to have engaged in collusive behaviour, and there was evidence of inappropriate sharing of confidential information.

Barclays settled the penalty at stage two of the investigation, allowing a 20% discount, without which the fine would have been £355.5 million.

2. National Westminster Bank plc, fined £264.7 million in 2021

This marked the first case where the FCA pursued criminal charges for money laundering failings. The fine related to NatWest’s failure to properly monitor the activity of Fowler Oldfield – a Bradford-based jewellery business that deposited £264 million cash with NatWest – between 2012 and 2016. 

Red flags included:

  • Large amounts of Scottish banknotes deposited throughout England
  • Notes carrying a prominent musty smell
  • Individuals acting suspiciously when depositing cash in NatWest branches.

Despite bank employees reporting suspicions, the bank took no appropriate action.

The bank pleaded guilty, and the fine was reduced by a third.

3. UBS AG, fined £238.8 million in 2014

One of five banks to receive a share of the £1.11 billion penalty for failing to control business practices in their G10 spot FX trading operations, UBS AG received the highest proportion of the shared fine.

The Swiss bank was found to have failed to adequately identify, manage and assess the risks linked to its G10 spot FX trading business. Risks were associated with confidentiality, conflicts of interest and trading conduct.

If staying abreast of rules and regulation is hard for the world’s biggest banks, what hope for small firms?

HSBC’s story serves as a useful reminder that failing to follow UK financial rules can result in big fines, penalties, and could cause harm to your firm’s reputation.

Adhering to compliance rules and regulations is essential but it isn’t always easy to achieve. No matter the size of your firm, there’s no way to turn compliance into a straightforward box-ticking exercise.

And, despite the efforts that many firms go to, complaints have become an inevitable part of doing business.

We regularly work with financial advisers and firms who have had claims brought against them – many come to us with decades of industry experience and a previously unblemished record.

This story, where a Chartered financial planner received a complaint from a client that she’d considered a friend, is just one example of how difficult it can be to handle a complaint effectively.

Regulation is hard work, but we can help

Compliance experts with decades of industry experience, we have an innate understanding of the regulatory landscape and claims management environment.

We have wide experience at all levels of complaints – from the low consequence and simple, to high impact and complex. And have successfully managed internal complaints, Ombudsman investigations, and civil claims.

Whether you want to discuss a current complaint that you don’t know how best to handle, or take precautionary measures to enhance your compliance procedures and protect your firm from potential future complaints, we can help.

Get in touch

To find out more about how we can help protect your firm and defend complaints, please email mail@jencap.partners, book a short call by completing our online form, or call 029 2000 2325.

We’d be delighted to answer your questions.