HSBC Bank Is Fined Big $45m Penalty for Illegal Trading
HSBC Bank (NYSE:HSBC) is being fined a big $45 million penalty for illegal trading by The Commodity Futures Trading Commission (CFTC).
The charges are specifically for manipulative and deceptive trading in Connection with swaps related to bond issuances, spoofing, and supervision and mobile device recordkeeping failures at various times during approximately an eight-year period, per the Commission.
HSBC is ordered to pay a $45 million civil monetary penalty; to cease and desist from further violations of the Commodity Exchange Act’s (CEA) anti-fraud, anti-manipulation, supervision, and recordkeeping provisions; and to engage in specified remedial undertakings.
HSBC has represented that it has already undertaken and continues to undertake extensive remedial measures, as described in the order, the press release stated.
“The Commission has zero tolerance for manipulative, deceptive or spoofing transactions, including by registered swap dealers,” said Director of Enforcement Ian McGinley.
“Registrants need to take their supervisory responsibilities seriously to prevent this conduct.
Today’s order makes it crystal clear that the CFTC will continue to vigilantly investigate and prosecute disruptions to market integrity and fraud and endeavor to protect all market participants, including swap counterparties, from abusive practices.”
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HSBC Bank News Today
The order finds HSBC violated the CEA at various times from approximately March 2012 to July 2020.
On multiple occasions between March 2012 and 2015, traders at HSBC engaged in and attempted to engage in manipulative and deceptive trading in interest rate swaps, basis swaps, and swap spreads in connection with interest rate swaps that
HSBC entered into with bond issuers (issuer swaps). The issuer swaps were priced in part based on prices displayed on pricing screens controlled by interdealer broker firms.
HSBC traders intentionally traded at the broker firms controlling the relevant screens during telephonic pricing calls in which the bond issuances, and the related issuer swaps, were priced, and HSBC traders structured their trading intentionally to move prices for the relevant swaps on these screens.
Traders engaged in this conduct to increase the profitability of issuer swaps for HSBC to the detriment of HSBC’s counterparties.
As the order finds, by trading in such a way as to move market prices in a direction that was better for HSBC and worse for its counterparties during pricing calls, HSBC used its counterparties’ material confidential information about the timing and pricing of issuer swaps in a way that was materially adverse to the interests of its counterparties.
HSBC also did not communicate with its counterparties in a fair and balanced manner based on principles of fair dealing and good faith.
“At times, supervisors and senior management at HSBC or its affiliates knew of, and even directed, HSBC traders to engage in this conduct.”
HSBC Fined $84 Million for ‘Failings’ in Anti-Money Laundering System
In December of 2021, The U.K.’s Financial Conduct Authority (FCA) fined HSBC Bank$84.7 million for “failings” in its anti-money laundering (AML) system.
The FCA reported the fine on its website on Friday (Dec. 17), saying that while HSBC used automated processes to monitor possible financial crime, the authority found “serious weaknesses” over an eight-year period between 2010 and 2018.
It seems the bank has an 8-year period history of deceptive and manipulative practices when viewing their track record.
“HSBC’s transaction monitoring systems were not effective for a prolonged period despite the issue being highlighted on numerous occasions,” Mark Steward, executive director of enforcement and market oversight at the FCA.
“These failings are unacceptable and exposed the bank and community to avoidable risks, especially as the remediation took such a long time.
HSBC continued their remediation to address these weaknesses after the relevant period.”
The authority said HSBC failed to “consider whether the scenarios used to identify indicators of money laundering or terrorist financing covered relevant risks until 2014, and carry out timely risk assessments for new scenarios after 2016.”
In addition, the bank did not properly test and update the parameters in its system to determine whether a transaction was suspicious, nor did it check the accuracy and completeness of the data within its monitoring systems.
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