HSBC Bank Middle East Limited (2015-09-03)

Summary

This is a public statement issued by the Jersey Financial Services Commission under Article 48(2) of the Banking Business (Jersey) Law 1991 concerning HSBC Bank Middle East Limited (HBME), a Jersey-incorporated bank operating mainly in the Middle East and North Africa. It sets out the findings of a Reporting Professional's detailed review of HBME's compliance with Jersey's AML/CFT and sanctions regime over the period 2008 to 2012, and describes the Bank's subsequent remediation efforts.

• Corporate governance: The Board and Audit Committee did not proactively reassess whether HBME's global policies remained equivalent to Jersey's AML Handbook requirements over time.
• Sanctions reporting: HBME failed to detect and report breaches of Jersey sanctions legislation to the Chief Minister's Office in a timely manner, though all breaches were eventually voluntarily disclosed.
• SARs: Suspicious activity reporting processes were inconsistent across jurisdictions, with some SARs not externally reported in a timely manner; HBME continues to file SARs locally rather than with Jersey's JFCU pending resolution of dual reporting issues.
• Customer due diligence: A dip sample review found CDD inadequate in 83 of 100 relationships reviewed, with issues in address verification, document certification, and ownership/control information; enhanced due diligence was frequently inadequate for high-risk relationships.
• PEP handling: Source of wealth was not consistently established or verified for politically exposed persons, and risk ratings were sometimes incorrect.
• Training: Local AML/CFT/sanctions training was inconsistent in quality and content across jurisdictions.
• Remediation: HBME has undertaken significant remediation, including restructuring its Compliance function, increasing Financial Crime Compliance headcount, enhancing screening and monitoring systems, and appointing a Regional Head of Regulatory Affairs and Policy.

The statement notes no finding of dishonesty or bad faith by HBME or its staff. The Commission states it will independently verify the effectiveness of HBME's remediation plan during 2015/16 and will continue to monitor implementation in liaison with regulators in other relevant jurisdictions.

Applies to

banks, deposit-taking businesses

Deadlines

• 2015/16: The Commission will independently verify the effectiveness of HBME's remediation plan during the course of 2015/16