HSBC has decided to reassign the Americas head of its global banking division because of the manager’s poor attitude about the bank’s compliance and audit program, according to an update from its compliance monitor.
The six-page report, written by federal prosecutors to summarize the monitor’s findings after one year of observing HSBC’s efforts to improve its anti-money laundering and sanctions compliance, cites that manager’s removal as one example of the positive steps HSBC’s top executives have taken since the bank signed a deferred-prosecution agreement in 2013.
According to the report, that division of HSBC, the Global Banking Markets business line in the United States, fought hard against the internal audit and compliance functions at HSBC that were testing its know-your-customer program in 2014. “In the monitor’s view, GBM’s interactions with both internal audit and [compliance] were marked by combativeness, overblown complaints about factual inaccuracy, and a basic lack of cooperativeness,” the report said. “The monitor concluded that the GBM business in the United States demonstrated a deficient culture that had not fully accepted the role and legitimacy of the internal audit and control functions.”
When HSBC’s senior leaders learned of that resistance, the report said, they decided to re-assign the manager of that division and remove him from the Global Business Markets’ executive committee. They also cut his bonus in half, which resulted in a 14 percent cut to his total compensation for 2014. Another senior executive in the division involved in the resistance also received a cut to his bonus. The report did not identify either employee by name, and said the manager’s removal is still pending until regulators approve that person’s replacement.
Overall the report paints a mildly positive picture for HSBC: its senior leaders now embrace a strong compliance program and genuinely want the business to improve, it said, but the bank still has much work ahead to improve its compliance technology and to root out examples of poor culture such as the Americas manager.
“In sum, as the monitor’s report indicates, HSBC has made material progress toward meeting the most stringent compliance standards imposed to date upon a global financial institution,” the report said. “But as the report also makes clear, HSBC must continue and enhance its progress in order to maintain compliance with the DPA’s very strict terms.”
(Disclosure: Compliance Week is owned by Wilmington PLC, which provides compliance training services to HSBC through another operating unit.)