Behind Expected Cuts at HSBC, Plans to Bolster Compliance Efforts

Behind Expected Cuts at HSBC, Plans to Bolster Compliance Efforts

Contributed by Gavin Bonnet on 12 June 2015
The axe may be falling on up to 50,000 positions at HSBC Holdings Plc but at least one department seems sheltered from the cost-cutting measures: the bank’s compliance team. 

The London-based bank disclosed Tuesday that it would exit Turkey and Brazil, in part because its operations there “do not fulfill” its risk and transparency requirements. The cuts, which are intended to save the institution up to $5 billion by 2017, follow four years of hiring some 4,000 staffers within its compliance team, which reached 7,200 employees earlier this year.

Overall, the bank will reduce its fulltime staff by 10 percent before reinvesting in “growth initiatives and compliance,” according to a presentation for investors.  Regulatory and legal proceedings related to anti-money laundering (AML), the investigation of convicted Ponzi schemer Bernard Madoff, forex manipulation and other issues cost HSBC $4.8 billion between 2011 and 2014, the bank said.

HSBC’s recent efforts suggest “that compliance is still at the forefront of many organization’s hiring agendas,” said Hakan Enver, operations director at Morgan McKinley, a recruitment consultancy in London.

“Compliance has seen increased levels of recruitment for many months now and the demand for compliance professionals continues, particularly in London, where institutions face pressure to manage the increased regulatory burden,” he said, adding that there has been a “huge drive” in hiring for know-your-customer compliance.

The bolstering of HSBC’s compliance team “follows on from the regulatory problems they’ve had with U.S. and European regulators in relation to sanctions breaches, money-laundering issues in Mexico, FX-rate rigging and the leaking of documents revealing tax evasion of customers in their private banking arm,” said Gavin Bonnet, managing director of London-based recruiter Pure Search.

HSBC likely hired many of its newest compliance staffers in “outsourced centers, low-cost areas and locations closer to high-risk jurisdictions,” said Bonnet, who cited China as a jurisdiction where the bank is seeking to expand. The roles could relate to junior to mid-level compliance duties in emerging markets and elsewhere, he said.

A spokeswoman for HSBC declined to comment beyond Tuesday’s financial disclosures.
In February, the International Consortium of Investigative Journalists and a raft of newspapers published details of leaked data indicating that the institution’s private banking arm in Switzerland may have knowingly maintained accounts for thousands of rich clients, some of whom were linked to arms traffickers, terrorist organizations and drug cartels.

U.K. officials have since overhauled an investigation into HSBC, as regulators and law enforcement officials in France and Germany continue probes over the institution’s possible role in aiding tax evaders. Last week, the bank agreed to pay approximately $43 million to Swiss prosecutors to settle AML violations.

In the United States, the bank continues to grapple with the fallout of its 2012 deferred prosecution agreement over AML and sanctions violations, which cost it over $1.9 billion. Earlier this month, U.S. prosecutors revealed in a 16-page motion that the bank’s controls to prevent money laundering and sanctions remain so weak that to disclose them could invite criminal exploitation, the Guardian reported.

Originally published by Irene Madongo on Moneylaundering.com, 11 June 2015