Global: ASIC Sues HSBC Australia Over Alleged Failures in Protecting Customers from Scams

The Australian Securities and Investments Commission (ASIC) has initiated legal action against HSBC Australia, accusing the bank of failing to adequately safeguard its customers from scams and unauthorized transactions.

Allegations of Systemic Failures

ASIC alleges that HSBC Australia did not have sufficient controls to prevent and detect unauthorized payments. Furthermore, the bank reportedly failed to meet its obligations under the ePayments Code, including investigating customer reports of unauthorized transactions within required timeframes and promptly reinstating access to banking services.

A significant surge in reports of unauthorized transactions was observed from mid-2023, often linked to scams where fraudsters impersonated HSBC Australia staff to gain access to customer accounts.

Between January 2020 and August 2024, HSBC received approximately 950 reports of unauthorized transactions, resulting in customer losses of $23 million. Notably, almost $16 million of these losses occurred in the six months between October 2023 and March 2024.

Lengthy Delays in Customer Support

ASIC Deputy Chair Sarah Court described the bank’s shortcomings as “widespread and systemic,” stating:

“We allege HSBC Australia failed to protect its customers and compounded the problem by not complying with its obligations under the ePayments Code. On average, the bank took 145 days to investigate reports of scams and 95 days to restore full account access. In one case, a customer waited 542 days to regain full access to their account.”

Regulatory Action

ASIC is pursuing several remedies, including:

• Declarations of contraventions.
• Pecuniary penalties.
• Adverse publicity orders.
• Recovery of costs.

This case underscores the critical need for financial institutions to prioritize robust fraud prevention measures and timely customer support, particularly as scams and cyberattacks continue to escalate globally. The outcome of the case is expected to set a precedent for how Australian banks handle unauthorized transactions and customer restitution.