HSBC faces legal challenge from small businesses – Financial Times


HSBC faces a potential legal challenge from small businesses that have had their accounts frozen as the largest bank listed in the UK attempts to crack down on anti-money laundering.

Hundreds of small companies, ranging from financial services boutiques to a fruit importer, have been hit by the crackdown, according to two people close to the situation.

Stewarts Law is seeking to launch a legal challenge on behalf of small companies that allege they have lost money as a result of being unable to conduct business.

Clive Zietman, head of commercial litigation at Stewarts, told the FT: “It is clear that in some cases HSBC’s actions caused great harm to a large number of perfectly respectable and innocent businesses.

“In so far as the law permits, HSBC should plainly provide fair compensation to any business that has been adversely affected by any wrongful conduct.”

A number of the businesses that allege to have been impacted have an international presence with multi-currency accounts, according to one person involved. In some cases, businesses had their accounts frozen for “many weeks”, the person said.

The situation came to light at the end of August, when a number of small companies started complaining that their accounts had been locked.

It comes after HSBC sent a series of letters to business customers requesting information in order to meet ‘know your customer’ requirements.

One person close to the bank said the issue arose after some businesses missed the deadline for filing information, or provided insufficient data.

One lawyer involved in the potential claim said some businesses have received compensation from HSBC, but said the amount does not cover the lost opportunity cost, where businesses were “seriously disrupted”.

HSBC has suffered from high-profile failings in relation to anti-money laundering processes in the past. The bank paid nearly $2bn after admitting in 2012 that it had lax controls after it served as a conduit for Mexican drug gangs.

Earlier this year, HSBC revealed that it was being investigated by the UK watchdog for failings around money-laundering controls.

HSBC has attempted to tighten its controls over the past few years, introducing a regime called the ‘safeguard’ initiative in a move to tighten its ‘know your customer’ processes and help stymie money laundering.

A spokesperson for HSBC said: “As part of our efforts to stop financial crime we are conducting detailed reviews of the information we hold about our customers.

“We apologise for the inconvenience this can cause, but if we don’t receive all the information we need from a business customer, we may be forced to restrict their ability to make foreign currency payments until we are able to complete their review.”

The bank said that it had a dedicated helpline to deal with the problems, and is investing in its online KYC system to help small business customers through the review.

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