HSBC Australia Sued for ‘Widespread’ Anti-Fraud Failings

Banking giant HSBC is facing a lawsuit in Australia over alleged fraud-prevention failures.

The Australian Securities and Investments Commission (ASIC) announced Monday (Dec. 16) that it was suing HSBC Australia, accusing the bank of failing to have proper controls to identify and stop unauthorized payments. 

“We allege HSBC Australia’s failings were widespread and systemic, and the bank failed to protect its customers,” ASIC Deputy Chair Sarah Court said in a news release.

“We allege that from at least January 2023, HSBC Australia was aware of the risks of unauthorized transactions occurring and that there were gaps in their fraud controls.”

Court added that this led to some customers getting scammed out of $90,000 in Australian dollars, or $57,188. 

Reached for comment by PYMNTS, an HSBC spokesperson offered this statement: “HSBC acknowledges the claim commenced by ASIC today. We are considering the matters raised and will continue to cooperate and work constructively with ASIC. Protecting our customers from scammers remains a top priority.  We continue to make significant investments in our fraud and scam prevention, detection and response.”

The regulator further alleges that HSBC failed to meet its obligations to investigate custom complaints about fraud and promptly reinstate their banking services in a timely manner.

ASIC says there was a “significant escalation” in reports of unauthorized transactions by HSBC Australia customers starting in mid-2023, which happened after scammers accessed their accounts by impersonating the bank’s staff.

Between January of 2020 and August of this year, HSBC received roughly 950 unauthorized transaction reports, resulting in customer losses of around $23 million in Australian dollars ($14.6 million). The bulk of this fraud happened between October 2023 and March 2024.

As noted here in October, the impact of fraud goes beyond a customer’s wallet. Research by PYMNTS Intelligence finds that more than half of victims consider switching banks after being scammed, while 30% leave. 

From there, the bank has to scramble to replace those customers and rebuild its reputation. More than half of consumers targeted by scams say their mental health suffered because they felt somehow responsible for becoming a victim in the first place.

“Most consumers have multiple relationships with different banks, and they will switch allegiances quickly based on where they feel there’s the highest level of trust and confidence in the relationship,” Featurespace founder Dave Excell told PYMNTS CEO Karen Webster.

The same research also shows that scams became the leading type of fraud in 2024, surpassing digital payment fraud. 

“Scams now account for 23% of all fraudulent transactions, with relationship/trust and product/service scams responsible for most losses,” PYMNTS wrote last week. “These scams manipulate individuals into authorizing fraudulent transactions, often using deceptive tactics. Additionally, fraud involving compromised credentials, where individuals are tricked into revealing account details, is also on the rise.”