ASIC sues banking giant for failing to protect customers from scams

The corporate watchdog is taking a multinational bank to the Federal Court over alleged failings to protect customers from scams.

The Australian Securities and Investments Commission (ASIC) has lodged a claim against HSBC’s Australian arm in the Federal Court, with allegations the bank failed to protect customers from scammers.

According to court proceedings, HSBC failed to safeguard 950 customers who collectively lost $23m in five years.

The corporate watchdog said the scam was more widespread than previously anticipated, with some customers losing more than $90,000.

ASIC deputy chair Sarah Court said the bank’s failings were “widespread and systemic”.

ASIC alleges customers lost $23m in a major banking scam. Picture: NewsWire / Nicholas Eagar NewsWire / Nicholas Eagar

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

In a statement, ASIC said it alleged from January 2020, HSBC failed to provide adequate systems and processes to stop these scams occurring.

ASIC said there were several measures HSBC could have taken to help customers but they lacked necessary controls to implement them, including failure to monitor and detect potential fraudulent activity.

This led to an almost $16m lost to scammers in the six months from October 2023 to March 2024.

The corporate watchdog also alleged HSBC’s response time was significantly slower than expected, resulting in customers being unable to use their accounts.

On average, the bank took 145 days to complete an investigation despite being required to do so and inform the customer within 21 days of receiving a report.

Additionally, it took the bank an average of 95 days to fully restore customers’ access to their bank accounts, ASIC alleged.

One customer was allegedly left waiting 542 days to regain full access.

An ASIC statement earlier in the year alleged HSBC Australia customers were exposed to the risk of third parties gaining access to online or mobile accounts because of products provided by the bank.

The scam relied on fraudsters using software to disguise their phone number and message customers in the same chain that were legitimate HSBC messages.

Scammers then warned customers that suspicious transactions had appeared on their accounts, prompting them to call a number that connected them to a fake fraud team, which would play the same on-hold message of HSBC.

ASIC deputy chair Sarah Court says the scam was widespread and systematic.

The scam relied on fraudsters using software to disguise their phone number and message customers in the same chain that were legitimate HSBC messages.

Scammers then warned customers that suspicious transactions had appeared on their accounts, prompting them to call a number that connected them to a fake fraud team, which would play the same on-hold message of HSBC.

“We know scammers are constantly looking for new ways to exploit people. Customers can lose their life savings in an instant. Scammers do not discriminate,” Ms Court said.

“All banks need to pull their weight in the fight against scams. We will not hesitate to take court action where we consider banks fail to comply with their obligations to protect their customers.”

ASIC is seeking declarations of contraventions, pecuniary penalties, adverse publicity orders, and costs.