HSBC Launches New Risk Monitoring System Across UK Operations

HSBC has implemented a cutting-edge risk monitoring system throughout its UK operations, the bank has revealed. This new approach, which moves away from traditional alerts-based transaction monitoring, was detailed by Chief Risk and Compliance Officer Ralph Nash at the International Anti-Financial Crime Financial 2024 event.

“We don’t do alerts-based transaction monitoring [anymore],” Nash explained during his presentation, outlining the bank's shift towards a more comprehensive method of assessing customer risk. He emphasized that HSBC now focuses on building a well-rounded risk profile for each customer.

The new system assigns probability scores to customers on a monthly basis, ranging from 1 to 1,000, indicating the likelihood that they pose a heightened financial crime risk. “On a monthly basis, [we assign] probability scores, from 1 – 1,000, for our customers that they are posing a heightened level of financial crime,” Nash said.

Instead of relying on isolated triggers like transactions from high-risk jurisdictions, the bank’s new system leverages a broader dataset to capture a fuller picture of a customer's behavior. These risk scores are based on "an observed set of behavior, over time, in the context of other reference data."

According to Nash, the UK has been the first major market for HSBC to implement this technology, covering its 17 million UK-based customers. He described the system as a "live technology" replacing conventional transaction monitoring, noting that it is fully compliant with the UK’s Financial Conduct Authority (FCA) requirements.

Nash further commented on the effectiveness of the system: “The million dollar question is – is it better? The answer is yes.” He continued, “We’re finding more risk, more quickly. We’re reporting more SARs and we’re making more proactive decisions.”

However, this development comes amid heightened regulatory scrutiny. Just last month, Bloomberg reported that the Bank of England’s Prudential Regulation Authority (PRA) directed HSBC to review its data monitoring practices within the new risk management system. The PRA’s order includes the appointment of an independent expert to assess the bank’s approach and submit a report to the authorities.

HSBC’s adoption of this new risk monitoring framework marks a significant shift in the bank’s compliance strategy, as it aims to detect financial crime risks with greater precision and speed.

By fLEXI tEAM