Australia's corporate watchdog, the Australian Securities and Investments Commission (ASIC), has launched legal action against HSBC Australia, alleging widespread failures in protecting customers from sophisticated scams.

The regulatory body claims that between January 2020 and August 2024, HSBC Australia received approximately 950 reports of unauthorised transactions, resulting in customer losses totalling A$23 million.

ASIC alleges that the bank demonstrated significant shortcomings in its approach to fraud prevention. The regulator found that HSBC took an average of 145 days to investigate unauthorised transactions, far exceeding the required investigation period of 21 to 45 days.

Deputy chair of ASIC, Sarah Court, stated: "We allege HSBC Australia's failings were widespread and systemic, and the bank failed to protect its customers." The regulator is seeking declarations of contraventions, financial penalties, and adverse publicity orders.

The legal action comes amid a concerning trend of banking-related scams in Australia. According to the Australian Banking Association, 265,000 banking scams were reported in the twelve months to September 2024, with losses approaching A$306.5 million.

Almost A$16 million of the reported losses occurred between October 2023 and March 2024, with some individual customers losing more than A$90,000. In one extreme case, a customer was locked out of their account for 542 days.

ASIC alleges that HSBC Australia lacked adequate controls to prevent and detect unauthorised payments, failed to promptly investigate customer reports, and did not reinstate banking services in a timely manner.

An HSBC spokesperson acknowledged the claims, saying: "We are considering the matters raised and will continue to co-operate and work constructively with ASIC."

This legal action represents ASIC's first lawsuit against a financial services institution specifically addressing scam protections, signalling a potential shift in regulatory approach to customer financial security.

The case highlights the growing challenge faced by financial institutions in protecting customers from increasingly sophisticated online scammers, with regulators demanding more robust protective measures.

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