HSBC has paid compensation to at least two small business owners with frozen accounts, according to reports, as the bank seeks to control the aftermath of its crackdown on financial crime.
It was recently reported by Reuters that hundreds of seemingly innocent business owners had their HSBC account suddenly frozen after the bank upped its scrutiny of firms with foreign links, and small business owners took to social media to voice their outrage at the sudden account closures, revealing the negative trading impact caused by HSBC.
On Monday 4 September, UK-based developer Richard Davey gave the most detailed account on a Medium blog post to highlight the extent of damage to his business caused by his frozen account.
According to Davey, the inability to pay suppliers meant he faced the loss of basic utilities, while a staff member threatened to resign having not received a monthly salary.
He claimed HSBC had failed for almost a month to provide any explanation for the account closure, or when it would be reopened. He finished his account with by handing some stark advice for fellow small business owners: “Don’t bank with HSBC.”
HSBC initially rejected accusations of a heavy-handed approach, and claimed founders were given signifnciant notice to provide the information the bank needed.
Those with regular overseas transactions were asked for three-month supply chain records, instructing customers to seek advice in their local branch or via telephone, it claimed.
However, as news of account closures began to spread, greater questions were asked over HSBC’s practices.
Mike Cherry, national chairman of the Federation of Small Businesses (FSB), said HSBC’s “overbearing” clampdown on financial crime had led to the “debilitation of innocent firms”.
“They’re complying at every stage of HSBC’s investigations, supplying all the evidence requested, and then waking up to see their accounts frozen without warning,” he said.
“Of course the bank must take a zero-tolerance approach to illegal activity – but it must also be certain of suspicions before action is taken against the exporting strivers that drive our economy forward.”
Meanwhile, Godfrey John Bewicke-Copley, co-chair of the all-party parliamentary group for fair business banking, said “we need to hear fully and openly from HSBC on this”.
With criticism mounting, HSBC softened its tone and began to compensate founders with frozen accounts.
Amanda Murphy, HSBC’s head of commercial banking who had previously maintained bank closures were only a “last resort”, has since contacted Reuters to indicate a different approach.
“If HSBC has disadvantaged a customer in any way we’ll always seek to make it right,” she said. Murphy confirmed HSBC had begun hiring staff and transferring existing workers from other departments to assist in the programme.
Davey also contacted Reuters to say HSBC had unfrozen his account and offered him some form of compensation.
However, while at least two business owners claim to have been compensated by HSBC, a number of similar cases have been rejected by the Financial Ombudsman.
The financial arbiter has appeared to have sided with HSBC over complaints made from affected business owners, with a response to one founder stating “adequate notice had been provided” for HSBC to freeze the company’s bank account.
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