FSA says customer data 'could have ended up in criminal hands'

HSBC has been fined almost £3.2m after the group lost customer data in the post on two occasions because of sloppy controls.

Three of the group’s divisions were fined. HSBC Insurance Brokers was fined £700,000, HSBC Life was fined £1.6m and HSBA Actuaries received a penalty of £875,000.

During its investigation into the firms’ data security systems and controls, the FSA found that large amounts of unencrypted customer details had been sent via post or courier to third parties.

Confidential information about customers was also left on open shelves or in unlocked cabinets and could have been lost or stolen. In addition, staff were not given sufficient training on how to identify and manage risks like identity theft.

Despite increasing awareness of the need to protect people’s confidential details, all three firms failed to put in place adequate procedures to manage their financial crime risks.

Margaret Cole, director of enforcement at the FSA, said: ‘These breaches are very disappointing. All three firms failed their customers by being careless with personal details which could have ended up in the hands of criminals.

‘It is also worrying that increasing awareness around the importance of keeping personal information safe and the dangers of fraud did not prompt the firms to do more to protect their customers’ details.’

In April 2007, HSBC Actuaries lost an unencrypted floppy disk in the post, containing the personal information of 1,917 pension scheme members, including addresses, dates of birth and national insurance numbers.

In July 2007, all three firms were warned by HSBC Group Insurance’s compliance team about the need for robust data security controls.

“All three firms failed their customers by being careless with personal details which could have ended up in the hands of criminals.

Margaret Cole, director of enforcement at the FSA

However, in February 2008 HSBC Life lost an unencrypted CD containing the details of 180,000 policy holders in the post.

The confidential information on both disks could have helped criminals to steal customers’ identities and commit financial crime.

Cole said: ‘Fraud, particularly identity theft, is a major concern to everyone and firms must ensure that their data security systems and controls are constantly reviewed and updated to tackle this growing threat.

‘In areas where we have previously warned firms of the need to improve, people can expect to see fines increase to deter others and change behaviour in the industry.’

The firms have taken a number of remedial actions to address the concerns raised, including contacting the customers concerned, improving their staff training and requiring that all electronic data in transit is encrypted.

HSBC Insurance Brokers, HSBC Actuaries and HSBC Life co-operated with the FSA in the course of its investigation and therefore qualified for a 30% discount on the fines.

Without the discount, the fines would have been £1m for HSBC Insurance Brokers, £1.25m for HSBC Actuaries and £2.3m for HSBC Life.

For more see HSBC's response