In a move that surprised industry watchers, HSBC completed its exit from U.S. retail banking in the first quarter of 2022, selling its branch operations to two regional players, Citizens Bank and Cathay Bank. HSBC first announced the exit on May 26, 2021. While officially framed as a strategic realignment, many analysts suggest that growing regulatory and AML compliance burdens played a significant role in the decision. HSBC had faced significant scrutiny over the past decade, including a $1.9 billion settlement in 2012 for AML and sanctions violations.

Operating in the U.S. requires rigorous compliance with Bank Secrecy Act (BSA) obligations, extensive Suspicious Activity Report (SAR) filing requirements, and cooperation with multiple enforcement agencies. For foreign banks like HSBC, the costs of maintaining compliance infrastructure at this scale can be prohibitive, especially in a low-margin retail environment.

HSBC’s departure may serve as a cautionary tale for other global institutions evaluating their footprint in the U.S. market. While retail banking offers diversification, it also exposes firms to enhanced regulatory expectations and complex oversight. For compliance leaders, this underscores the importance of aligning risk appetite with operational strategy.

Institutions operating in the U.S. must ensure their AML programs are not only compliant but defensible in the face of regulatory inquiry. This includes automating compliance workflows, improving customer risk segmentation, and investing in centralized reporting tools. As AML and sanctions regulations become increasingly stringent, institutions will need to weigh the costs of compliance against the strategic value of market presence.

Source: HSBC exits US mass market retail banking
Image Source: HSBC exits US mass market retail banking