Updated with additional HSBC comments
An HSBC manager has admitted to an audacious swindle involving unauthorised withdrawals from client accounts and forged signatures to fund an expensive Siġġiewi farmhouse, as well as his penchant for exotic birds.
The bank is seeking to recover €1 million in misappropriated funds and damages from former mortgage protection manager Kenneth Gauci, who worked for the bank from 1989 until he was fired in August 2021.
He was dismissed after complaints began to trickle in from HSBC’s clients over unexplained withdrawals and transfers, triggering an internal bank investigation and a criminal complaint.
HSBC has admitted in civil court proceedings that to this very day, it has been unable to establish the full extent of the fraud, and there may be other clients who were impacted that they are not yet aware of.
He also faces criminal charges of money laundering and fraud. Gauci is contesting the main charges by the police as well as the amount HSBC says was stolen.
Gauci initially admitted to defrauding six clients, but a “complex” investigation carried out by the bank soon uncovered that many more had funds stolen or transferred without their consent.
According to Gauci, he started carrying out unauthorised withdrawals and stealing cash deposits in 2019. The bank was only alerted to his actions two years later.
HSBC describes Gauci as having been a “one-stop shop” for home loans. When the bank first caught wind of the missing client funds, it had spoken to bank tellers to try to establish how Gauci perpetrated the fraud.
The investigation by HSBC was triggered by customer complaints about missing money from their account.
HSBC quickly eliminated the possibility that the funds had been transferred out of client accounts due to some sort of administrative error.
An HSBC investigator was told by bank tellers that it was normal for them to hand over cash to Gauci that had been withdrawn from a client’s account. Gauci would hand the tellers a document supposedly signed by HSBC clients authorising the withdrawal.
Gauci would claim to the tellers that he was simply helping his clients avoid queuing up at the branch for their withdrawals, by handing them the money himself.
HSBC noted in its internal investigation that this blatantly breached bank rules, as cash withdrawals should only ever be given to clients directly, and not via a third party.
When confronted about this, Gauci admitted to the bank that it was “indeed possible” that he had forged client signatures. Gauci also admitted that he would replace funds withdrawn from one client’s account by replacing them with funds illicitly withdrawn from another client’s account.
Gauci appears to have preyed on people who lacked formal education and may have not been technologically savvy.
A family member of one of his victims told Times of Malta that his father, a pensioner who does not know how to read or write, trusted Gauci blindly.
The man, who was still of working age at the time, would trust Gauci with cash deposits that were meant to be paid into his current account, yet the money given to the HSBC manager would not actually be paid in.
Instead, Gauci would pay money into the pensioner’s account from other HSBC clients, to make it appear as if the cash had been deposited.
The money would then be withdrawn again soon after, often the very next day, leaving just enough to cover automated monthly loan repayments that the man had.
Banking records seen by Times of Malta appear to support the claims, with the account showing multiple deposits from third parties, which appear to have been Gauci’s attempt to cover the fact that the cash had not been deposited by transferring in money from other HSBC clients.
The accounts also confirm that the money transferred in from other clients would often be withdrawn soon after. The pensioner has sued HSBC for damages, claiming that the bank only ever compensated him for a “small amount” of the money stolen by Gauci.
Gauci says he started withdrawing customer funds in 2019, according to court filings. The funds, he told HSBC, were mainly used for the completion of a pricey Siġġiewi farmhouse, as well as funding his lifestyle and hobby of collecting exotic birds.
Social media pictures of the secluded property indicate it plays host to a number of expensive pets, including birds and horses.
Gauci admitted to also using client money to finance both his and his children’s living expenses.
The bank manager described one of his victims as a “businessman and friend” who owned a pet shop.
Much like the scheme used to defraud the pensioner, Gauci’s “friend” would give him cash to deposit, which the bank manager would then keep.
To compensate for the theft, Gauci said he would debit other HSBC client accounts and deposit them into the pet shop owner’s account.
As the net started to close in during the summer of 2021, Gauci sent an e-mail to HSBC colleagues, apologising for his actions.
“I have worked with you all and you know that this is definitely not me. Not even I can understand what has happened,” he wrote, promising to “remediate” his actions.
Two days later, the bank dismissed Gauci for gross misconduct, after initially having suspended him on half pay.
In the disciplinary board hearing, Gauci was accused of falsifying and forging bank and client records, misappropriating funds, bringing the bank into disrepute, acting dishonestly and unlawfully, as well as serious procedural breaches.
Assets frozen by prosecutors
Apart from their own internal probe, HSBC escalated the matter by referring the case to the police.
The 51-year-old was quietly charged with money laundering and fraud last October, in an arraignment that went under the media’s radar. He denies the main charges.
His assets were frozen by prosecutors, and HSBC’s separate civil case to recoup the claimed €1 million in misappropriated funds and interest is still ongoing.
Gauci did not respond to a request for comment.
A spokesperson for HSBC said the bank is not in a position to comment on cases relating to individual customers or employees.
“We take our role of protecting the interests of our customers and the wider financial system very seriously and expect our employees to adhere to the highest standards of conduct.”
HSBC said it has “zero tolerance” for fraudulent activities and where there is evidence of misconduct, they take appropriate action, liaising with all parties concerned and informing the police and relevant authorities.
In additional comments on Monday, the HSBC spokesperson said the bank's internal investigation has been concluded and all impacted customers identified and contacted.
"Appropriate action has been taken to safeguard our customers".