HSBC warned by British regulator over weak fraud and staff controls

LONDON (Reuters) - HSBC <HSBA.L> has been told by the Bank of England to tighten up compliance controls for fraud, staff conduct and other non-financial risks, a source close to the bank said on Thursday.

Prudential Regulation Authority regulators had highlighted the weaknesses and HSBC <HSBA.L> executives will discuss ways to address them at a forthcoming meeting, the source told Reuters, confirming an earlier report by Bloomberg.

Samir Assaf, HSBC's global banking and markets division head, told senior bankers on a conference call on Tuesday of the issue, said the source, adding the weaknesses had been identified during routine regulatory work.

HSBC has been dogged by compliance problems, with the most high profile scandal involving helping Mexican drug cartels launder money, leading to a $1.9 billion U.S. settlement in 2012.

A Department of Justice deferred prosecution agreement ended five years later, after HSBC invested hundreds of millions of dollars in compliance measures.

The PRA compliance issue adds to HSBC interim chief executive Noel Quinn's workload as he begins a costly overhaul to address sluggish European and U.S. performances.

(Reporting by Iain Withers; Editing by Alexander Smith)