Swiss regulator finds HSBC violated money laundering rules

Switzerland’s financial regulator has banned HSBC’s Swiss private bank from taking on prominent public figures as clients after finding the lender violated anti-money laundering regulations.

Finma imposed a range of penalties on HSBC’s subsidiary in relation to a case that involved several transactions between 2002 and 2015 in which more than $300mn was transferred between Lebanon and Switzerland.

HSBC failed to notify authorities about the transactions until September 2020, despite closing the accounts down in 2016 because of the risks of maintaining the relationships.

“In its checks, the bank failed to recognise the indications of money laundering presented by these transactions; it likewise failed to satisfy requirements for the initiation and continuation of customer relationships with politically exposed persons, and was thus in serious breach of its due diligence obligations,” Finma said.

As part of the sanctions handed down on Tuesday, Finma ordered HSBC to carry out an anti-money laundering review of all its high-risk relationships and business dealings with prominent public clients, known as politically exposed persons. Finma said the bank could not start new relationships with PEPs until it had completed its review.

Finma and HSBC declined to name the former clients involved in the case.

The Financial Times has previously reported that Switzerland’s attorney-general in 2021 started an investigation into allegations that Lebanon’s central bank governor and his brother embezzled more than $300mn from that institution through transactions to a mysterious offshore company.

In a letter to Lebanese authorities requesting legal assistance in 2021, the attorney-general’s office alleged that Riad Salameh, Lebanon’s central bank governor for 20 years until last summer, and his brother, Raja Salameh, transferred $333mn, from an account at the central bank to a HSBC Switzerland account in the name of “Forry Associates”. The transactions took place between 2002 and 2015.

Hundreds of millions were then funnelled from Forry to Swiss bank accounts controlled by both Salamehs, the investigators alleged in the letter. Finma started enforcement proceedings against HSBC in connection with the Lebanese clients in 2021.

Riad Salameh, who has denied all allegations of misconduct, was charged by prosecutors in Beirut in 2022 with embezzling more than $330mn in public funds. He is also under criminal investigation in Switzerland and seven other jurisdictions, probing allegations of financial crimes. These include France and Germany, which have issued warrants for his arrest.

Raja Salameh told the FT in 2021 that “my integrity has never been questioned. I have always earned my money legitimately.” The brothers did not immediately respond to a request for comment on Tuesday.

HSBC said it planned to appeal against the decision by Finma.

“We acknowledge the matters raised by Finma, which are historic,” the bank said. “HSBC takes its anti-money laundering obligations very seriously including complying with all laws and regulations in every market we operate in.”

The Geneva-based HSBC subsidiary has previously been hit with enforcement actions by Finma after a former IT worker leaked details of thousands of clients, which included details of the bank helping customers evade tax in 2008.

The case led to a criminal inquiry by Geneva’s public prosecutor into suspected “aggravated money laundering” and police raids at the Swiss bank’s headquarters.

With additional reporting by Raya Jalabi in Beirut