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Switzerland’s financial regulator has banned Swiss private bank HSBC from accepting prominent public figures as clients after it found the lender had breached anti-money laundering regulations.
Finma imposed a number of sanctions on an HSBC subsidiary in connection with the case, which involved several transactions between 2002 and 2015 in which more than $300 million was transferred between Lebanon and Switzerland.
HSBC did not notify authorities of the transactions until September 2020, despite closing the accounts in 2016 due to the risk of maintaining relationships.
“In its checks, the bank did not recognize the signs of money laundering presented by these transactions; it also failed to meet the requirements for establishing and continuing customer relationships with politically exposed persons, thereby seriously breaching 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 cannot establish new relationships with PEPs until it completes the review.
Finma and HSBC declined to name former clients involved in the case.
The Financial Times previously reported that the Swiss Attorney General opened an investigation in 2021 into allegations that the governor of Lebanon’s central bank and his brother embezzled more than $300 million from the institution through transactions with a mysterious offshore company.
In a letter to Lebanese authorities seeking legal assistance in 2021, the attorney general’s office said Riad Salameh, governor of Lebanon’s central bank for 20 years until last summer, and his brother Raja Salameh transferred $333 million from a central bank account. bank to the account of HSBC Switzerland in the name of “Forry Associates”. The transactions took place between 2002 and 2015.
Hundreds of millions were then diverted from Forra to Swiss bank accounts controlled by both Salamehas, investigators alleged in the letter. Finma launched enforcement proceedings against HSBC in relation to Lebanese clients in 2021.
Riad Salameh, who has denied all allegations of wrongdoing, was indicted in Beirut in 2022 for embezzling more than $330 million in public funds. He is also under investigation in Switzerland and seven other jurisdictions investigating allegations of financial crimes. These include France and Germany, which have issued arrest warrants for him.
Raja Salameh told the FT in 2021 that “my integrity has never been questioned. I’ve always made my money legally.” The brothers did not immediately respond to a request for comment Tuesday.
HSBC said it plans to appeal Finma’s decision.
“We acknowledge the issues raised by Finma, which are historic,” the bank said. “HSBC takes its anti-money laundering obligations very seriously, including compliance with all laws and regulations in every market in which we operate.”
HSBC’s Geneva-based subsidiary has previously been hit by enforcement action from Finma after a former IT worker leaked details of thousands of clients, including details of the bank helping customers avoid paying tax in 2008.
The case led to a criminal investigation by the Geneva public prosecutor on suspicion of “money laundering with aggravating circumstances” and a police raid on the headquarters of a Swiss bank.
With additional reporting by Ray Jalabi in Beirut