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The Swiss financial regulator has banned HSBC’s Swiss private bank from taking on prominent public figures as clients after finding the lender had breached anti-money laundering regulations.
Finma has imposed a series of fines on the HSBC subsidiary in connection with a case involving multiple transactions involving the transfer of more than $300 million between Lebanon and Switzerland between 2002 and 2015.
HSBC only informed authorities of the transactions in September 2020, despite closing the accounts in 2016 due to the risks of maintaining the relationships.
“During its checks, the bank failed to recognize the indications of money laundering associated with these transactions; it also failed to meet the requirements for initiating and continuing client relationships with politically exposed persons, and was thus in serious breach of its due diligence obligations,” Finma said.
As part of the sanctions imposed on Tuesday, Finma ordered HSBC to conduct an anti-money laundering investigation into all its high-risk relationships and business transactions with prominent public clients, known as politically exposed persons. Finma said the bank could not enter into new relationships with PEPs before completing its investigation.
Finma and HSBC declined to name the former clients involved in the case.
The Financial Times previously reported that Switzerland’s attorney general launched an investigation in 2021 into allegations that the governor of Lebanon’s central bank and his brother embezzled more than $300 million from that institution through transactions with a mysterious offshore company .
In a letter to Lebanese authorities requesting legal assistance in 2021, the attorney general’s office alleged that Riad Salameh, governor of Lebanon’s central bank for 20 years until last summer, and his brother, Raja Salameh, had transferred $333 million from an account at the central bank. banking on an account of HSBC Switzerland in the name of “Forry Associates”. The transactions took place between 2002 and 2015.
Hundreds of millions were then funneled from Forry into Swiss bank accounts controlled by both Salamehs, investigators alleged in the letter. Finma initiated enforcement proceedings against HSBC in 2021 in connection with the Lebanese clients.
Riad Salameh, who has denied all allegations of wrongdoing, was charged by prosecutors in Beirut in 2022 with embezzling more than $330 million in public funds. He is also under criminal 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 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 Finma’s decision.
“We recognize the issues 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 in which we operate.”
The Geneva-based subsidiary of HSBC was previously hit with enforcement action from Finma after a former IT employee leaked data on thousands of customers, including details of the bank helping customers avoid taxes in 2008.
The case led to a criminal investigation by the Geneva public prosecutor into suspected “aggravated money laundering” and police raids on the Swiss bank’s headquarters.
With additional reporting by Raya Jalabi in Beirut