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Switzerland Imposes PEP Ban on HSBC

Author: Niall Hearty  25 June 2024

Niall Hearty of Rahman Ravelli outlines how the bank’s money laundering shortcomings led to the Swiss financial regulator taking action.

Switzerland’s financial regulator has banned HSBC’s Swiss private bank from taking on politically exposed persons (PEPs) as clients due to money laundering failings. 

Finma imposed a range of penalties on HSBC’s subsidiary in a case that involved several transactions between 2002 and 2015 in which more than $300 million was transferred between Lebanon and Switzerland. The regulator found that the lender had violated anti-money laundering regulations in these activities.

Although HSBC closed the accounts in 2016 due to the risks of continuing the relationships, the bank did not notify the authorities about the transactions until September 2020.

Finma said: “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 has ordered HSBC to carry out an anti-money laundering review of all its high-risk relationships and business dealings with prominent public clients. It has said that HSBC cannot begin new relationships with such PEPs until this review has been completed.

Neither Finma nor HSBC has named the clients in the case. It has previously been reported that Switzerland’s attorney-general began an investigation in 2021 into allegations that Lebanon’s central bank governor Riad Salameh and his brother Raja Salameh embezzled more than $300 million from the central bank via transactions to an HSBC Switzerland account. The money was then moved on to other Swiss bank accounts. In 2022, Riad Salameh was charged in Lebanon with embezzlement. He is under criminal investigation in Switzerland and seven other jurisdictions.

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

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

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Niall Hearty

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Niall has a wealth of corporate crime expertise and an ability to coordinate global bribery and corruption cases. His achievements in such investigations have made him a logical choice for corporate clients.

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