HSBC Private Bank (Suisse) is said to have maintained transaction accounts for Riad Salameh, the former head of Lebanon’s central bank. The bank is accused of serious violations of money laundering regulations.
The head of the central bank of a country on the brink of economic collapse is siphoning off hundreds of millions via accounts in Switzerland: This unprecedented suspicion concerns Riad Salameh, the governor of the Lebanese central bank who retired in July 2023 after 30 years in office.
The banker, once celebrated as a financial wizard, is now being investigated by law enforcement authorities in several countries, including the local Federal Prosecutor’s Office. In Switzerland, the case also brought the Financial Markets Supervisory Authority (Finma) into action, which has now concluded its investigation with severe sanctions against Geneva-based HSBC Private Bank (Suisse).
Reporting to the money laundering office is too late
According to Finma, the subsidiary of the major British bank seriously violated its duty of care to prevent money laundering in dealings with two politically exposed persons. The persons in question are probably Riad Salameh, now 73, and his brother Raja, who have been named in criminal proceedings for embezzlement and money laundering in several countries.
The incriminated transactions were carried out between 2002 and 2015 and totaled over 300 million dollars. “The funds, which came from a state institution, were transferred from Lebanon to Switzerland and usually flowed back after a short time, mainly to other accounts in Lebanon,” writes the financial market supervisory authority.
A leaked request for legal assistance from Switzerland to Lebanon reveals that the HSBC account of a shell company in the British Virgin Islands controlled by Raja Salameh served as a vehicle for the transactions. According to Finma, the bank never clarified why this transit account was maintained.
HSBC failed to adequately check the origin of the assets and their purpose and background. Numerous transactions with increased risk were insufficiently clarified and documented. “It was therefore not possible to determine the legality of these transactions based on the information collected,” Finma explained.
HSBC neither suspected money laundering nor did it check the requirements for establishing and maintaining customer relationships with politically exposed persons in its dealings with the Salameh brothers. It only reported the matter to the Federal Money Laundering Reporting Office in September 2020, although it had already decided in 2016 to end its business relationship with the Salamehs for risk reasons. The Geneva bank had thus seriously violated its due diligence and reporting obligations, according to the supervisory authority.
No new business
It ordered a series of measures. HSBC must review all ongoing business relationships with politically exposed persons and business relationships with increased risks from the perspective of combating money laundering. An auditor appointed by Finma will continuously monitor the implementation of these measures. As long as implementation continues, the bank may not enter into any new business with politically exposed persons. It must also provide Finma with a comprehensive written explanation of the responsibilities within the Board of Directors and the Executive Board.
According to a statement, HSBC plans to appeal the Finma decision to the Federal Administrative Court. However, the bank acknowledges that the issues raised date back to earlier times. It takes its obligations to combat money laundering very seriously and complies with the laws and regulations in all markets in which it operates.
The subsidiary of the major British bank, which is primarily active in asset management, had already come under the authorities’ scrutiny before. In particular, after the data theft in 2007 by then-employee Hervé Falciani. This led to a reprimand by Finma in 2011 and, four years later, to criminal proceedings by the Geneva judiciary following the so-called Swissleaks revelations. This was settled with an agreement based on the reparation article in the criminal code, in which the bank paid the canton of Geneva 40 million francs.
Investigations for four years
In the Salameh case, Finma reprimanded Banque Audi (Suisse) last March for serious failures in money laundering prevention. The subsidiary of the Lebanese Audi Group must also repay illegally obtained profits amounting to 3.9 million francs. The Office of the Federal Prosecutor (OAG) has been conducting a criminal investigation into aggravated money laundering against the Salameh brothers since 2020. When asked, an OAG spokesman did not want to comment on the status of the proceedings or the amount of money seized, but confirmed that the investigation is still ongoing.