HSBC Swiss Unit Cuts Ties With Middle Eastern Billionaires Amid Regulatory Pressure

HSBC’s Swiss private banking arm is moving to sever ties with wealthy clients from the Middle East, including many whose fortunes surpass $100 million, as the institution looks to scale back its exposure to individuals it categorizes as high-risk.

According to a report from «Bloomberg» over the weekend, more than 1,000 clients from Saudi Arabia, Lebanon, Qatar, and Egypt are being notified that they will no longer be able to maintain accounts with HSBC’s wealth operation in Switzerland. Some affected individuals have already received formal notice, while others are expected to be contacted in the coming months and advised to relocate their assets to other jurisdictions.

“HSBC announced plans in October last year to reshape the Group to accelerate strategic delivery. As part of this, we are evolving the strategic focus of our Swiss Private Bank,” the lender said in an emailed statement.

The shift comes against a backdrop of intensified oversight from Swiss regulator Finma, which determined that HSBC’s private banking division in Switzerland had fallen short in carrying out proper due diligence on accounts belonging to politically exposed persons deemed high-risk. The process of winding down these relationships is projected to conclude within six months, with HSBC assembling a dedicated team to oversee the transition, «Bloomberg» reported.

“We are creating a simpler, more dynamic organisation, focused on increasing leadership and market share in the areas where we have a clear competitive advantage,” the bank added.

The decision represents another setback for HSBC in the Middle East, a region that has increasingly drawn the attention of international wealth managers. While rivals have aggressively expanded their presence to serve the region’s high-net-worth clients, HSBC has struggled to gain traction, even after hiring former Credit Suisse wealth management chief for the region, Aladdin Hangari, several years ago.

Last year, Finma prohibited HSBC from onboarding any new politically exposed persons and ordered the bank to appoint an independent auditor to review its handling of related business practices. Under HSBC’s internal risk framework, clients with more than 100 million francs ($124 million) automatically qualify as high-risk, with factors such as nationality and domicile further influencing their risk classification, according to «Bloomberg».

HSBC’s Swiss private banking arm had long been central to the group’s expansion efforts in Middle Eastern wealth management, but those ambitions have been undermined by regulatory scrutiny and a wave of banker departures. The Swiss unit has also become entangled in a money-laundering investigation linked to alleged embezzlement by the former governor of Lebanon’s central bank.

In June last year, Finma revealed that HSBC Private Bank (Suisse) had neglected to properly examine the origins, purpose, or context of over $300 million in suspicious transactions that took place between Lebanon and Switzerland between 2002 and 2015.

By fLEXI tEAM