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Swiss HSBC Unit Found in Serious Breach of Financial Market Law Over Money Laundering Failures

A Swiss division of HSBC has been found to have "seriously violated financial market law" due to significant lapses in its money laundering obligations related to "two politically exposed persons," according to the Swiss Financial Market Supervisory Authority (FINMA). The regulator highlighted that the case involved over $300 million in transactions that were not adequately scrutinized by the bank.

Swiss HSBC Unit Found in Serious Breach of Financial Market Law Over Money Laundering Failures

The transactions in question originated from a government institution in Lebanon, which transferred funds to a Swiss bank account before distributing the money to various other accounts in Lebanon. Following its investigation, FINMA has ruled that HSBC Private Bank (Suisse) SA is barred from entering into any new business relationships with politically exposed persons until it reforms its anti-money laundering procedures.

"HSBC Private Bank (Suisse) SA has co-operated with FINMA’s proceedings," the regulator stated. FINMA initiated enforcement proceedings against HSBC Private Bank (Suisse) SA in December 2021 concerning the bank's dealings with two politically exposed persons. These proceedings have now concluded.

FINMA's statement revealed that HSBC Private Bank (Suisse) SA had two high-risk business relationships where it "failed to carry out an adequate check of either the origins, purpose or background of the assets involved." Additionally, numerous high-risk transactions were poorly clarified and documented, preventing the establishment of their legitimate nature. "The transactions in question were carried out between 2002 and 2015 and amounted to a total of more than US$300 million," FINMA added.

The regulator noted that the funds "originated from a government institution" and were transferred from Lebanon to Switzerland before generally being quickly sent back to other accounts in Lebanon. FINMA emphasized that at no point did the bank investigate why a transitory account was used for these transactions.

Cyprus Company Formation

HSBC Switzerland failed to recognize the signs of money laundering in these transactions, according to FINMA. "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," the regulator said. Additionally, the bank did not report to the Money Laundering Reporting Office for an extended period, failing to do so even in 2016 when it chose to close the risky business relationships. A report was not filed until September 2020.

As a result, FINMA found that HSBC did not meet its reporting obligations or anti-money laundering requirements, constituting "a serious breach of supervisory provisions." The regulator has ordered the bank to review all "current high-risk business relationships and business relationships with politically exposed persons" from an anti-money laundering perspective. HSBC must also reassess the risk categorization of its other customers.

"An audit agent will monitor the implementation of these measures on site on an ongoing basis and will submit a report to FINMA," the regulator stated. Furthermore, the bank is prohibited from establishing any new business relationships with politically exposed persons until the review is completed and verified by the audit agent.

HSBC Private Bank (Suisse) SA must also provide FINMA with a detailed account of the responsibilities within its board of directors and executive management, including how these duties are allocated. FINMA noted that its decision has not yet come into force. At the time of publication, HSBC had not responded to a request for comment.



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