HSBC Private Bank Violated Switzerland Money Laundering Regulations in $300 Million Transactions for 2 Politically Exposed Persons Between 2002 to 2015, Failed to Perform Adequate Checks on Origin, Purpose or Background of Assets, High-Risk Transactions Insufficiently Clarified & Documented, Source of Funds from Government Institution & Transferred from Lebanon to Switzerland & Transferred Back to Lebanon in a Short Period of Time, Failed to Notify Switzerland Money Laundering Reporting Office Including When Closing Account in 2016 Due to Risks, Report Filed Only in 2020
19th June 2024 | Hong Kong
Swiss Financial Market Supervisory Authority (FINMA) has issued a statement of HSBC Private Bank violating Switzerland money laundering regulations in more than $300 million transactions for 2 Politically Exposed Persons (PEP) between 2002 to 2015, with HSBC Private Bank failing to perform adequate checks on origin, purpose or background of assets, and high-risk transactions insufficiently clarified & documented. The source of funds were from government institution, and was transferred from Lebanon to Switzerland, and transferred back to Lebanon in a short period of time. HSBC Private Bank failed to notify Switzerland Money Laundering Reporting Office including when closing account in 2016 due to risks. The report was filed only in 2020. FINMA (18/6/24): “ FINMA proceedings: HSBC Private Bank (Suisse) SA violated money laundering regulations. HSBC Private Bank (Suisse) SA breached its obligations in the prevention of money laundering in connection with two politically exposed persons and thereby seriously violated financial market law. This was established in the context of enforcement proceedings by the Swiss Financial Market Supervisory Authority FINMA, which has imposed measures to ensure that compliance with the law is restored. The decision orders that, until these measures have been implemented in full, the bank may not enter into any new business relationships with politically exposed persons. In December 2021, FINMA opened enforcement proceedings against HSBC Private Bank (Suisse) SA in connection with banking relationships held with two politically exposed persons and these proceedings have now been concluded. HSBC Private Bank (Suisse) SA has co-operated with FINMA’s proceedings. Serious violation of supervisory law – HSBC Private Bank (Suisse) SA operated 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. In addition, a number of high-risk transactions were insufficiently clarified and documented, making it impossible to establish the legitimate nature of these transactions. The transactions in question were carried out between 2002 and 2015 and amounted to a total of more than USD 300 million. The funds, which originated from a government institution, were transferred from Lebanon to Switzerland and – generally after a short time – primarily flowed back to other accounts in Lebanon. At no time did the bank clarify why a transitory account held with it was used for these transactions. 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. The bank further failed to notify the Money Laundering Reporting Office over a protracted period. It still did not submit a report even in 2016, when it decided to close the relevant business relationships in light of various risks. Such a report was not filed until September 2020. By doing so, the bank did not comply with either the reporting obligations or the anti-money laundering requirements, in serious breach of supervisory provisions. FINMA imposes measures – FINMA has ordered the bank to conduct a review, with regard to anti-money laundering aspects, of all the current high-risk business relationships and business relationships with politically exposed persons. It must also check the correct categorisation of the risks presented by 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 bank may not enter into any new business relationships with politically exposed persons until such time as completion of the reviews has been confirmed by the audit agent. In addition, HSBC Private Bank (Suisse) SA must issue FINMA with a comprehensive presentation of the responsibilities within its board of directors and executive management as well as details of how they are assigned. The decision has not entered into force.” In 2021, HSBC was fined $85 million (GBP 63.9 million) for failure in its Anti-Money Laundering processes by the United Kingdom Financial Conduct Authority (FCA). Using automated processes to monitor hundreds of millions of transactions a month to identify possible financial crime between 2010 to 2018, HSBC had failed to consider and update new scenarios to identify possible money laundering or terrorist financing, and to check the accuracy and completeness of the data. HSBC did not dispute the FCA’s findings and agreed to settle at the earliest possible opportunity, which meant it qualified for a 30% discount (The Financial Conduct Authority would have imposed a financial penalty of £91,352,600). HSBC has undertaken a large-scale remediation programme into its anti-money laundering processes, which was supervised by the Financial Conduct Authority.
“ HSBC Private Bank Violated Switzerland Money Laundering Regulations in $300 Million Transactions for 2 Politically Exposed Persons Between 2002 to 2015, Failed to Perform Adequate Checks on Origin, Purpose or Background of Assets, High-Risk Transactions Insufficiently Clarified & Documented, Source of Funds from Government Institution & Transferred from Lebanon to Switzerland & Transferred Back to Lebanon in a Short Period of Time, Failed to Notify Switzerland Money Laundering Reporting Office Including When Closing Account in 2016 Due to Risks, Report Filed Only in 2020 “
FINMA proceedings (18/6/24): HSBC Private Bank (Suisse) SA violated money laundering regulations. HSBC Private Bank (Suisse) SA breached its obligations in the prevention of money laundering in connection with two politically exposed persons and thereby seriously violated financial market law. This was established in the context of enforcement proceedings by the Swiss Financial Market Supervisory Authority FINMA, which has imposed measures to ensure that compliance with the law is restored. The decision orders that, until these measures have been implemented in full, the bank may not enter into any new business relationships with politically exposed persons. In December 2021, FINMA opened enforcement proceedings against HSBC Private Bank (Suisse) SA in connection with banking relationships held with two politically exposed persons and these proceedings have now been concluded. HSBC Private Bank (Suisse) SA has co-operated with FINMA’s proceedings.
Serious violation of supervisory law – HSBC Private Bank (Suisse) SA operated 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. In addition, a number of high-risk transactions were insufficiently clarified and documented, making it impossible to establish the legitimate nature of these transactions. The transactions in question were carried out between 2002 and 2015 and amounted to a total of more than USD 300 million. The funds, which originated from a government institution, were transferred from Lebanon to Switzerland and – generally after a short time – primarily flowed back to other accounts in Lebanon. At no time did the bank clarify why a transitory account held with it was used for these transactions. 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. The bank further failed to notify the Money Laundering Reporting Office over a protracted period. It still did not submit a report even in 2016, when it decided to close the relevant business relationships in light of various risks. Such a report was not filed until September 2020. By doing so, the bank did not comply with either the reporting obligations or the anti-money laundering requirements, in serious breach of supervisory provisions.
FINMA imposes measures – FINMA has ordered the bank to conduct a review, with regard to anti-money laundering aspects, of all the current high-risk business relationships and business relationships with politically exposed persons. It must also check the correct categorisation of the risks presented by 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 bank may not enter into any new business relationships with politically exposed persons until such time as completion of the reviews has been confirmed by the audit agent. In addition, HSBC Private Bank (Suisse) SA must issue FINMA with a comprehensive presentation of the responsibilities within its board of directors and executive management as well as details of how they are assigned. The decision has not entered into force.
HSBC Fined $85 Million for Failure in Anti-Money Laundering Processes
24th December 2021 – HSBC has been fined $85 million (GBP 63.9 million) for failure in its Anti-Money Laundering processes by the United Kingdom Financial Conduct Authority (FCA). Using automated processes to monitor hundreds of millions of transactions a month to identify possible financial crime between 2010 to 2018, HSBC had failed to consider and update new scenarios to identify possible money laundering or terrorist financing, and to check the accuracy and completeness of the data. HSBC did not dispute the FCA’s findings and agreed to settle at the earliest possible opportunity, which meant it qualified for a 30% discount (The Financial Conduct Authority would have imposed a financial penalty of £91,352,600). HSBC has undertaken a large-scale remediation programme into its anti-money laundering processes, which was supervised by the Financial Conduct Authority.
FCA Official Statement:
The FCA has fined HSBC Bank plc (HSBC) £63,946,800 for failings in its anti-money laundering processes. HSBC used automated processes to monitor hundreds of millions of transactions a month to identify possible financial crime. However, the FCA found that three key parts of HSBC’s transaction monitoring systems showed serious weaknesses over a period of eight years from 31 March 2010 to 31 March 2018.
In particular, HSBC failed to:
- consider whether the scenarios used to identify indicators of money laundering or terrorist financing covered relevant risks until 2014; and carry out timely risk assessments for new scenarios after 2016;
- appropriately test and update the parameters within the systems that were used to determine whether a transaction was indicative of potentially suspicious activity;
- check the accuracy and completeness of the data being fed into, and contained within, monitoring systems.
HSBC did not dispute the FCA’s findings and agreed to settle at the earliest possible opportunity, which meant it qualified for a 30% discount. Otherwise, the FCA would have imposed a financial penalty of £91,352,600. HSBC has undertaken a large-scale remediation programme into its anti-money laundering processes, which was supervised by the FCA.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:
‘HSBC’s transaction monitoring systems were not effective for a prolonged period despite the issue being highlighted on numerous occasions. These failings are unacceptable and exposed the bank and community to avoidable risks, especially as the remediation took such a long time. HSBC continued their remediation to address these weaknesses after the relevant period.’
The FCA’s action relates to HSBC’s compliance with UK laws and the matters addressed in our Notice were not part of the action taken by the U.S Department of Justice in 2012.
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