HSBC Private Bank (Switzerland) is once again at the epicenter of a cross-border financial crime investigation, with Swiss and French authorities targeting the bank’s anti-money laundering (AML) practices. The criminal probes, now public, reveal a pattern of serious compliance failures with a particular focus on high-risk clients, politically exposed persons (PEPs), and large transfers linked to the troubled Lebanese banking sector.

At the heart of these investigations are two “historic” banking relationships that have placed HSBC’s Swiss arm in the direct line of fire of both the Swiss Financial Market Supervisory Authority (FINMA) and the French judiciary. The bank’s most recent half-yearly disclosures confirm that the regulatory heat is mounting, and that the investigations are still in their early stages. This fresh wave of regulatory scrutiny underscores how major international banks remain exposed to sophisticated money laundering schemes, especially when onboarding and managing accounts for high-risk clients from jurisdictions facing political and economic instability.

Money Laundering Failures at HSBC Private Bank

When the Swiss regulator FINMA published its statement in June 2024, the scope and gravity of HSBC Private Bank’s compliance failures became apparent. FINMA’s action was triggered by two banking relationships involving politically exposed persons from Lebanon, a country that has long been viewed as high-risk for illicit finance due to endemic corruption and weak regulatory controls.

The regulator’s review revealed that HSBC Private Bank had not adequately verified either the source or the intended use of assets totaling CHF 300 million, which had flowed through accounts linked to a Lebanese public institution. This glaring lapse in AML controls stands out for several reasons:

• The clients in question were PEPs, which under Swiss AML law and the Financial Action Task Force (FATF) recommendations require the highest level of scrutiny, ongoing due diligence, and periodic review.
• The assets originated from Lebanon’s central bank, meaning that the funds were not just privately held wealth, but public money subject to stringent controls and enhanced monitoring obligations under both Swiss and international standards.
• HSBC’s onboarding and ongoing monitoring processes failed to deliver sufficient risk mitigation, allowing the bank to accept and manage these assets despite the red flags.

The consequences for HSBC Private Bank were immediate. FINMA not only criticized the bank’s deficient controls, but also imposed significant restrictions. The bank was forbidden from onboarding any new PEP clients until further notice, and was ordered to re-examine its entire portfolio of existing high-risk relationships. This measure echoes a growing trend among European regulators to clamp down on private banks that serve as gateways for illicit flows linked to state actors, corrupt officials, and politically connected elites.

The Riad Salameh Case: Unraveling a $300 Million Scandal

No discussion of this case is complete without examining the role of Riad Salameh, the former governor of Banque du Liban (the Lebanese central bank), who stands accused at the center of the controversy. Salameh’s tenure at the central bank ended in disgrace, as allegations of embezzlement and large-scale money laundering came to light amid Lebanon’s deepening financial crisis.

Swiss and French prosecutors allege that Riad Salameh, with the assistance of his brother Raja Salameh, misappropriated over $300 million from Lebanese public funds, channeling these assets into a complex web of offshore accounts and real estate investments. Much of the money, according to investigators, passed through Swiss financial institutions, including HSBC Private Bank.

The Office of the Attorney General of Switzerland formally opened a criminal investigation against Riad and Raja Salameh in 2020, focusing on aggravated money laundering and embezzlement. The case is remarkable for several reasons:

• The suspected embezzled funds were public assets, amplifying the severity of the alleged crime.
• The flows were routed through accounts that should have triggered immediate and ongoing scrutiny under Swiss AML law, including the Money Laundering Act (MLA) and the Ordinance on the Prevention of Money Laundering (AMLO-FINMA).
• HSBC Private Bank’s role in onboarding and servicing the Salameh-related accounts put the spotlight on the bank’s AML framework, especially regarding the identification of beneficial ownership, transaction monitoring, and the duty to report suspicious activities to Swiss authorities.

The charges against Riad Salameh are part of a much broader reckoning for Lebanese elites accused of looting public funds as the country slipped deeper into economic collapse. Investigators in Switzerland, France, and Lebanon are pursuing parallel cases, attempting to trace the global movement of assets linked to the former central banker and his associates. The HSBC case illustrates the vulnerabilities of the global private banking sector, where personal relationships and profit incentives sometimes override compliance obligations and risk management best practices.

Regulatory Measures and Enforcement Trends in Swiss Private Banking

The HSBC Private Bank case is symptomatic of wider trends in the Swiss financial sector. Over the past decade, Swiss authorities have significantly strengthened their AML regulatory regime, but the high-profile failures at HSBC reveal persistent gaps that continue to attract both domestic and foreign criminal actors.

Swiss AML law, particularly the Money Laundering Act (MLA), mandates financial intermediaries to conduct rigorous due diligence on customers, monitor transactions, and report suspicious activity to the Money Laundering Reporting Office Switzerland (MROS). These requirements are even more stringent when dealing with PEPs, given the heightened risk of corruption and abuse of public office.

Yet, enforcement history shows that Swiss private banks have struggled to adapt fully to these obligations, often falling short in areas such as:

• Enhanced due diligence for PEPs and high-risk countries.
• Ongoing review of customer profiles and transactional behavior.
• Prompt filing of suspicious activity reports when red flags emerge.

FINMA’s intervention against HSBC Private Bank was particularly significant, as it imposed operational restrictions, not just financial penalties. The regulator’s insistence on verifying the legitimacy of existing client relationships signals a shift towards proactive supervision and hands-on enforcement.

These measures are not unique to Switzerland. Across Europe and beyond, regulatory authorities are intensifying their oversight of private banks, especially those serving global elites from unstable or corruption-prone jurisdictions. Similar actions have been taken by French, UK, and US regulators in recent years, as global financial centers seek to reduce their exposure to illicit flows and restore confidence in the integrity of their banking systems.

Lessons for Financial Institutions and the Evolving AML Landscape

The HSBC Private Bank scandal serves as a cautionary tale for the entire private banking sector. Several key lessons emerge for banks and regulators striving to strengthen the fight against money laundering and the movement of illicit wealth:

1. High-Risk Client Management: Serving PEPs and clients from high-risk countries demands rigorous controls, robust due diligence, and regular re-assessment of risk. Onboarding such clients without exhaustive scrutiny invites regulatory action and reputational damage.
2. Transparency and Source of Wealth Verification: Banks must move beyond box-ticking exercises when verifying source of funds and wealth. This is especially critical where public assets and sovereign institutions are involved.
3. Ongoing Monitoring and Proactive Reporting: Static onboarding checks are no longer sufficient. Financial institutions must invest in advanced transaction monitoring systems capable of detecting complex layering and movement of funds that may signal money laundering or embezzlement.
4. Collaboration With Authorities: Effective AML controls require open communication with regulators and law enforcement. Filing timely and comprehensive suspicious activity reports is not just a legal obligation but a core element of responsible banking.
5. Consequences of Failure: The HSBC case demonstrates that enforcement is no longer limited to financial penalties. Operational restrictions, bans on new client onboarding, and reputational fallout can have far-reaching consequences for banks that fall short of compliance expectations.
6. International Cooperation: Money laundering cases increasingly span multiple jurisdictions, as illustrated by the joint Swiss-French investigation and the international pursuit of the Salameh assets. Banks must recognize that domestic compliance failures can quickly escalate into global scandals.

By learning from these failures and embedding a culture of compliance at every level, financial institutions can mitigate their exposure to regulatory risk and contribute meaningfully to the global fight against financial crime.

Moving Forward: The Road Ahead for HSBC Private Bank and AML Oversight

HSBC Private Bank’s ongoing challenges reflect both the complexity of global financial crime and the shifting landscape of regulatory enforcement. The cases currently under investigation by Swiss and French authorities could set important precedents for how regulators respond to AML failings in private banking, especially when public funds and PEPs are involved.

Going forward, several questions remain for HSBC and the wider industry:

• Will further sanctions or prosecutions be announced as investigations develop?
• How effectively will HSBC be able to overhaul its compliance culture and internal controls to prevent similar failures?
• What lessons will other private banks draw from this episode, particularly those operating in jurisdictions exposed to political risk and capital flight?

The ultimate outcome of the criminal proceedings against HSBC Private Bank, as well as the wider pursuit of embezzled Lebanese public funds, will be watched closely by regulators, compliance professionals, and the banking sector worldwide. As AML standards tighten and enforcement grows more aggressive, the case underscores a fundamental truth: robust compliance is no longer optional, especially in an era where the movement of illicit capital is relentlessly pursued across borders.

Related Links

• Swiss Financial Market Supervisory Authority (FINMA): HSBC Enforcement Action
• Swiss Money Laundering Act (MLA) – Official English Version
• FATF Guidance: Politically Exposed Persons (Recommendations 12 and 22)
• French Anti-Money Laundering Legislation Overview (Tracfin)
• Swiss Attorney General: Asset Recovery Procedures

Other FinCrime Central Articles About HSBC

• BPMB and HSBC hit with regulatory penalties for AML lapses in Malaysia
• HSBC Faces Allegations of Neglect in Massive Lebanese Money Laundering Scandal
• Russia: Prigozhin used JP Morgan and HSBC to pay for Chinese supplies to Wagner Group in Africa

Source: Swiss Info

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