Thanks to The National, we now know that for more than 10 years, HSBC turned a blind eye to alleged substantial money laundering by Raja Salameh, brother of Lebanon’s former central bank chief, Riad Salameh.
Suspicious transactions totalling hundreds of millions of dollars were allowed to go unchecked by the bank’s Geneva branch. This, despite compliance officers raising red flags including a “lack of information on the transactions”, according to the internal documents seen by The National. Concerns were dismissed as “inappropriate” by Raja Salameh’s representative, who described him as a man of “morality”.
Raja is accused of helping embezzle $300 million in public funds from Banque du Liban, between 2000 and 2015. Now, thanks to some excellent journalism, attention is focusing on the alleged enablers behind the international scheme, among them the banks that were happy to allow Lebanon’s ruling elite carte blanche so long as the country’s financial system was solid.
Barring this trade was not worth it, seemingly, in the larger picture of netting the country’s overall banking business. As a result, HSBC allowed Riad Salameh and his associates to purchase luxury properties abroad and salt away the cash. The papers reveal that one single HSBC manager was able to repeatedly bypass the bank’s internal controls.
HSBC refuses to comment. Meanwhile, the Swiss authorities have banned the bank from taking on new politically exposed customers and Lebanon has filed a lawsuit against HSBC – its first against a foreign bank – accusing it of failing to conduct proper due diligence.
On it goes, another case against HSBC and yet another against a major bank that says one thing about complying with the law and cracking down on illicit money flows, but is then shown to have done something quite different.
For me, it has an especially familiar ring. In my book, Too Big To Jail, I detailed how HSBC, the giant multinational that likes to portray itself as “the world’s local bank”, the friendly face of corporate and personal finance, acted as a conduit for the fearsome Mexican Sinaloa crime cartel led by El Chapo to wash its ill-gotten drugs proceeds.
It was an exposé that rang across Hong Kong, London, Washington, the Cayman Islands and Mexico. At the end, I highlighted other centres where HSBC operated that also aroused concern. One was Switzerland, where court evidence disclosed HSBC admitted to conspiring with clients to commit US tax fraud, tax evasion and filing false tax returns.
How much was being kept from US officials? Said the papers: “HSBC Switzerland held approximately $1.26 billion in undeclared assets for US clients.”
Asked to co-operate by US investigators, HSBC claimed Swiss bank secrecy. It chose to supply account codenames and numbers rather than identifiable details and used nominees in the British Virgin Islands, Liechtenstein and Panama to conceal their true ownership.
The HSBC Swiss bankers allegedly flew to the US to drum up tax evasion business – “at least four HSBC Switzerland bankers travelled to the United States to meet at least 25 different clients. One banker also attended Design Miami, a major annual arts and design event in Miami, Florida, in an effort to recruit new US clients to open undeclared accounts with HSBC Switzerland.” For that, the bank was required by the US Justice Department to pay a penalty of $192.35 million and given three years to demonstrate good conduct.
Compared with the fine imposed for money laundering for “drug kingpins and rogue nations”, including El Chapo and his organisation, and considering how US prosecutors framed the charge, that was small. Then, HSBC was hit with a record US fine of $1.9 billion.
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A Lebanese policeman stands guard next to a bank window broken by depositors who had demanded access to their money. An activist group said it will continue to organise bank raids to help people retrieve their trapped savings. AP photo -
A closed Byblos Bank branch, where a man was reportedly detained after allegedly holding up the bank to access his own savings, in Ghazieh, Lebanon. Reuters -
A man identified as Abed Soubra inside a Blom Bank branch, in the Tariq Al Jdideh neighbourhood of Beirut. Reuters -
Lebanese depositors inside a Blom Bank branch in Beirut. A group of customers, at least one of whom was armed, took hostages in the bank, demanding access to their savings. They were reportedly able to withdraw $20,000 from an account of one of the depositors before they left. EPA -
An armed woman and a dozen activists reportedly broke into a Beirut bank branch to retrieve more than $13,000 from what she said were her trapped savings. Lebanon's cash-strapped banks since 2019 have imposed strict limits on withdrawals of foreign currency, tying up the savings of millions. AP Photo -
A woman, identified as Sally Hafez, appears to be carrying a gun at a Blom Bank branch in Beirut, in this screengrab taken from Al Jadeed footage. Reuters -
A woman is comforted as she is seen through a shattered window of a Blom Bank branch after a hostage-taking incident. Reuters -
An ATM is covered with diesel fuel, vandalised by angry depositors. AP photo -
Members of the Lebanese security forces stand around a toy gun allegedly used by depositors in a hostage-taking situation, at a Blom Bank branch in Beirut. EPA -
People gather near a Blom Bank branch during an hostage-taking situation in Beirut. EPA
Some, but not all, of the period covered by The National report relates to the years when the bank was facilitating El Chapo and other criminals. It was a time when the banking behemoth had grown massively and rapidly, when it had become more difficult to manage. That expansion, however, was not the concern of law enforcers or indeed the society and public they were responsible for protecting.
HSBC was assuring all and sundry that its checks and balances were sound, that it was a stickler for operating by the rules. The comfort it provided gave the company licence to pursue a relentless policy of growth – it wanted to become the biggest bank in the world – and to make acquisitions around the world. At every turn, country regulators were promised the bank would stick to the tightest controls and standards and permission to proceed was granted and renewed.
Some, but not all. HSBC was fined by the US in late 2012. Their inquiries centred on the period 2003 to 2010. The Lebanese laundering through the bank’s Swiss subsidiary took place from 2000 to 2015.
There were two aspects of the El Chapo story that were shocking. One was the brazen nature of his money-cleansing – ever the organiser, he went so far as to have special pouches made that exactly fitted the cashiers’ windows so the dollars from selling drugs on the streets of the US could be slid seamlessly through – and the other was how the American government was keen to jail those bankers and executives they deemed responsible but the British, in the form of the then UK chancellor, George Osborne, persuaded them otherwise.
HSBC was Britain’s largest bank and to do so risked bringing down not only British banking but that of Europe and the wider world – the entire financial edifice was said to be in danger.
Reluctantly, the US swallowed the line and chose to fine HSBC instead. No individual HSBC employee was pursued. While El Chapo and other cronies are serving lengthy prison terms, the banking legitimisers walk free.
A third, which is related to the second, is that no public inquiry has ever been held, the UK government and regulators failed to act – this, despite its biggest bank having been fined the largest amount in US history.
No senior banker was prosecuted for taking the world to the brink of financial meltdown in 2008, a crisis that required the injection of taxpayers’ funds and still depressed markets. Similarly, no senior banker has gone to jail for ignoring compliance procedures and helping criminals launder their cash.
Governments can huff and puff as much as they like and proclaim things are getting ever tighter, but until they do, until bankers’ personal reputations are ruined and the corporate brand is sullied, nothing will change. Sadly, there will be other cases like that of HSBC Geneva.
Chris Blackhurst is the author of Too Big To Jail – Inside HSBC, the Mexican Drug Cartels and the Greatest Banking Scandal of the Century (Macmillan)
