An investigation by HSBC into Huawei Technologies found that the Chinese smartphone maker maintained close financial ties to a front company in Iran years after purportedly selling it, documents show.
The HSBC investigation was in late 2016 and 2017 as the bank was trying to get the US Department of Justice to dismiss criminal charges for its own misconduct involving sanctions.
The bank’s findings were presented in 2017 to the department, which used them to help bring its current criminal case against Huawei’s chief financial officer, Meng Wanzhou.
Ms Meng is accused of conspiring to defraud HSBC and other banks by misrepresenting Huawei’s relationship with the suspected front company, Skycom Tech.
Huawei has said Skycom was a local business partner in Iran but the US maintains it was an unofficial subsidiary used to conceal Huawei’s Iran business.
Huawei and Skycom are also defendants in the US case, accused of bank and wire fraud, and breaching US sanctions on Iran.
US authorities claim Huawei used Skycom to obtain embargoed US goods and technology in Iran and to move money out of the country through the international banking system.
They say that as a result of Huawei’s deception, HSBC and other banks cleared more than $100 million of transactions related to Skycom through the US that could have breached economic sanctions Washington had in place at the time against Iran.
Huawei has denied the charges in the case.
“Information provided by HSBC to the Justice Department was provided pursuant to formal demand, including grand jury subpoena or other obligation to provide information pursuant to a deferred prosecution agreement or similar legal obligation," said Robert Sherman, a spokesman for HSBC.
“The US Department of Justice has confirmed that HSBC is not under investigation in this case.”
Ms Meng, the daughter of Huawei’s founder, was arrested in Vancouver in December. She remains free on bail while the US government tries to have her extradited to face bank and wire fraud charges.
The case comes at a time of heightened trade tension between Washington and Beijing, and amid concerns by the US that Huawei’s equipment could be used for Chinese espionage.
The company, based in Shenzhen, is the world’s largest maker of telecoms networking equipment and has repeatedly denied such claims.
Ms Meng has maintained that she is innocent of the allegations against her.
The HSBC documents contain new financial details about Huawei’s relationship with Skycom and Canicula Holdings, the company to which Huawei claims it sold Skycom in 2007.
All three companies previously had bank accounts at HSBC. The Skycom and Canicula accounts part of what the bank internally called the “Huawei Mastergroup".
The HSBC investigation found many ties between the three companies, suggesting Huawei controlled Skycom and Canicula long after the purported sale, the documents show. Canicula’s address was care of Huawei Technologies.
The inquiry also found that Huawei financed Canicula’s purchase of Skycom, lending Canicula about €14m (Dh58.52m) in a deal the documents show was not closed until December 2009.
Canicula repaid Huawei a year later using funds from Skycom.
After HSBC asked Huawei in 2013 to close the Skycom and Canicula accounts, Huawei employees assisted the bank.
At Huawei’s request, the remaining funds in the Skycom account were transferred to a Huawei bank account, the documents show.
In 2012 and 2013 it was reported that Skycom had offered to sell at least €1.3m worth of embargoed Hewlett-Packard computer equipment to Iran’s largest mobile phone operator in 2010.
Ms Meng served on Skycom’s board of directors between February 2008 and April 2009.
The reports, by Reuters, are quoted in the HSBC documents and the indictment.
The indictment claims that banks in part relied on Huawei’s false statements in news stories – that it had not breached sanctions on Iran and that Skycom was a local partner – to continue doing business with Huawei and Skycom.
HSBC had its own sanctions problems. In 2012, it paid $1.92 billion and entered a five-year deferred prosecution agreement with the Justice Department for disregarding rules designed to prevent money laundering and processing transactions that breached sanctions.
Under the deal, HSBC agreed to strengthen its sanctions and anti-money laundering programmes and to co-operate with the Justice Department in any investigations.
The HSBC documents showed investigators conducted more than 100 interviews, reviewed more than 292,000 emails and analysed years of financial transactions.
At least four presentations were made to the Justice Department between February and July 2017. The criminal charges against the bank were dismissed in December 2017.
The bank’s Huawei investigation found that in August 2013, at Huawei’s request, HSBC’s then deputy head of global banking for the Asia-Pacific region, Alan Thomas, met Ms Meng.
The documents show she later provided Mr Thomas with a PowerPoint presentation in English that stated Huawei had sold its shares in Skycom and that she was no longer on its board.
The presentation described Skycom as a Huawei “business partner” in Iran. That presentation, which the US claims contained “numerous misrepresentations”, plays a central role in the US case against Ms Meng.
Mr Thomas, who retired in 2017, declined to comment.
In the months after the meeting with Ms Meng, HSBC considered whether to retain Huawei as a customer, the documents show.
The bank initially concluded the reputational risks were acceptable and kept on Huawei. But the indictment said HSBC told Huawei about 2017 that it was terminating the relationship.
The HSBC investiagtion also uncovered financial transactions by Canicula that referred to Syria or involved a Syrian bank.
It was reported last month that until 2017 Canicula operated in Syria, where it was connected to Huawei. Like Iran, Syria has been subjected to US sanctions.
HSBC told the Justice Department that it was aware of another company linked to Skycom in Iran.
In August 2016, the bank's documents say, it was notified by a British engineering recruitment company, Matchtech Group, that a Matchtech subsidiary had provided contractors to support telecommunications projects in Iran from 2010 to 2016.
The subsidiary, Networkers International, had contracted with Skycom and Huawei, and had received payments in US dollars from Skycom, according to the HSBC documents.
The payments totalled about $7.6m. Networkers terminated its Iran-related contract with Skycom in October 2016, Matchtech told HSBC.
Matchtech is now known as Gattaca. A spokesman for Gattaca declined to comment.