FINMA takes action against HSBC Private Bank Switzerland over “serious breach” in PEP due diligence
The Swiss Financial Market Supervisory Authority (FINMA) has taken action against the Swiss arm of HSBC’s private banking division after its dealing with two politically exposed persons (PEPs) allegedly violated the country’s financial market law.
FINMA penalises HSBC Private Bank Switzerland
The division is said to have engaged in two high-risk business relationships, for which it executed “a number of high-risk transactions” – totalling over $300 million – between 2002 and 2015.
FINMA claims these transactions originated from the account of a government institution, and were transferred from Lebanon to Switzerland and then back to other accounts in Lebanon “after a short time”.
With this, the regulator says the division failed to “carry out an adequate check of either the origins, purpose or background of the assets involved” and to “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 PEPs, and was thus in serious breach of its due diligence obligations,” its filing on the matter continues.
It adds that the division neglected to notify the Money Laundering Reporting Office of the development over the protracted period, and did not submit the required report until September 2020, four years after it terminated the relationships “in light of various risks”.
“By doing so,” FINMA states, “the bank did not comply with either the reporting obligations or the anti-money laundering requirements, in serious breach of supervisory provisions.”
FINMA orders audit
By means of a resolution, the regulator has now ordered the division to “conduct a review, with regard to anti-money laundering aspects, of all the current high-risk business relationships and business relationships with PEPs”, as well as to “check the correct categorisation of the risks presented by its other customers”.
It has installed an audit agent to monitor and report on the progress made towards these resolutions, and has barred HSBC Private Bank Switzerland from entering into new business relations with PEPs “until such time as completion of the reviews has been confirmed by the audit agent”, which will include “a comprehensive presentation of the responsibilities”.
Speaking to FinTech Futures, HSBC says: “We acknowledge the matters raised by FINMA, which are historic. HSBC takes its Anti-Money Laundering obligations very seriously including complying with all laws and regulations in every market we operate in.
“As we plan to appeal the decision it would be inappropriate to comment further.”
