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HSBC's Swiss Branch Violates Money Laundering Regulations

Swiss banking supervisory authority FINMA has ruled that HSBC Holdings’ HSBC Switzerland branch, HSBC Private Bank (Suisse) SA, violated money laundering regulations.

In a press release, FINMA said that the ruling follows enforcement proceedings opened by it in December 2021, which focused on HSBC’s banking relationships with two unnamed politically exposed people.

FINMA stated, “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.”

FINMA claims that the transactions were carried out between 2002 and 2015, and amounted to more than $300 million. The transactions involved funds originating from a government institution being transferred from Lebanon to Switzerland and back to Lebanon.

HSBC said, “We acknowledge the matters raised by FINMA, which are historic. HSBC takes its Anti-Money Laundering [AML] 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.”

FINMA has ordered HSBC Private Bank (Suisse) not to enter business relationships with politically exposed persons until it conducts a review into the AML aspects of all its current high-risk business relationships and those with politically exposed people.

HSBC is also required to check the categorization of risks presented by its other customers and get the completion of these reviews confirmed by an audit agent.

Over the past six months, HSBC shares have gained 11.8% compared with the industry’s growth of 6.6%.


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Currently, HSBC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Legal Troubles for Other Foreign Banks

Recently, as part of an industry-wide investigation into lenders’ exposure to the private equity industry, Britain’s Prudential Regulation Authority (“PRA”) asked Barclays PLC BCS to review its exposure to leveraged finance. The news was first reported by Bloomberg, citing a source familiar with the matter who asked not to be identified.

For a long time now, the Bank of England has been concerned about how lenders across the industry are measuring their exposure to the giants of private equity.

In April, the BoE said that very few banks have a clear understanding of their exposures to private equity, which places them at risk of a “large loss.”

Per the people with knowledge of the matter, the PRA asked Barclays to commission a section 166 review of the business. Such a review forces a firm to bring in an outside expert to examine their practices and produce an independent report for the authorities, which can then prompt further action if necessary.

Likewise, Mitsubishi UFJ Financial Group Inc. MUFG units are under investigation by Japan’s securities regulator, Securities and Exchange Surveillance Commission (“SESC”), for compromising its clients' confidentiality by bypassing firewalls between the bank's operations.

SESC mentioned that MUFG Bank Ltd., Morgan Stanley MUFG Securities Co. and Mitsubishi UFJ Morgan Stanley Securities Co. shared confidential customer details on at least 10 occasions to attract more business. The exchange breached the regulatory firewalls that were established to prevent commercial and investment banking units from sharing client data.

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