In Switzerland, this news went almost unnoticed. On 24th June 2024, FINMA, the Swiss Financial Market Supervisory Authority, announced in a press release that HSBC Private Bank (Switzerland) had “seriously breached its due-diligence obligations” relating to the prevention of money laundering “in relation to two politically exposed persons”. The decision ordered that the bank may not enter into any new business relationships with politically exposed persons until it had reviewed all current such relationships. It was also ordered to provide FINMA with “a comprehensive presentation of the responsibilities within its board of directors and executive management”.

Having already been criticized in several financial cases in recent years, the large Geneva-based bank has emerged pretty unscathed so far, without facing any criminal prosecution or fines, despite the key role it has played in the far-reaching Riad Salameh affair. It was this huge scandal that FINMA had in mind when it issued its reprimand, even though it did not mention the names. The ex-governor of the Central Bank of Lebanon (BDL) and his brother Raja are currently being prosecuted for aggravated money laundering in a dozen countries, including Switzerland, suspected of having swindled the BDL out of hundreds of millions of dollars. And these funds have been passing through HSBC Private Bank (Switzerland) for more than a decade. 

Payable-through account 

Forry Associates quickly gave the bank the runaround. Even though it had no office or staff, this small offshore company had an average annual turnover of 25 million US-Dollars. It was allegedly authorized to place treasury bills and Eurobonds issued by the BDL with Lebanese financial intermediaries and paid in “fees and commission” by the latter.

The way it operated its account bears the hallmark of a flow-through account, involving frequent inflows and outflows of funds. Consequently, of the hundreds of millions that arrived in Geneva, 207 million was then sent to Lebanon, to Raja Salameh’s accounts in four local banks, designated as “personal expenses”. Part of the money received from the BDL also supplied the accounts of companies in Switzerland and abroad, which we now know were controlled by Riad Salameh. Overall, the ex-governor of the BDL and his offshore structures have allegedly received – directly or indirectly - more than 26 million US-Dollars, 9.2 million Euros and 5.3 million Swiss Francs from Forry Associates. The money was used to invest in real estate and securities, both in Switzerland and abroad, as we have revealed in a previous investigation.

“We’re comfortable”

The first alarm bell sounded in HSBC’s internal system for monitoring payments in 2006. That year, between June and September, five transfers totalling more than 8 million US-Dollars arrived in Geneva. They came from the BDL, with references such as “Central Board Resolution/Fees & Commissions”. The compliance department asked for clarification. The banker in charge of the account, who also held senior positions within the institution, was called upon to comment. “We’re comfortable,” he replied in an e-mail. He explains that Raja Salameh, whom he introduced to the bank, had worked at the Republic National Bank of New York in Beirut (an institution bought in 1999 by HSBC), before creating Forry Associates, a financial consulting company, whose tasks entrusted by the BDL included marketing treasury bills and Eurobonds. As for the amounts paid out of Forry Associates’ account, they represented Raja’s real estate investments in Lebanon, according to reassurances from this senior executive, explaining that he had seen the land and chalets bought by his client during his visits to the country. 

Forry Associates nevertheless continued to raise concerns. In late 2007, the case was submitted to the Due Diligence Committee (DDC). This body, made up of members of HSBC’s management, legal and compliance department, was created in 2003. It is responsible for reviewing the most sensitive cases. It was decided that the banker would go to Beirut before Christmas to obtain “a resolution” from the BDL justifying the large transfers to Forry Associates. HSBC already had obtained a brokerage contract, signed in 2002 between the BDL and the small company, which bore Riad Salameh’s signature. 

18-month wait for documentation

In Spring 2009, an employee from the compliance department politely pointed out in an e-mail that the additional documentation, promised 18 months earlier, had still not arrived. A few weeks later, the bank received a message via Swift (a messaging system used by most banks) in which the BDL confirmed that the payment of fees and commissions to Forry Associates had been approved by its Central Council. In addition to Governor Riad Salameh, this body consisted of four other vice-governors, as well as a representative from the Ministry of Economy and Finance. 

This explanation would fall down many years later. When giving evidence in 2022 in Lebanon, as part of the proceedings in France, the BDL’s vice-governors declared that they had no knowledge of the intermediary role played by the company Forry Associates. 

But at the time the BDL’s Swift message, which made no reference to the links between Forry Associates and Raja Salameh, managed to reassure the Due Diligence Committee, which met a few months later. Raja Salameh’s banker, who attended the meeting, explained to his colleagues that it would have been “inappropriate” to ask for more details from the BDL, which had been “kind” enough to provide this confirmation. He said that he was perfectly comfortable with the explanations which had also been provided to him by the BDL’s head of the compliance department. His boss, a senior executive at the bank, gave the green light to maintaining the customer relationship. 

String of requests for clarification 

Public Eye identified nearly twenty requests for clarification sent by the compliance department to the account manager for Forry Associates between 2006 and 2013. In addition to the steady inflow of funds, there were also question marks over transfers to other companies with obscure profiles. 

In Summer 2008, for instance, an employee wanted to clarify why Forry Associates had made two payments – one of nearly 350,000 US-Dollars, the other of more than 450,000 US-Dollars – to the Panamanian company West Lake Commercial Inc., which held its accounts with Julius Baer Zurich. He was told that this offshore company had brought clients to Forry Associates to make investments in the real estate and commodities sectors, and that it was therefore receiving “kickbacks”. Swiss investigators would later establish that the beneficial owner of West Lake Commercial Inc. – which had received more than 7 million US-Dollars in total from Forry Associates – was none other than Riad Salameh. This crucial information was not available to HSBC Private Bank (Switzerland) at the time. 

In early 2013, it was a compliance employee who sounded the alarm. She sent an e-mail to her colleagues at the FCC (Financial Crime Compliance), an investigation team that gets involved when a potential risk is identified. Transactions made on the Forry Associates account led to an “extraordinary turnover” (very rapid inflows and outflows of funds), with little or no information on their nature, according to the HSBC investigators. They decided to pass on their findings to senior management as part of reviewing the SCC/PEP accounts – a procedure that required the bank’s management to review the accounts of the most sensitive customers every year. After this review, Raja Salameh was classified for the first time as a “PEP Associate”, the category with the highest risk profile for the bank. But following the reassuring explanations from his banker, it was finally decided to maintain the customer relationship, without any additional action being requested. 

Risk to the bank’s reputation

2015 proved to be a crucial year. Within the bank, repeated alerts started to be perceived as posing a risk to its reputation. On this occasion, FCC investigators would go through the Forry Associates account with a fine-toothed comb, also looking into the profile of its beneficial owner, supported by the Financial Intelligence Unit (FIU), an internal investigation unit. 

Some negative details about the Salameh brothers, which had passed so far under the bank’s radar, then resurfaced. For example, this US diplomatic cable, dated March 2007 and published in 2011 by Wikileaks, which mentioned a “rumour” alleging that Raja Salameh had, in the early 1990s, received commission on a contract executed by his brother Riad for printing new Lebanese banknotes. The FIU then considered these allegations plausible. More worrying still was the fact noted by the investigation unit that while Raja Salameh had always claimed to wholly own Forry Associates, the documentation available to the bank failed to provide proof of this. A recommendation was made for Raja Salameh’s banker – still the same one as before – to go to Lebanon to meet the governor of the BDL and obtain clarification.

Forry Associates account discreetly closed

In July 2015, the banker received via e-mail the updated version of the contract signed between BDL and Forry Associates. But there was a problem: there were discrepancies between the document sent by Raja Salameh and the 2002 original. At the time, the contract mentioned a Forry Associates address in Geneva, Place du Lac 2, but an address in Lebanon was now specified. In 2021, the Lebanese justice system was able to establish that this was the location in Beirut where Raja Salameh had his office at the time, noting that “both the residents of the building and the maintenance engineers had never noticed any real activity going on in this office”. 

Another odd thing was that the first version of the contract bore the signature of Riad Salameh and that of a certain “Kevin Walter”, whose name did not feature in any document provided to HSBC Private Bank (Switzerland) when the account was opened. In the updated version of the contract from 2015, it was Raja Salameh who signed alongside his brother as managing director, whereas the bank had only identified him as the beneficial owner of the structure. 

Due to these numerous fiascos, the FCC recommended in March 2016 terminating the customer relationship with the BDL governor’s brother and closing the Forry Associates account. The decision was ratified a month later by the Reputational Risk Committee. However, the bank still held back from submitting a report to MROS, even though Article 9 of Switzerland’s Money Laundering Act requires financial intermediaries to report immediately any well-founded suspicion within the meaning of this provision.

Very late report made in 2020

The Forry case was to remain on the back burner for a few more years. In 2019, Lebanon was at boiling point. Hundreds of thousands of citizens were taking to the streets to protest against their leaders’ corruption. The national currency, which had been held artificially at a high exchange rate against the dollar for years, collapsed. Unemployment skyrocketed, while thousands of Lebanese savers were barred from accessing their foreign currency accounts. Meanwhile, some members of the Lebanese elite were able to transfer their money abroad. During the demonstrations, Riad Salameh, the architect of this monetary policy, was now being booed, accused of being complicit in this quagmire and of illegally enriching himself.

In Spring 2020, a group of Lebanese activists announced that they had filed a complaint against him for embezzlement and corruption. This was when OCCRP, the corruption investigation organization, and its Lebanese partner Daraj, an independent online media, published an explosive investigation into Riad Salameh: “Lebanon’s Offshore Governor”. The journalists identified a huge network of offshore companies that Salameh and his relatives hid behind, enabling them to increase their immense fortune and make investments in several countries, especially in real estate. The name of Forry Associates then cropped up, but without the journalists being able to unravel the mysteries surrounding it. 

It was now time for action within HSBC Private Bank (Switzerland). Even though the relationship with Raja Salameh had been terminated four years earlier, his brother, the governor of the BDL, was the beneficial owner of an account held by the establishment, opened in 2003 in the name of an offshore company, Naranore Limited (BVI). 

The Financial Crime Threat Mitigation (FCTM) department – responsible for tackling financial crime and assessing threats, which was part of HSBC’s compliance department – was called to the rescue. In a report of about twenty pages, the bad news published in the media was collated and the investigators reviewed all the compliance alerts triggered in recent years in relation to the Salameh brothers within the bank. 

It was no longer possible to hide the dust under the carpet. On 20th August 2020, HSBC Private Bank (Switzerland) sent a report to MROS about three accounts: those of Raja Salameh and Forry Associates, which had been closed four years earlier, and that of the BDL governor. Their banker, the one who had already back in 2006 said he was “comfortable” with the situation, tried to protect them up to the last minute. Three days before the report was submitted to MROS, he explained that in Lebanon the proceedings announced against Riad Salameh were mainly dictated by political agendas. But to no avail this time. According to our information, he appeared as a witness in June 2021 in the Swiss proceedings. 

Legal ramifications for HSBC? 

Now, this affair could become more complicated for HSBC Private Bank (Switzerland). As an Emirati newspaper revealed in mid-January, the Lebanese state filed a criminal complaint in Switzerland against the financial institution, which would be its first legal action taken against a foreign bank in the Riad Salameh affair. According to our information, this complaint will be directed against Riad and Raja Salamé and all parties involved, including HSBC. The aim is to expand the scope of the investigation in Switzerland and to become a complainant to obtain potential compensation.

When contacted with respect to this complaint, the Office of the Attorney General of Switzerland (OAG) informed us that it would not be possible to respond to our questions prior to the publication date of this text.

When contacted, HSBC Private Bank (Switzerland) replied: “We acknowledge the matters raised by FINMA last year. HSBC takes its Anti-Money Laundering obligations very seriously including complying with all laws and regulations in every market we operate in. It would be inappropriate to comment further on a regulatory matter.”