Private Banking Division of HSBC in Switzerland ends relationships with clients from the Middle East due to increased scrutiny
In a significant move, HSBC Holdings' Swiss private banking arm has announced the discontinuation of services to a segment of high-net-worth clients from the Middle East. The decision, which targets clients with assets above $100m, was made in response to regulatory compliance issues and anti-money laundering investigations.
Over 1,000 individuals from Saudi Arabia, Lebanon, Qatar, and Egypt are affected by this decision. The affected clients have been deemed high-risk by the bank's internal assessments.
The initiative to end these client relationships is expected to be largely completed within a six-month timeframe. A specialized team is being put in place by HSBC to oversee the termination of these banking services.
Last month, HSBC disclosed that the investigation is linked to "two historical banking relationships." The details of this decision were reported by Bloomberg.
The bank's private banking arm has struggled to keep pace with Swiss competitors in wealth management services. This move comes as competitors like Credit Suisse are expanding their wealth management presence in the Middle East and Switzerland, potentially taking market share from HSBC Private Bank in these regions.
In June last year, Finma pointed out two instances where HSBC Private Bank (Suisse) did not thoroughly verify the source and intended use of assets, involving transactions exceeding $300m between Lebanon and Switzerland from 2002 to 2015. As a result, HSBC was ordered to overhaul its anti-money laundering protocols and reassess high-risk client relationships, particularly those involving politically exposed persons (PEPs).
The bank's Private Bank (Suisse) unit is currently under investigation by law enforcement authorities in Switzerland and France for suspected money laundering activities, which are believed to be linked to the alleged misappropriation of funds by the former head of Lebanon's central bank.
HSBC International Wealth and Premier Banking CEO Barry O'Byrne announced the decision in an e-mailed statement. The bank is prohibited from taking on new PEP clients until it completes a review and verifies compliance with regulatory requirements.
No further information about alternative banking options for the affected clients was provided in the report. The challenges faced by HSBC's Swiss private banking sector in maintaining its position in the competitive Middle Eastern market were reported earlier.
As part of this reshaping, the Swiss Private Bank is evolving its strategic focus. The announcement was made in response to HSBC's plans to reshape the Group to accelerate strategic delivery, as announced in October last year.
