HSBC’s Swiss Private Bank Cuts Middle East Clients Amid Scrutiny
HSBC’s Swiss private banking unit is ending relationships with wealthy clients from the Middle East, including many with assets exceeding $100 million, as the lender seeks to reduce exposure to individuals it considers high-risk.
More than 1,000 clients from Saudi Arabia, Lebanon, Qatar and Egypt are being told they can no longer bank with HSBC’s Swiss wealth arm, «Bloomberg» reported this weekend. Some clients have already begun receiving notices, while others will be formally advised in the coming months to transfer their accounts to other jurisdictions.
«HSBC announced plans in October last year to reshape the Group to accelerate strategic delivery. As part of this, we are evolving the strategic focus of our Swiss Private Bank,» the bank said in an emailed statement.
The shift comes amid heightened scrutiny from Swiss regulator Finma, which has found that HSBC’s private bank failed to conduct adequate due diligence on high-risk accounts held by politically exposed persons. The exits are expected to be largely completed within six months, with HSBC assembling a team to manage the process, according to «Bloomberg».
Further Setback
«We are creating a simpler, more dynamic organisation, focused on increasing leadership and market share in the areas where we have a clear competitive advantage,» HSBC said.
The move marks a further setback for HSBC in a region that has become a magnet for global wealth managers. Rivals have expanded aggressively to cater to high-net-worth clients in the Middle East, while HSBC has struggled despite hiring Credit Suisse’s former top wealth executive for the region, Aladdin Hangari, several years ago.
Barred From Taking New Business
Finma last year barred HSBC from taking on new business with politically exposed persons and instructed the bank to appoint an external auditor to review the relevant business practices.
Clients with assets exceeding 100 million francs ($124 million) are automatically deemed high-risk under HSBC’s framework, with domicile and nationality also affecting the risk rating, according to «Bloomberg».
Focus of a Money-Laundering Probe
HSBC’s Swiss unit had been central to its push into Middle East wealth management, though the effort has been hampered by regulatory setbacks and banker departures. Most recently, the Swiss private bank became the focus of a money-laundering probe tied to alleged embezzlement by the former governor of Lebanon’s central bank.
Finma said last June that HSBC Private Bank (Suisse) failed to adequately verify the origins, purpose, or background of more than $300 million in suspect transactions between Lebanon and Switzerland from 2002 to 2015.
