HSBC's Swiss Private Bank Retreats From Mediterranean After Money Laundering Case

Tom Burroughes

28 June 2013

HSBC has seen its Swiss private bank sharply cut its Mediterranean team after a former employee was convicted of laundering money for Moroccan drug dealers.

"Following a strategic review of the legacy business formerly known as the Mediterranean business in Geneva - which the Bank acquired when it took over Republic in 1999 – and recent internal investigations involving former employees - the bank has decided to restructure this part of the business. As a consequence, we will be exiting most of the portfolio in this business to make it fit the Global Private Bank strategy, which primary focus is on business owners and their families. This indicates no change to our commitment to the markets concerned," the bank told WealthBriefing in an emailed statement.

"Less than 15 employees are working for the concerned business. The team will be reduced accordingly to the portfolio downsizing. We are discussing opportunities elsewhere in the bank where possible."

A former HSBC banker, fired after an internal investigation last year, was convicted in January of laundering money through Swiss bank accounts for Moroccan drug smugglers, along with his brother who worked for a Geneva-based asset manager, according to a report by Reuters.

The bank told the news service that it was not involved in the drug smuggling investigation and had cooperated fully with the police. He also said separate Israel teams in Zurich, Tel Aviv and New York that were not part of Medis were unaffected.

Money laundering

The latest developments come after UK/Hong Kong-listed HSBC has already been hit by scandals concerning money laundering. Last year, HSBC agreed to make a total payment of $1.92 billion to settle a US criminal investigation over breaches of anti-money laundering and sanctions laws, said to be the biggest penalty ever paid by a bank for such transgressions. HSBC created dramatic headlines earlier in 2012 when its then-global compliance boss, David Bagley, resigned in front of a US Senate Committee that was grilling HSBC executives and other persons about a report claiming widespread shortcomings in how HSBC operated anti-money laundering controls. It was said that money laundering failings facilitated monies for drug gangs, rogue states such as Iran, and terrorists.

In January, the bank said it would hire former US deputy attorney general Jim Comey to help avoid a repeat of lapses in its anti-money-laundering controls.

The latest affair in the Mediterranean business is entirely unrelated to the US matters, this publication understands.

HSBC has taken further steps to bolster its ability to fight financial crime, it says. In May, the former director-general of MI5, the UK’s domestic spy agency, was set to join HSBC's board as a non-executive director in August. Sir Jonathan Evans will also become a member of a special committee HSBC created to help combat financial crime. The unit was set up after the bank’s AML breach fine.

Meanwhile, to view the latest list of banks that have been punished or censured for various financial misdeeds or mishaps, click here.