In February 2013 a compliance officer at HSBC raised concerns with the bank’s financial crimes investigation team about funds flowing through an account held within its private bank in Switzerland.
The account was Forry Associates, a company controlled by Raja Salameh, the brother of Lebanon’s central bank governor at the time, Riad Salameh. More than a hundred million dollars had passed through the account with little information about the nature of the transactions. The compliance officer found the activity suspicious.
After an initial review by HSBC’s investigations team, the issue was escalated to senior managers who oversee assessments of politically exposed persons, according to people familiar with a French judicial probe. They decided to keep the relationship with Forry Associates going.
That decision could prove costly for HSBC. It has helped put Europe’s largest lender at the centre of a huge money-laundering scandal that involves the alleged embezzlement of hundreds of millions of dollars from Lebanon’s central bank by its former governor and his associates.
French prosecutors this month confirmed they had brought preliminary charges against HSBC’s Swiss Private Bank over allegations it helped Riad Salameh embezzle funds. A judge will later decide whether to take the matter to trial or dismiss the charges.
Investigators allege that $330mn was transferred from the central bank — Banque du Liban — to Forry Associates between 2002 and 2015. They also traced 174 transactions from Forry Associates to Raja Salameh’s personal HSBC account in the period between 2009 and 2016, totalling $204mn, according to court documents and people familiar with the investigation.
Riad Salameh has long claimed he had “nothing to do” with Forry but Lebanese and European investigators allege the company was central to the alleged scheme to siphon off public funds that ultimately benefited Riad Salameh and his relatives.
The case against HSBC is largely mounted on evidence gathered by Swiss authorities, which are also investigating the company’s Swiss unit over alleged aggravated money laundering, as part of a broader multiyear investigation into the Salameh brothers.
The Swiss regulator Finma had previously found that HSBC’s Swiss unit seriously breached anti-money laundering requirements in its handling of Lebanon-linked clients. In its 2024 decision, it also criticised the bank for taking too long to report its suspicions to the authorities despite mounting red flags.
“The bank failed to recognise the indications of money laundering presented by these transactions,” Finma wrote in its finding. “It likewise failed to satisfy requirements for the initiation and continuation of customer relationships with politically exposed persons, and was thus in serious breach of its due diligence obligations,” it added.
The period under scrutiny — 2001 to 2016 — is particularly bruising for HSBC. The bank paid a then record $1.9bn fine in 2012 to settle allegations in the US that it had allowed itself to be used by Mexican drug cartels and terrorist financiers for money laundering. US investigators also found that the bank had ignored internal warnings about the flow of funds.
Last year, HSBC warned that the investigations could have a “significant” impact on the group. It has already terminated relationships with more than 1,000 wealthy Middle Eastern clients from countries including Saudi Arabia and Lebanon. The banking group declined to comment on this story.
HSBC’s relationship with the Salameh brothers started just before the turn of the millennium when it bought Republic National Bank of New York.
As part of the transaction it inherited banker Sobhi Tabbara, a longtime acquaintance of Riad and Raja Salameh, who had spent more than a decade at the bank.
Tabbara described Raja Salameh as someone “very well known to me for over 20 years” in internal communications. The two men had met when Raja Salameh was heading the Beirut office of Republic National Bank of New York, people familiar with the investigation told the FT in 2023.
HSBC opened an account for Forry Associates, a shell company registered in the British Virgin Islands, shortly after it was established in 2001. Mossack Fonseca, the law firm that would go on to be at the centre of the Panama Papers scandal, acted as its administrator and its beneficial owner was Raja Salameh.
The account was set up to receive funds from the Banque du Liban under a 2002 contract signed with Forry Associates. The company would receive commission payments made to Raja Salameh for his role as a broker for the central bank.
HSBC did not have a copy of the contract when the account was opened, according to legal documents and people familiar with the investigation.
Internal HSBC records show that Tabbara vouched for the account linked to Raja Salameh, saying Forry Associates was a legitimate business.
But European investigators who later looked into the company, in one of multiple ongoing investigations into the Salamehs, could not verify that Forry Associates had employees, clients or any activities beyond receiving money from the central bank.
HSBC’s own compliance monitoring programme raised multiple alerts regarding Forry Associates beginning in 2006, a decade before the bank cut ties with the Salameh brothers.
In 2007, HSBC sought evidence to justify the Banque du Liban payments flowing into the Forry Associates account and Tabbara was scheduled to travel to Beirut.
HSBC wanted so-called resolutions approved by Banque du Liban’s Central Council that would purportedly corroborate the transfers of fees and commissions into the Forry Associates account.
It is unclear if Tabbara made the trip or whether HSBC then received any documents. But in 2009 the bank received a Swift message from the Banque du Liban, which stated that the reference numbers cited on commission payments to Forry Associates matched resolutions adopted by its central council.
Tabbara said he followed up with a Banque du Liban compliance officer, who confirmed that Forry was one of their brokers and the central bank’s board was aware of the contract and related transactions. The latter claim was later disputed by investigators.
The communication made through the secure global messaging network Swift, used by thousands of financial institutions, was heavily relied on by HSBC as a reason for maintaining the relationship with Raja Salameh.
“This body [the board] is obviously in full knowledge of the commission levied by Forry,” Tabbara told HSBC compliance officers in 2009, according to an internal memo. “I think it would be inappropriate to ask for more details, as they were kind enough to already send us this authenticated Swift.”
“I am fully comfortable with their explanation,” he added. By 2011 more than $100mn had passed through the Forry Associates account according to Swiss regulators.
Tabbara was by then leading the lender’s private banking efforts in the Middle East and north Africa, a role he would stay in for over a decade until his departure in January 2024. He did not respond to requests for comment.
In summer 2015, almost fourteen years after HSBC first opened the Forry Associates account, it finally received a contract between the company and the Banque du Liban.
But there were discrepancies between the version provided by Raja Salameh and the original 2002 contract with the Banque du Liban, according to people familiar with the investigation.
The contract provided to the bank in 2015 was signed by Raja Salameh himself, while the original was signed by Riad Salameh and another individual.
The bank’s financial intelligence unit requested a new round of verifications. By then roughly $300mn had passed through the account.
In tracing the flow of transactions, it found the bulk of the funds had been sent from the Forry Associates account to Raja Salameh’s personal HSBC accounts before being routed onward to his bank accounts in Lebanon.
The FIU privately concluded that these personal accounts were “likely” being used as a “pass-through” and “most probably aiming to conceal” the source of the funds in question.
In early 2016, HSBC decided to close all relationships linked to Raja Salameh. It maintained the decision was unrelated to money laundering concerns and instead based on “risk appetite,” according to people familiar with the investigation.
The net started to close around Riad Salameh in 2019. Years prior, the then central bank governor had turned to what he described as “financial engineering” to keep the country’s economy going. He offered commercial banks interest of up to 12 per cent to increase their dollar deposits at the Banque du Liban in an effort to shore up its large stock of foreign reserves.
Banks, in turn, offered high interest rates to their customers on multiyear deposits.
More than two-thirds of Lebanese bank deposits were invested with the state by 2019. Repayments on outstanding public debt made up more than a third of total government expenditure annually in what has been referred to as “a state-sponsored Ponzi scheme.”
Today, Riad Salameh is charged with embezzling $44mn by Lebanon and is under criminal investigation in several European countries for siphoning off hundreds of millions more from the central bank.
He has long denied all allegations of misconduct. His lawyers said: “The suspicions of embezzlement of funds by Riad Salameh correspond neither to [his] lifestyle nor to the financial reality of the case, since his wealth was built before he took office at the [Banque du Liban].” They did not comment on HSBC’s alleged role, since an international arrest warrant blocks access to the case file.
In 2020, four years after HSBC had cut off its ties with the Salamehs and Forry Associates, and as Lebanon’s economy was in freefall, the bank filed a report to Switzerland’s money laundering reporting office. To Swiss regulators, it was too late.
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