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HSBC shuts out Iranian, Libyan, and Syrian clients—unless they’re seriously rich

March 12, 2013
March 12, 2013

HSBC Middle East has new rules for clients of countries facing international sanctions: the bigger the bank account, the safer the client.

The bank is shutting down the accounts of most Iranian, Libyan and Sudanese nationals, after paying a record $1.92 billion settlement to US authorities for processing millions of dollars worth of banned transactions from those countries. But there is a loophole: Customers with relationship managed accounts, which require them to maintain minimum balances of 100,000 dirhams ($30,000) for a so-called advanced account or 350,000 dirhams ($100,000) for a premium, get to keep banking.

It is a policy that sends the wrong message to clients in the region, says Gulf News, a widely read regional daily newspaper:

It implies that all of those countries’ citizens are part of a conspiracy to launder money. More telling, though, is the banks’ decision to allow those with cash reserves to maintain their accounts, suggesting HSBC is willing to risk having citizens from those countries on their books, provided there is enough money to justify it.

HSBC Middle East spokesman Tim Doyne said that relationship managed accounts, which just happen to serve wealthier clients, let the bank conduct ongoing oversight of customers and their account histories. HSBC will still close any accounts that show “any data, activity or pattern that we consider irregular or in violation of our due diligence standards.”

That may not be enough to reassure clients, banking experts say, especially as other financial institutions are retaining their clients in sanctioned countries despite mounting pressure. Standard Chartered, which paid over $650 million last year to settle claims of money laundering by varied US entities, has said it will not follow HSBC’s example.

“Standard Chartered does not sever relationships with clients based on their nationality and we adhere to the highest standards of compliance to local and international regulations. [The bank] is focused on Asia, Africa and the Middle East, and 90 per cent of our profits and revenues are generated from these markets,” a spokesperson told the Gulf News, which first reported on the matter.

From a financial perspective, such profiling may work against HSBC, which has been struggling in recent months under the weight of fines and scandals. HSBC recently reported that its 2012 pre-tax profit tumbled 6% to $20.6 billion. Its Middle East operations were even harder hit, with pre-tax profit down 10% to $1.4 billion.

To close down accounts without evidence of wrongdoing, while maintaining the accounts of the most well-off, sends a very questionable message indeed.

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