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Probe Points to Former HSBC Syria Link

Lina Saigol and Sharlene Goff
Thursday, 16 Aug 2012 | 5:03 AM ET

HSBC opted to continue with a business relationship with one of the key financiers to the regime of Syrian president Bashar al-Assad even after its own compliance officials raised concerns about a trust linked to him, according to an investigative report into money-laundering by the US Senate.

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Rami Makhlouf, the first cousin of Assad who controls a large swathe of the Syrian economy, was a beneficiary along with his father of a trust set up in the Cayman islands by HSBC , emails released by the US Senate’s permanent sub-committee on investigations show.

The emails were released in July as part of a broader report that criticized HSBC over its money laundering controls. However, they were overshadowed at the time by claims in the report that HSBC ignored warnings its activities may have exposed the US financial system to drug money from Mexico and inadvertently provided banking services to lenders suspected of links to terrorist organizations.

The Senate subcommittee report said the trust linked to the Makhloufs was set up by HSBC Cayman Islands and administered by HSBC Geneva.

The nature of the trust has not been revealed although the bank ended its business relationship after Rami Makhlouf was designated by the US Treasury’s Office of Foreign Assets Control on February 21, 2008 as a person who had benefited from corruption.

The designation, part of an effort by the Bush administration to isolate Damascus economically and diplomatically, barred US companies from dealing with him.

One week after the designation, a HSBC Cayman’s compliance officer asked HSBC’s US division for information about whether any action had been taken by the bank over Mr Makhlouf, according to Senator Carl Levin, chairman of the Senate investigations subcommittee.

In an email released by the senate subcommittee, the Cayman compliance officer said that concerns were raised about the client in 2007 and reviewed at “group level”. A decision was then made to continue the relationship, according to the email.

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An anti-money laundering executive in HSBC’s compliance department on Fifth Avenue in New York also wrote in an email on the same day: “We have determined that accounts held in HSBC Cayman are not in the jurisdiction of, and are not housed on any systems in the United States. Therefore, we will not be reporting this match.”

Rami Makhlouf is currently subject to EU and US sanctions for facilitating violence against protesters by bankrolling the regime. Muhammad Makhlouf, who is Assad’s uncle and Rami’s father, is named as a beneficiary of the trust in the emails. He was blacklisted by the US Treasury in December 2011 for his role as financier to Assad.

HSBC told the Financial Times it was confident that had taken appropriate action to ensure the bank did not breach sanction rules.

“We cannot comment on individuals even to confirm or deny they are customers,” said the bank. “We abide by all relevant sanctions globally.”

Mr Levin alleged people at HSBC headquarters had made “a conscious, knowing decision” to maintain an account for the benefit of an international terrorist.

“So how is it that HSBC Geneva, or its Cayman affiliate, or any affiliate in the HSBC system, could have maintained a trust benefiting a terrorist, or gotten permission from group headquarters to service such an individual?,” Mr Levin said at a hearing in July.

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