HSBC's involvement in Huawei case could still complicate trade talks with China even though the bank isn't being investigated

Key Points
  • HSBC has long-held ties to China and has had numerous problems in the U.S.
  • A person familiar with the matter told CNBC that the bank is not being investigated in the legal case against Huawei.
Meng Wanzhou
Alexander Bibik | Reuters

In the saga involving the recent arrest of Huawei CFO Meng Wanzhou in Canada, questions have surfaced as to whether U.K. banking giant HSBC will be named in the legal case.

According to a story in the Wall Street Journal, a monitor appointed by the U.S. government to oversee HSBC's anti money-laundering controls flagged illicit transactions made by Huawei at the bank and shared them with New York prosecutors. That led to the arrest Saturday of Meng, potentially for violating U.S. sanctions that prohibit Huawei from selling equipment to Iran.

HSBC is not being investigated as part of the case, according to a person familiar with the matter, who asked not to be named because the matter is confidential.

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However, HSBC's broader involvement could further complicate trade talks between the U.S. and China. Even though the bank is headquartered in the U.K., HSBC (originally known as the Hongkong and Shanghai Banking Corporation) is one of China's most influential companies and has one of the largest foreign-owned banking networks on the mainland. HSBC incorporated locally in China in 2007.

Additionally, HSBC has had its share of encounters with U.S. authorities.

In 2012, the bank forfeited $1.9 billion to U.S. authorities for its role in allegedly laundering money from drug cartels as well as Iran, Cuba, Libya, Sudan and Burma, countries that were all sanctioned. The agreement also led to the federal monitorship of the company's anti-money laundering organization in the U.S.

As far back as the 1990s, HSBC groups allegedly "worked with sanctioned entities to insert cautionary notes in payment messages," including not mentioning Iran, according to the 2012 agreement.

Huawei has been under scrutiny since at least 2012 for accepting money from Iran and, according to a House Intelligence Committee Report, not complying with a federal investigation into the issue.

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