- HSBC and Standard Chartered, two British banks that have taken heat for anti-money laundering violations in the past decade, may have been used to facilitate alleged illicit transactions between Iran and Chinese technology giant Huawei, The Wall Street Journal reported on Sunday.
- Over the weekend, China's foreign ministry threatened "severe consequences" as a result of the arrest Huawei CFO Meng Wanzhou, who is the daughter of the company's founder.
British banks Standard Chartered and HSBC were reportedly among financial institutions misled by Chinese technology giant Huawei into funneling illicit payments from Iran, The Wall Street Journal reported on Sunday, citing sources familiar with the matter.
According to the Journal, Huawei allegedly used a third-party intermediary — a small Hong Kong-based technology firm called Skycom — to channel payments between the company and Iran. The Journal reported that a spokesman for Huawei declined to comment.
Huawei's chief financial officer Meng Wanzhou was arrested during a layover in Vancouver, Canada on Dec. 1 at the request of U.S. authorities. Beijing has threatened unspecified "severe consequences" if Canadian courts don't release Meng, the daughter of Huawei founder Ren Zhengfei. Meng returns to court for a bail hearing Monday.
Both HSBC and Standard Chartered are based in the U.K., and both have been under scrutiny from global regulators for past money-laundering violations. The two banks also have had federal monitors in place to watch for the types of transactions described in the Huawei filings — but neither bank has been accused of any wrongdoing as part of this case.
Responding to CNBC, Standard Chartered declined to comment but clarified that the bank was not a target of investigations related to Huawei. HSBC also declined to comment on the WSJ story.
"The US Department of Justice has confirmed that HSBC is not under investigation in this case," said Stuart Levey, Chief Legal Officer at HSBC in a response to an email from CNBC.
Huawei has also been under U.S. government scrutiny since 2012 for a wide range of purported issues, such as alleged government-supported cyber espionage, intellectual property theft and violations of sanctions, including those related to Iran.
According to the court case outlined on Friday, Huawei executives allegedly knew of an investigation into sanctions violations as early as 2017, and had been "altering their travel patterns to avoid any travel to or through the United States." Meng's attorney has countered that trade-war tensions were responsible for the travel changes.
Meng's bail hearing will continue on Monday, with the judge in Vancouver likely set to consider electronic monitoring devices to determine whether she is a flight risk and rule on bail. The U.S. will likely make a request for extradition if bail is denied, with the extradition process typically taking months.
China's foreign ministry has not laid out clearly what it means by "severe consequences." Sources currently working for U.S. companies in China have expressed some unease to CNBC about how the case will impact their ability to do business in the region. The Chinese foreign ministry also released a statement to the Canadian courts saying they were "severely violating the legal, legitimate rights of a Chinese citizen."
However, Trump administration officials have downplayed any impact from the case on trade talks between the U.S. and China. White House economic adviser Larry Kudlow and U.S. Trade Representative Robert Lighthizer have both emphasized the Huawei case is separate from ongoing trade talks with China.
To comply with international anti-money laundering laws, banks must collect information from corporate and personal customers on their finances to ensure money from illegal practices — like drug sales or human trafficking — or sanctioned people or places don't flow through the bank.
Banks are held to high standards in how they facilitate transactions from sanctioned countries (like Iran, Burma and Côte d'Ivoire) or individuals. Recently, four military commanders were accused of war crimes in Myanmar, while 19 alleged cybercriminals were accused of interfering with the 2016 election.
For banks like Standard Chartered and HSBC, already under heavy regulator scrutiny for past anti-money laundering violations, the stakes are even higher.