When it comes to AML compliance, red flags aren’t just warnings. They are flashing neon signs that need immediate attention.
And yet, for over a decade, HSBC chose to look the other way.
A growing storm of allegations now surrounds the global banking giant, with mounting evidence that it failed to flag hundreds of millions of dollars in suspicious transactions linked to Raja Salameh, the brother of Lebanon’s disgraced former central bank governor, Riad Salameh. At the heart of the controversy is a shell company called Forry Associates, and the consequences of HSBC’s inaction are both far-reaching and likely painful.
Are those red flags blinking?
Why, yes, they were. Between 2002 and 2015, Forry Associates allegedly siphoned off $330 million in public funds from Banque du Liban (BDL), Lebanon’s central bank. Raja Salameh is now facing serious criminal charges for his role in the operation, one that European and Lebanese prosecutors believe was orchestrated from within the highest levels of Lebanon’s financial elite.
But, significantly, this wasn’t just a failure in Lebanon. HSBC Geneva was one of the banks through which the questionable funds flowed. Internal HSBC documents reveal a disturbing pattern. Compliance officers raised concerns, flagged the lack of transparency in transactions and questioned the legitimacy of the Forry account. Those concerns were repeatedly ignored.
Relationships or compliance?
A key player in HSBC’s missteps appears to be Sobhi Tabbara, a senior relationship manager and long-time associate of Raja Salameh. Tabbara vouched for Forry’s legitimacy, claiming it was a real brokerage firm and that its commissions were simply funding Raja’s real estate ventures.
In reality, Forry had no employees, no actual services and operated purely as a front. But Tabbara’s reassurances carried weight within HSBC. The National reports that Tabbara used his influence to maintain the client relationship, ignoring red flags and enabling the continued flow of illicit funds.
A 2009 document supposedly from BDL was cited to justify keeping the Forry account open. But prosecutors later discovered the document was never formally approved by the central bank’s board but was part of the scheme’s efforts to maintain secrecy.
The high cost of compliance failures
By 2015, even HSBC’s own internal investigation couldn’t confirm whether Raja Salameh was the actual beneficial owner of the Forry account. Despite this, the account remained open for years, and the money kept moving into luxury properties abroad tied to Riad Salameh and his network.
The NGO Public Eye, which has closely followed the case, argues that HSBC’s failings are emblematic of a wider problem in the Swiss AML system, which heavily relies on financial intermediaries to self-report suspicious activity. But in this case, business interests trumped compliance obligations. HSBC, eager to maintain a lucrative client relationship, allowed red flags to pile up without taking decisive action.
A cautionary tale
HSBC’s handling of the Forry case isn’t just an isolated compliance failure. It’s actually a powerful lesson for the global financial sector. When banks prioritize profit over principles, and when compliance teams are overruled by relationship managers with vested interests, the results can be catastrophic.
The fallout from this scandal goes beyond reputational damage. It highlights the urgent need for stronger, more independent compliance frameworks, systems where red flags can’t be brushed aside, no matter how “moral” or “trustworthy” a client claims to be.
Due diligence isn’t a box-ticking exercise in the world of finance. It’s the first line of defense against corruption and money laundering. HSBC’s costly oversight in the Forry case serves as a chilling reminder: ignore red flags, and you may end up complicit.
Training your staff in AML needs to be more than a tick-box exercise. Companies and law firms can easily fall out of compliance or get caught up in dirty money without a robust AML framework. Let Vinciworks help you with its suite of AML courses.
