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Lebanon has filed a lawsuit against HSBC in Switzerland, in its first legal action against a foreign bank related to a corruption case involving former Lebanese central bank governor Riad Salameh. Helene Iskandar, head of state litigation, told The National she filed the lawsuit on January 14.
Switzerland's Attorney General opened an investigation into Mr Salameh in 2020 for aggravated money laundering. Judicial documents allege Mr Salameh siphoned at least $330 million from the central bank through commissions paid into the account of his brother’s company, Forry Associates Ltd, at HSBC Private Bank Switzerland.
The funds then followed a complex path through different countries and accounts to pay for luxury properties in the EU and US for Riad Salameh and his relatives, according to European investigators.
Lebanon alleges that HSBC Switzerland failed to conduct proper due diligence on the origin of the funds.
In June, Switzerland’s banking regulator – the Swiss Financial Market Supervisory Authority, Finma – accused HSBC Private Bank Switzerland of breaching money-laundering rules in relation to Riad Salameh's case and ordered measures to be taken.
The regulator found the bank failed to properly assess the origin, purpose or background of the assets involved, despite a series of high-risk transactions that were insufficiently documented.
Finma banned HSBC's Swiss private bank from entering into new business relationships with prominent public figures in July 2024. It accused the bank of failing to notify authorities about the transactions despite money laundering risks.
HSBC did not reply to The National's request for comment. Riad Salameh and his brother, Raja, have denied any wrongdoing.
Since Switzerland opened an investigation into Riad Salameh, at least six other countries, including Lebanon, France, Germany, Luxembourg, Belgium and Lichtenstein, have launched corruption investigations against him.
Asked about Lebanon's lawsuit, the Office of the Attorney General of Switzerland said it would not provide "any further information" as it concerned ongoing criminal proceedings on suspicions of aggravated money laundering in connection with the embezzlement of funds from the Banque du Liban, Lebanon's central bank.
Red flags
Judicial documents seen by The National highlight a series of red flags concerning Forry Associates and the flow of funds around the company.
According to the minutes of Raja Salameh's hearing before the Lebanese judiciary, Forry was established in 2001 in the Virgin Islands “on the advice of HSBC Bank in Geneva”, which handled the “incorporation procedures” and opened a bank account for the company.
Under an irregular agreement with Lebanon's central bank, Forry collected a 0.38 per cent commission from Lebanese commercial banks between 2002 and 2015 – without their knowledge or providing services – each time they bought financial instruments from the central bank.
In 2015, HSBC requested an additional copy of the Forry contract, which was signed by Raja Salameh, despite him not being one of Forry's directors – making the contract legally non-binding, according to investigators.
The contract presented to HSBC differed from the one signed in 2002 by the central bank governor and a Forry representative named Kevin Walter, who investigators have been unable to identify or locate.
Twelve years after that contract was signed, and hundreds of millions of dollars in commissions later, the anomalies eventually raised red flags. HSBC refused to process two transfers from the central bank to Forry, totalling $7 million, which it then returned to the central bank.
According to the Lebanese investigation into Riad Salameh, the funds were then transferred to lawyer Michel Tueni to be delivered to Forry. Mr Tueni could not be reached for comment on the rationale behind the transfers.
“After this incident, Forry no longer received bank transfers from Banque du Liban and the company was dissolved in 2016,” Jean Tannous, a former judge who was in charge of the Lebanese investigation, wrote in a note.
HSBC waited until September 2020 to file a report, four years after closing the accounts in light of various red flags.
Raja Salameh told investigators the company's closure was unrelated to HSBC's restrictions, saying it shut down due to a “drop in business activity” in 2015.
That same year, however, Lebanon's central bank launched a “financial engineering” scheme, which led to an increase in transactions between the central bank and Lebanese banks.
Once praised as one of guardians of the banking sector, Riad Salameh, who led the central bank from 1993 until 2023, has been under intense scrutiny since the collapse of the Lebanese economy in 2019.
He has been in custody in Lebanon since September over a separate case involving embezzlement and the manipulation of financial statements, linked to the Lebanese broker Optimum Invest SA.
According to Banque du Liban's forensic audit, Optimum used similar mechanisms to Forry to allegedly siphon off public funds through commissions between 2015 and 2018.
Optimum began dealings with the central bank in 2015, the same year Forry ceased its operations with the regulator. Riad Salameh is alleged to have embezzled at least another $42 million from the central bank through Optimum.
