HSBC closes bank accounts of consulates over risks that include exposure to money laundering

By Christine Duhaime | August 5th, 2013

HSBC Cancels Bank Accounts of Consulates

HSBC has given notice to several consulates and the Vatican that it is closing their accounts within 60 days. No reason has been officially cited for the cancellation of the client bank agreements but it is likely as a result of the exposure such accounts hold for financial institutions for money laundering and corruption.

Consulates by definition deal with funds from politically exposed persons (“PEP“) which present higher risks of corruption and money laundering because of the possibility that they may abuse their position and influence to carry out corrupt acts, such as accepting and extorting bribes or misappropriation of state assets and then use domestic and international financial systems to launder the proceeds.

There are reputational risks for accepting funds belonging to PEPs if it later emerges that the funds were proceeds of crime. And there are also operational, legal and concentration risks, all of which are interrelated and factor into a bank’s decision to open or close high-profile accounts. The accounts of PEPs are more expensive to maintain for banks by reason of the enhanced and continual due diligence and monitoring required.

The closure of the bank accounts is creating chaos for consulates worldwide.

Comments are closed.