Background: The case against Riad Salameh

HSBC was already entangled in a broader series of money-laundering scandals – including allegations of laundering nearly $900 million for drug cartels and processing illegal transactions for countries under US sanctions. As part of a 2012 settlement, HSBC Holdings paid a record $1.25 billion fine to US federal regulators, admitted to major compliance failures and pledged to implement reforms. In exchange, the US judiciary deferred the prosecution, agreeing to close the case if HSBC met its obligations during a five-year period.

During this probation period, HSBC continued processing suspicious transactions for Forry, despite nearly twenty requests for clarification sent by the compliance department to the account manager of Forry Associates between 2006 and 2013, according to the Public Eye investigation. It wasn’t until the spectacular collapse of Lebanon’s financial sector in 2019 – and the uncovering of a national-scale Ponzi scheme tied to former BDL governor Riad Salameh – that HSBC’s Swiss arm eventually reported the account to Switzerland’s Money Laundering Reporting Office (MROS), which led to the opening of legal proceedings.

Since then, at least six European countries have launched investigations into the case. France, Luxembourg and Germany set up an international investigative team, leading to the seizure of properties worth millions across Europe and the issuance of an arrest warrant for the governor by French authorities. At least six people have been placed under formal investigation in France in connection with the case.

In September, Riad Salameh, once lauded as the linchpin of the Lebanese financial sector, was arrested over money-laundering allegations in Lebanon. Since then, he has moved between detention and medical care for health reasons, as the prosecution against him continues. Both brothers have repeatedly denied any wrongdoing. They did not reply our request for comment.

The chain of failures that enabled the massive fraud scheme also expose deep shortcomings at HSBC and within the BDL. These accusations present a new set of challenges for the newly appointed central bank governor, Karim Soueid, who took office last week.

Forry: The brokerage used to 'embezzle' from the central bank

In 2001, Raja Salameh approached Sobhi Tabbara, a senior banker at HSBC Geneva, for help setting up a brokerage firm. According to HSBC documents from the time, Mr Tabbara described Salameh as a “Lebanese individual” with “good morality”, whom he had known since 1989. The two met when Raja Salameh was heading the Beirut representative office of Republic National Bank of New York, which was later acquired by HSBC.

HSBC documents portray Forry as a legitimate company with an established presence.

According to explanations provided by Mr Tabbara to HSBC, Raja Salameh had opened a consultancy firm to offer financial advice and intermediation services to individuals and banks after he left his previous position. The company, Forry, was mandated by the central bank, headed by his brother, to market its financial instruments.

In a 2013 banking document, Forry is described as having been “in business before his brother was appointed governor of the central bank”.

But European and Lebanese investigations tell a different story. According to prosecutors, Forry had no employees, no offices, not even a landline. No one in the financial sector had heard of it. Banque du Liban was Forry’s only client – and the company was created after Riad Salameh was appointed governor in 1992.

Financial experts say there was no reason to involve a broker to sell BDL instruments to domestic banks.

Yet Lebanese banks were unknowingly paying a 0.38 per cent commission to the brother’s company each time they bought financial instruments from the central bank, under a secret contract signed between Forry and Banque du Liban in 2002.

Raja Salameh apparently struggled to justify Forry’s role. When French investigators asked whether the central bank could not have handled the task itself, he replied: “I cannot answer that question. You would need to ask representatives of the Banque du Liban.”

According to internal documents, HSBC never questioned the nature of Forry’s activities.

“Banks must scrutinise the background of transactions to ensure their legitimacy,” Lebanese lawyer Fouad Debs, who specialises in international criminal law, told The National. “Specifically for transactions that are related to public institutions or appear to be illegitimate and not match the customer's profile and returns,” he added.

HSBC: How compliance officers were misled

According to the Public Eye investigation, the first alarm was raised in 2006, and again in 2007, when the account was submitted to the HSBC Due Diligence Committee (DDC), where it was decided that Mr Tabbara would go to Beirut to obtain additional documentation.

In 2009, approximately 18 months later, the compliance department raised new red flags about the account, Mr Tabbara provided additional clarification.

He told compliance officers he had called Riad Salameh, who assured him the contract and related transactions had been approved by the central bank’s board, composed of four vice governors, the Director General of the Ministry of Finance and the Director General of the Ministry of Economy and Trade, a claim later contradicted by investigators.

A BDL “Treasury & Compliance Services” employee then sent an encrypted SWIFT message to Mr Tabbara explaining that the number listed on each transaction referred to resolutions adopted by the central bank's board.

The compliance officer at the BDL could not be identified. A source at BDL told The National that no department by that name existed at the time.

The SWIFT message did not explain the economic background of the transactions but Mr Tabbara said the document was sufficient to keep the account running.

“This body [the board] is obviously in full knowledge of the commissions levied by Forry,” he told HSBC compliance officers. “I think it would be inappropriate to ask for more details, as they were kind enough to already send us this authenticated SWIFT. I am fully comfortable with their explanation.”

Yet investigations reveal that the board was, in fact, not aware of the Forry arrangement. Contracts between BDL and commercial banks, as well as board resolutions reviewed by The National, do mention a 0.38 per cent commission – but never name a beneficiary.

Interviews conducted by The National show that both BDL board members and Lebanese bankers believed the 0.38 per cent commission was going directly to the central bank.

“We all assumed it was going to the central bank,” a board member at the time told The National.

According to the Lebanese prosecutor, the entire arrangement was conducted in secrecy within the BDL, with no administrative oversight of the payments to Forry.

During his 2021 hearing with the Lebanese judiciary, Riad Salameh said transfers to Forry were managed directly by himself, through the Department of External Operations, which executed the payments after his approval.

Why the 'red flags' may have been ignored

In 2015, HSBC’s Financial Intelligence Unit (FIU), the bank’s internal investigation team, requested a new round of verifications. The unit traced the flow of funds and found the bulk of the money had been transferred from the Forry account to Raja Salameh’s personal accounts in Lebanon through Raja Salameh personal accounts at HSBC.

The investigation concluded that these personal accounts were “likely” being used as a “pass-through” account – meaning it primarily served to briefly hold funds before moving them elsewhere – “most probably aiming to conceal” Raja Salameh’s ultimate source of wealth, which is the BDL.

Due to all these red flags, HSBC decided to close Forry's account in 2016. However, the bank did not report the matter to the anti-money laundering office until four years later, amid Lebanon's financial collapse. Public Eye said that the account's report was based on an explosive 20-page document by the Financial Crime Threat Mitigation (FCTM) department - part of HSBC’s compliance division - reviewing all the compliance alerts triggered in recent years in relation to the Salameh brothers within the bank.

The FIU also noted it was unable to confirm whether Raja Salameh was the ultimate beneficial owner of the account.

In a 2021 hearing with Swiss investigators, Mr Tabbara, as a witness, said the sums transferred from the account were intended to finance Raja Salameh’s real estate projects in Lebanon – an explanation he had also given to HSBC compliance officers.

“I saw some of his real estate investments in Lebanon but I don’t know if we have documentation detailing them,” he said, adding he didn’t know who was responsible for verifying the documents' plausibility.

Court documents showed otherwise. Investigators have uncovered a complex money trail across the globe flowing from the Forry account, which they say is typical of money-laundering schemes, ultimately funding a lavish property empire in Europe and the US for Riad Salameh and his relatives.

The bulk of the funds were first transferred to Raja Salameh’s accounts in Lebanon, then funnelled back to Riad Salameh. Some commissions were also transferred directly from Forry to two offshore accounts held by Riad Salameh – which HSBC failed to flag – as well as to an account belonging to Riad's romantic partner, Anna Kosakova.

“It would appear that there was undue influence from a very senior individual, a failure of internal checks and balances to challenge that person’s version of events, and incomplete due diligence on the PEP relationship,” an international compliance expert told The National, requesting anonymity.

“All the red flags were brushed aside by the relationship manager and no one appeared to step up to express any discomfort,” he added.

For decades, Riad Salameh enjoyed an extraordinary aura, which was tarnished only in recent years after the string of legal troubles, with few daring to question him or his policies.

This complacency wasn’t limited to HSBC. Another European bank, BGL BNP Paribas, which also processed Forry’s commission payments, said in an internal document seen by The National that it was “rather clumsy” to scrutinise Salameh’s wealth, given “the client’s level of renown and integrity”.

There is “no concern about his integrity and the origin of his wealth, which was first acquired during his private-sector career and then boosted by the stellar performance of local government bonds and real estate”, the document said.

Mr Debs, the lawyer, told The National that large transactions also generated profits for banks, which may explain why suspicions were ignored, along with bonuses for the relationship managers handling the account.

In 2024, the Swiss Financial Market Supervisory Authority concluded that HSBC Geneva “seriously violated financial market law” in relation to the case, and banned the bank from taking on new politically exposed customers.

In January, The National revealed that Lebanon had filed a lawsuit against HSBC in Switzerland, in its first legal action against a foreign bank related to the corruption case, accusing it of failing to conduct proper due diligence on the origin of the funds.