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This article touches on the very foundations on where banks have to draw the line when it comes to accepting a business on the grounds of acceptable standards; as far as the firms AML policy and risk appetite principles are concerned.

HSBC is understandably ever so careful after its $1.92 Billion dollar fine and a few post fine negative publicity issues (Swiss private banking & tax evasion accusations, being the latest). The infamous case of INTERPAL (Natwest Vs Weiss) where an innocent UK based charity involved with “alleged honest charity” work in Palestine showed banks just how so careful and risk averse they might need to be.

On the flip side, HSBC’s decision (subject off course to its policy, risk tolerance, risk appetite and risk based approach) should have (and may indeed have) weighed the consequential risks inherent with accepting the charitable organisations account. The size, nature and complexity of the charity along with the jurisdiction it was involved in would have understandably swayed their decision in rejecting the account.

The consequence of not doing this right from the client enquiring on the possibility of opening the account, could potentially create a reputational and PR issue as HSBC would not like to be seen to deny “fundamental rights issues” to needy helpless children in an impoverished society to which this charity allegedly claims to provide.

It can be argued however that the charity’s eventual success in a bank co owned by HSBC would have thrown their policy of not accepting the account in the first instance a laughable instance but to HSBC’s defence this may be due to how much influence HSBC has over the joint ownership and how influential its policies & procedures are adopted in the local bank it co owns. The recent Barclays bank case involving MSB (Money Service Business) offering to Somali clients is one such case on how you balance offering a service and risking money laundering or terrorist financing risks.

So what then is the solution? – The solution lies in effective, efficient and common sense approach in conducting due diligence and balancing the right timing of reviewing accounts that pose not just an “immediate risk” but in this charitable case, what I would refer to as a “consequential or transferable risk” where the wrong is not coming from the charity but where the monies involved end up in bad hands which spell disaster in terms of sanction, terrorist financing and invariably operational, regulatory and reputational risks to which the institution “involved in the arrangement” may potentially be exposed to.

Hence why the saying: “ is better to be safe than sorry…” may very well be HSBC’s rationale.


Signed by Tom Brown ACAMS