HSBC Reviews Humanitarian Payments Amid Report Iran Frozen

Jun 24, 2014 7:50 am ET

(Updates with lawyer’s comments from fourth paragraph.)

June 24 (Bloomberg) -- HSBC Holdings Plc said it continues to review humanitarian payments involving countries facing sanctions as a press report said Europe’s largest bank stopped processing some Iranian transactions.

“Our policy only requires the freezing of such payments where required under applicable laws and regulations,” the London-based bank said in a statement. “HSBC continues to consider humanitarian payments involving sanctioned countries on a case-by-case basis, including to ensure that they are legitimate, in accordance with applicable regulatory requirements and otherwise consistent with HSBC policy.”

Reuters, citing bankers and traders it didn’t identify, reported today that HSBC froze payments allowed under sanction laws for reasons such as food imports, and that Iran is trying to get the bank to resume them. U.S. authorities have stepped up pressure on banks since HSBC settled probes involving Iran in 2012, and is seeking to fine France’s BNP Paribas SA on similar grounds.

“They’re thinking ‘it isn’t really worth us taking the risk,’” Owen Watkins, a lawyer at Lewis Silkin LLP in London, said in an interview. “You can never really be 100 percent sure that the money isn’t somehow going to be diverted for a sanctions-breaching purpose.”

HSBC didn’t specify that any transactions involved Iran, and declined to comment beyond the statement.

Sanctions, Fine

HSBC was little changed at 606.2 pence as of 12:40 p.m. in London trading. The stock has fallen 8.5 percent this year.

Reuters reported that the Iranian central bank said it didn’t have “interactions” involving humanitarian trade with HSBC. An official at the central bank wouldn’t immediately comment to Bloomberg News. The report cited separate Iranian government officials as saying that they were in talks to get HSBC to resume processing payments.

HSBC’s Middle East unit last year said it would stop personal-banking services to some customers with links to Iran. That followed its 2012 agreement to pay $1.92 billion to settle U.S. probes of money laundering.

Most of the violations involved failure to monitor transactions by drug dealers in Mexico, though Senate testimony also indicated HSBC handled so-called U-turn transactions through U.S. financial institutions that involved funds from Iran to non-U.S. banks.

HSBC’s fine and settlements by other lenders made banks reconsider their business with Iranian clients, Shane Gleghorn, a partner at Taylor Wessing LLP in London, said by telephone.

“The risks attendant with doing any business with Iran, or Syria, for example, are very significant,” he said.

BNP Paribas, France’s largest bank, is close to agreeing to plead guilty and pay as much as $9 billion to settle allegations it violated U.S. sanctions against countries including Iran and Sudan, according to a person familiar with the negotiations. Standard Chartered Plc agreed to pay $327 million of fines after regulators alleged it violated U.S. sanctions with Iran in 2012.

--With assistance from Ladane Nasseri in Dubai.