HSBC and Standard Chartered have been quizzed by banking regulators and United Nations investigators after it emerged that both banks had relationships with a company controlled by notorious Russian arms dealer Victor Bout.
Mr Bout, described as a "merchant of death" by Peter Hain when he was a Foreign Office minister, has been identified in UN reports as selling arms to Charles Taylor, the former president of Liberia, and Unita rebels in Angola, in breach of UN sanctions. He is also alleged to have supplied weapons and aircraft to the Taliban and al-Qa'ida.
San Air General Trading, a company UN investigators say is controlled by Mr Bout, ran accounts at branches of both HSBC and Standard Chartered in the United Arab Emirates.
Mr Bout, who was recently charged with money-laundering offences in Belgium, was based in the UAE before being expelled last year. He now operates out of Russia.
The accounts have now been closed. HSBC and Standard Chartered told the Abu Dhabi central bank of their concerns over the accounts after it emerged that San Air had links to Mr Bout.
The central bank told the UN's expert panel, which has been investigating sanctions- busting by arms traders. It contacted HSBC and Standard Chartered and the two banks have been co-operating with the authorities.
Standard Chartered commented: "We have been in contact with the UN expert panel and have shown to their satisfaction that we had suspicions about certain customers and have taken steps to terminate this relationship."
HSBC admitted breaches of money-laundering procedures had taken place in its branches in the UAE in 1999 and 2000. "Certain transactions were not reported at the time," said a spokeswoman. "This is something we have since reported to the regulators and we have strong compliance procedures in place."
Though both banks are UK-based, and so regulated by the Financial Services Authority, money-laundering issues are the responsibility of the central bank where the branches are based.Reuse content