HSBC Bank is decidedly not tactful in asking more than 40 diplomatic missions, consulates and embassies in London to take their business elsewhere.
The nations reportedly requested to move to another bank include The Vatican, Papua New Guinea and the African republic of Benin.
The bank claims the requests are business decisions and that all business accounts, including diplomatic missions, have had their accounts reviewed on a rolling basis over the past 27 months.
Although the bank declined to comment about relationships with specific customers, a spokesman explained the accounts had to satisfy five business criteria – international connectivity, economic development, profitability, cost efficiency and liquidity.
If the diplomats fail to pass the tests, HSBC is asking them to close their accounts.
Letters of introduction
According to the Foreign Office, this is triggering financial ‘havoc’ in the diplomatic community as the accounts pay the day-to-day bills for embassies and consulates.
Civil servants are offering letters of introduction to diplomats and discussing how the issues might be resolved with HSBC, said a spokesman.
Cash also runs through the accounts to pay wages, school fees and other staff costs.
The action will make visa processing more difficult as diplomatic missions cannot process online payments, credit or debit cards without a bank account.
Many foreign missions are having trouble in switching their accounts as other banks are running similar tests on their clients.
Regulators have warned banks that some foreign missions flag money laundering risks, because unlike other business customers, diplomatic immunity allows them not to divulge the source of money in the accounts.
No one wants our business
Lawrence Landau, honorary consul of Benin, said: “We simply cannot find a new bank at the moment. HSBC have given us a 60 day deadline but no other bank seems to want our business.”
HSBC has already had a run in with the US government over unwittingly laundering cash for a Mexican drugs cartel through branches in Latin America. The bank was fined £1.26 billion for poor money laundering management and the head of compliance stepped down.
HSBC in London is not the only bank to shut the doors on diplomats in recent years.
In 2012, JP Morgan Chase and Citigroup turned away the accounts of Angola, the Congo Republic, Sudan and Yemen.
The US State Department had to persuade the banks to reopen some accounts, while others found new bankers.
In 2004, The Riggs National Bank, in Washington DC, was fined and sold after a US Senate report revealed executives aided Chile dictator Augusto Pinochet in hiding millions of dollars.
