HSBC London asks over 40 diplomatic missions, including PNG, to close bank accounts

HSBC Sign:/Getty Images

International banking giant HSBC has asked more than 40 diplomatic missions in London to close their banks accounts, including accounts in Papua New Guinea.

Commentators are suggesting it may be an attempt by the banking giant to recoup its reputation after one of the world's biggest money-laundering scandals saw HSBC in the United States fined $US2 billion.

John Balavu, Port Moresby's acting High Commissioner in London, says PNG is not happy about HSBC's decision to close its London-based accounts.

"After banking with them for more than 20 years it came as a surprise," Mr Balavu said.

"This is what I call a bombshell."

Mr Balavu says the decision by HSBC to close PNG's accounts was for commercial reasons.

"London, as you are aware, is a financial hub of the world and these banks, over here, deal with mega-bucks, with mega-returns and we probably didn't fall into that category," he said.

Mr Balavu says his efforts to find out more about why PNG's London-based accounts were to be closed by HSBC has met a brick wall.

"I tried to probe further into that question but all they would say is that it was a commercial decision made by the bank but what is behind that commercial decision they could not disclose to us," he said.

Will McSheehy, the head of media relations for HSBC's Global Commercial Banking says HSBC does not "comment on individual customer relatoinships".

Last year HSBC was fined almost $2 billion dollars in the United States for repeated serious breaches of anti-money laundering legislation.

A 300-page report for the US Senate found the bank had for years acted as a conduit for drug lords and rogue nations, failing to disclose tens of thousands of sensitive transactions amounting to billions of dollars and resisting closing accounts linked to suspicious activity.

When the scandal began to unfold, HSBC tried to reduce damage to its reputation with internal reforms.

However Mr Balavu says the PNG mission in London has never been questioned by authorities about suspicious transactions.

"We are always clean and we do our banking in a very transparent way," he said.

PNG has now found a bank in London that is willing to take its business, but Mr Balavu says finding a new bank was a nightmare.

"It was very difficult because most of the banks when we approached them said they were not into accepting new businesses," he said.

"Other banks said the embassies and high commissions were in a different category and they were not into that line of business."

John Ridgway, the international managing partner with legal firm Rockwell Olivier, says banks everywhere are tightening their rules and closing bank accounts where necessary.

"It would seem to be something which is more likely to be on the increase than the decrease ... for emerging parts of Asia and emerging and developing parts of the Pacific," Mr Ridgway said.

"It is probably something governments need to be attuned to."

Michael Ahrens, executive director of Transparency International Australia, says a country's corruption rating, often judged by the organisation's corruption perception index, has a big impact on its reputation.

Mr Ahrens says in the future diplomatic missions will find it harder to open bank accounts due to their corruption rating.

"As far as countries close to us are concerned, there are a number of them that who rank very low on the Transparency International CPI (Corruption Perception Index) so I don't think it is going to stop with actions by one bank," he said.

Mr Ahrens says Pacific Island countries can protect themselves from having their bank accounts closed by improving their anti-corruption practices.

"They can protect themselves by doing much, much more to strengthen their money-laundering and anti-corruption frameworks," he said.

ABC News