HSBC has launched a lobbying effort to convince the Chinese government that it is not responsible for the arrest of Huawei's finance director, as the bank tries to distance itself from the diplomatic row over China's top telecoms equipment maker.
The UK-listed bank stepped up engagement with Chinese officials after the arrest in December of Meng Wanzhou, the Huawei executive who is also the daughter of the company's founder, according to several people briefed on the discussions.
Ms Meng is out on bail in Canada, where her lawyers are trying to stop her extradition to the US to face charges of bank and wire fraud in an indictment that also alleges that Huawei conducted business in Iran in contravention of US sanctions.
HSBC provided information that helped US prosecutors build the case against Ms Meng and Huawei in a move that has infuriated executives at the telecoms group, according to people familiar with the matter.
John Flint, HSBC's chief executive, and other senior representatives of the bank have told Chinese officials that it had little choice but to co-operate with the investigation after the US Department of Justice requested information on its relationship with Huawei in 2017, according to three people briefed on several of the discussions.
In 2017, HSBC was operating under the supervision of an independent monitor appointed by the DoJ in 2012 after the bank was fined $1.9bn for breaching sanctions and helping Mexican drug cartels launder money.
Mr Flint defended the bank's co-operation with the DoJ investigation in a meeting earlier this year with the Chinese ambassador to the UK after he was called to the embassy in London following Ms Meng's arrest, two of the people said.
HSBC's chief legal officer, Stuart Levey — who served as a senior US Treasury department official with responsibility for financial crime in the George W Bush and Obama administrations — also attended the meeting, they added.
"The Chinese are very angry at the treatment of [Ms] Meng and have asked us about our role in her prosecution," said one HSBC insider briefed on the discussions.
"We've told them we had a US monitor, with between 200 and 400 people inside the bank at any given time, that had access to everything: stonewalling the DoJ was not an option."
One person advising HSBC described the situation as "incredibly sensitive" for the bank, which generates nearly 75 per cent of its profits in Hong Kong, the autonomous Chinese territory, and mainland China.
HSBC's nervousness underscores how companies fear getting caught up in the sparring between Beijing and Washington, especially when they have adopted growth strategies predicated on expanding in China.
As well as a wholly-owned retail and commercial bank and joint ventures in asset management and insurance in mainland China, HSBC in 2017 became the first foreign bank to launch a majority-owned securities venture in Shenzhen.
The bank terminated its relationship with Huawei in 2017 over "risk concerns regarding [its] business practices", according to an indictment against Huawei and Ms Meng, which was filed in a US court earlier this year.
The indictment alleges that Huawei "repeatedly misrepresented" its business dealings in Iran to HSBC and several other banks.
From a legal perspective, they can't claim they were deceived or knew nothing, because we have evidence Ren Zhengfei, Huawei CEO
The Chinese telecoms group told the banks that "although [it] conducted business in Iran, it did so in a manner that did not violate applicable US law", whereas "in reality" it was breaking the law, the indictment alleges.
HSBC — which is described as a "victim institution" by the DoJ and is not under investigation — terminated its relationship with Huawei in 2017.
The bank's attempts to distance itself from the Huawei furore have been complicated by the Chinese telecom group's efforts to shift the focus on to its erstwhile bank, which had banked with the company since the mid 1990s.
Ren Zhengfei, Huawei's chief executive and founder, challenged US prosecutors' characterisation of HSBC as a victim institution in a recent interview with the Financial Times.
Mr Ren said HSBC had known "from the beginning" that a Huawei affiliate called Skycom had business interests in Iran and that the bank "understood Skycom's relationship with Huawei".
"This can be proven by emails between the bank and Huawei, which have the bank's logo on them. From a legal perspective, they can't claim they were deceived or knew nothing, because we have evidence," he added.
A spokesperson for HSBC said: "We are not a party to this case so it is not appropriate for us to comment." The Chinese embassy in London declined to comment.
A person briefed on the investigation said the US government had been building a case against Huawei long before the bank became involved in 2017.
One person close to HSBC said there was little evidence that the bank had fallen out of favour with the Chinese government, pointing to the bank's involvement in several recent initiatives between the UK and China.
Written by: David Crow in London, Henny Sender in New York and James Kynge in Shenzhen
© Financial Times