Chinese telecoms giant Huawei's chief financial officer was arrested as part of a US investigation of an alleged scheme to use the global banking system to evade US sanctions against Iran, according to sources familiar with the probe.
The United States has been looking since at least 2016 into whether Huawei violated US sanctions against Iran. More recently, the probe has included the company's use of HSBC to make illegal transactions involving Iran.
Huawei CFO Meng Wanzhou, the daughter of the company's founder, was arrested in Canada and faces extradition to the United States, sparking fears it could reignite a Sino-US trade dispute and roiling global stock markets.
In 2012, HSBC paid US$1.92 billion and entered a deferred prosecution agreement with the US Attorney's office in Brooklyn for violating US sanctions and money-laundering laws.
An HSBC spokesperson declined to comment. HSBC is not under investigation, according to a person familiar with the matter.
Huawei also declined to comment. After news of the arrest, Huawei said it has been provided little information of the charges against Meng, adding that it was "not aware of any wrongdoing by Ms. Meng."
A spokesman for the US Attorney's office in Brooklyn, which Reuters has reported is investigating Huawei, declined to comment.
US and Asian shares tumbled as news of the arrest heightened anxiety over prospects of a collision between the world's two largest economic powers, not just over tariffs but also over technological hegemony.
HSBC's US-listed shares initially fell as trading volume rose, dropping as much as 6 percent after Reuters reported the bank's link to the case, and were subsequently down 4.7 percent.
Huawei is already under intense scrutiny from Washington and other western governments over its ties to the Chinese government, driven by concerns it could be used by Beijing for spying. It has been locked out of US and some other markets for telecom gear, but has repeatedly insisted Beijing has no influence over it.
(Reporting by Karen Freifeld; editing by Chris Sanders, Jonathan Oatis and Dan Grebler)