LONDON » A trove of leaked documents shows that HSBC’s Swiss private bank turned a blind eye to illegal activities of arms dealers and blood diamond traders while helping rich people evade taxes, according to a report based on the documents that was published Monday.
The data relate to accounts worth $100 billion held by more than 100,000 people and legal entities around the world.
A former HSBC employee-turned-whistleblower, Herve Falciani, gave the data to French tax authorities in 2008. France shared it with other governments and launched investigations.
The French newspaper Le Monde obtained a version of the data and shared the material with the International Consortium of Investigative Journalists, which analyzed the material together with The Guardian and the BBC in Britain.
WHAT THE FILES SHOW
The leaked documents mainly cover the years 2005 to 2007.
HSBC, which is based in London but has operations globally, served those close to the regimes of former Egyptian President Hosni Mubarak, former Tunisian leader Ben Ali and Syria’s Bashar Assad.
The consortium said clients include former and current politicians from Britain, Russia, Ukraine, Kenya, India, Mexico, Lebanon, the Democratic Republic of the Congo, Zimbabwe, and Algeria.
Switzerland had the greatest number of clients of the data examined, followed by France, the United Kingdom, Brazil and Italy. In terms of ranking by value, Switzerland was first with $31.2 billion, followed by the United Kingdom with $21.7 billion; Venezuela with $14.8 billion; the U.S. with $13.4 billion; and France with $12.5 billion.
WHY IT MATTERS
Though some of the details of such operations were disclosed previously, when HSBC was fined in 2012 by the U.S. for allowing criminals to use its branches for money laundering, Monday’s information suggests HSBC took an active role in assisting the wealthy in hiding their money from authorities.
"The bank repeatedly reassured clients that it would not disclose details of accounts to national authorities, even if evidence suggested that the accounts were undeclared to tax authorities in the client’s home country," the consortium said. "Bank employees also discussed with clients a range of measures that would ultimately allow clients to avoid paying taxes in their home countries."
Crawford Spence, a professor of accounting at the University of Warwick, said this case was different than other recent tax scandals.
"HSBC has been complicit in clear tax evasion and law breaking rather than legitimate tax avoidance," he said.
The disclosures could see governments step up their efforts to prosecute tax evaders and the bank itself.
Governments are looking to crack down on tax evasion to bolster their coffers depleted by the financial crisis and amid criticism that the rich aren’t paying their fair share.
In Britain, the report sparked criticism of tax authorities. The national tax agency clawed back 135 million pounds ($236 million) from some of the 3,600 Britons identified as using the Geneva branch of HSBC, but only one person has been prosecuted. France, by contrast, launched 103 legal actions.
"You are left wondering, as you see the enormity of what has been going on, what it actually takes to bring a tax cheat to court," Margaret Hodge, chair of Parliament’s Public Accounts Committee, told the BBC.
Hodge said the former chairman of HSBC, Stephen Green, must face questions about whether he was "asleep at the wheel, or he did know and he was therefore involved in dodgy tax practices."
In Belgium, an investigating judge is considering arrest warrants against some former and current officials of the HSBC bank if cooperation in an investigation on the Swiss operations does not improve.
WHAT HSBC SAYS
HSBC stressed that the documents were from eight years ago and said it has since implemented initiatives designed to prevent its banking services from being used to evade taxes or launder money.
Franco Morra, CEO of HSBC’s Swiss subsidiary, said the new management had shut down accounts from clients who "did not meet our high standards."
"These disclosures about historical business practices are a reminder that the old business model of Swiss private banking is no longer acceptable," he said in a statement.
Frank Jordans in Berlin and Greg Keller in Paris contributed to this story.