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 U.S. prosecutors have stepped up efforts to establish whether HSBC,
the world's second largest bank, helped Americans evade taxes after
media reports said the bank had helped wealthy customers conceal
millions of dollars of assets.
U.S. authorities are also probing whether HSBC manipulated currency
rates, and a U.S. law enforcement official said on Monday the
investigations could prompt the Department of Justice to revisit a
2012 deferred prosecution agreement with the bank.
The agreement was part of a $1.9 billion settlement that allowed
HSBC to avoid criminal charges after it was found to have helped
move hundreds of millions of dollars in illicit drug money through
the U.S. financial system.
"It is quite possible that the (agreement) may be reopened as a
result of the bank's activities on either or both the tax evasion
and foreign exchange manipulation front," said the U.S. law
enforcement official, who requested anonymity because the
investigations are ongoing.
British lawmakers said they plan to open an inquiry into the bank
after it came under fire for its past practices in Switzerland.
HSBC shares fell 2 percent by 0845 GMT on Tuesday, underperforming
the European bank index <.SX7P>. They fell 1.6 percent on Monday
after media reports about the activities of its Swiss operation
based on client data from 2006-07.
A spokesman for HSBC declined further comment on Tuesday after the
bank issued a statement late on Sunday in response to the media
reports.
SWISS ACCOUNTS
The International Consortium of Investigative Journalists (ICIJ),
which coordinated the release of details of leaked client data, said
a list of people who held HSBC accounts in Switzerland included
soccer and tennis players, rock stars and Hollywood actors.
Reuters could not independently verify any of the names listed by
the ICIJ. Having a Swiss bank account is not illegal and many are
held for legitimate purposes.
The newly released HSBC Swiss client list included royalty such as
Morocco's King Mohammed, politicians, corporate executives including
former Santander <SAN.MC> chairman Emilio Botin, who died last year,
and wealthy families, the ICIJ said. A spokesman for the Moroccan
royal palace declined to comment.
Uruguayan soccer player Diego Forlan, who was also on the list, on
Monday denied evading taxes by hiding money in Swiss accounts with
HSBC.
The documents also listed arms dealers, people linked to former
dictators and traffickers in blood diamonds, and several individuals
on the current U.S. sanctions list, including Gennady Timchenko, an
associate of Russian President Vladimir Putin. Timchenko's Volga
Group declined to comment.
"We acknowledge and are accountable for past compliance and control
failures," HSBC said after news outlets published the allegations
about its Swiss private bank.
The Guardian and other media cited documents obtained by the ICIJ
via French newspaper Le Monde.
HSBC said that its Swiss arm had not been fully integrated into HSBC
after its purchase in 1999, allowing "significantly lower" standards
of compliance and due diligence to persist.
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CURRENCY BRICKS
The Guardian asserted that the files showed HSBC's Swiss bank
routinely allowed clients to withdraw "bricks" of cash, often in
foreign currencies which were of little use in Switzerland.
HSBC also marketed schemes which were likely to enable wealthy
clients to avoid European taxes and colluded with some to conceal
undeclared accounts from domestic tax authorities, the Guardian
said.
The reports began a political debate in Britain ahead of a
parliamentary election in May, with Margaret Hodge, a senior
opposition Labour Party lawmaker, saying tax authorities had done
too little to collect tax money.
HSBC's admission of failing has renewed scrutiny on Stephen Green,
who was executive chairman between 2006 and 2010. Green was later
made a member of Britain's upper house of parliament and served as
minister for trade and investment between 2011 and 2013.
The HSBC client data were supplied by Herve Falciani, a former IT
employee of HSBC's Swiss private bank, HSBC said. HSBC said Falciani
downloaded details of accounts and clients at the end of 2006 and
early 2007. French authorities have obtained data on thousands of
the customers and shared them with tax authorities elsewhere,
including Argentina.
Switzerland has charged Falciani with industrial espionage and
breaching the country's secrecy laws. Falciani could not be reached
for comment but has previously told Reuters he is a whistleblower
trying to help governments track down citizens who used Swiss
accounts to evade tax.
HSBC said it was cooperating with authorities investigating tax
matters. Authorities in France, Belgium and Argentina have said they
are investigating.
HSBC said the Swiss private banking industry, long known for its
secrecy, operated differently in the past and this may have resulted
in HSBC having had "a number of clients that may not have been fully
compliant with their applicable tax obligations."
Its private bank, especially its Swiss arm, had undergone "a radical
transformation" in recent years, it said in a detailed four-page
statement.
(Additional reporting by Tom Miles in Geneva, Mark John in Paris and
Andrew Osborn in London)
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