Among the revelations, HSBC's Swiss private bank:
• Routinely allowed clients to withdraw bricks of cash, often in foreign currencies of little use in Switzerland.
• Aggressively marketed schemes likely to enable wealthy clients to avoid European taxes.
• Colluded with some clients to conceal undeclared “black” accounts from their domestic tax authorities.
• Provided accounts to international criminals, corrupt businessmen and other high-risk individuals.
The HSBC files, which cover the period 2005-2007, amount to the biggest banking leak in history, shedding light on some 30,000 accounts holding almost $120bn (£78bn) of assets.HSBC has the usual excuses for bad behavior. The one that caught my eye is that its management was just not paying attention while the lower level unit and employees misbehaved. Further excerpts:
Although tax authorities around the world have had confidential access to the leaked files since 2010, the true nature of the Swiss bank’s misconduct has never been made public until now. Hollywood stars, shopkeepers, royalty and clothing merchants feature in the files along with the heirs to some of Europe’s biggest fortunes.
* * * *
The files show how HSBC in Switzerland keenly marketed tax avoidance strategies to its wealthy clients. The bank proactively contacted clients in 2005 to suggest ways to avoid a new tax levied on the Swiss savings accounts of EU citizens, a measure brought in through a treaty between Switzerland and the EU to tackle secret offshore accounts.
The documents also show HSBC’s Swiss subsidiary providing banking services to relatives of dictators, people implicated in African corruption scandals, arms industry figures and others. Swiss banking rules have since 1998 required high levels of diligence on the accounts of politically connected figures, but the documents suggest that at the time HSBC happily provided banking services to such controversial individuals.
* * * *
The Guardian’s evidence of a pattern of misconduct at HSBC in Switzerland is supported by the outcome of recent court cases in the US and Europe. The bank was named in the US as a co-conspirator for handing over “bricks” of $100,000 a time to American surgeon Andrew Silva in Geneva, so that he could illegally post cash back to the US.
Another US client, Sanjay Sethi, pleaded guilty in 2013 to cheating the US tax authorities. He was one of a group of convicted HSBC clients. The prosecution said an HSBC banker promised “the undeclared account would allow [his] assets to grow tax-free, and bank secrecy laws in Switzerland would allow Sethi to conceal the existence of the account”.
In France, an HSBC manager, Nessim el-Maleh, was able to run a cash pipeline in which plastic bags full of currency from the sale of marijuana to immigrants in the Paris suburbs were collected. The cash was then taken round to HSBC’s respectable clients in the French capital. Bank accounts back in Switzerland were manipulated to reimburse the drug dealers.
HSBC is already facing criminal investigations and charges in France, Belgium, the US and Argentina as a result of the leak of the files, but no legal action has been taken against it in Britain.
Former tax inspector Richard Brooks tells BBC Panorama in a programme to be aired on Monday night: “I think they were a tax avoidance and tax evasion service. I think that’s what they were offering.
“There are very few reasons to have an offshore bank account, apart from just saving tax. There are some people who can use an ... account to avoid tax legally. For others it’s just a way to keep money secret.”Thanks to gottaloveUStax, a commenter, for the link to the article.
Here are other reports:
- Chad Bray, HSBC Under Renewed Scrutiny Over Swiss Tax Avoidance Claims (NYT DealBook 8/9/15), here.
- Bill Whitaker, The Swiss Leak (CBS 60 Minutes 2/8/15), here.
A spokesman for the British tax collection agency said on Monday that it had used the data to collect more than £135 million in back taxes and penalties and that the government had increased the maximum penalty an individual faces for hiding money overseas to 200 percent of the tax evaded. Those agreements, which are civil in nature, remain confidential.The maximum US income tax penalty is the fraud penalty of 75%. That has historically been the penalty that applied. (There have been some adjustments to the base to which it applied; it used to be all unreported and unpaid, but now, under burden of proof rules, only the portion of the tax attributable to fraud. See Section 6663, here. This raises an interesting issue that is discussed from time to time -- what is the appropriate level of civil penalty for tax misbehavior. Focusing on the current civil fraud penalty of 75%, is that the appropriate level to discourage that particular type of misbehavior, to recompense the Government for the costs it necessarily incurs to root it out, to offer some punishment and recompense for the many who do not get caught, and so on. Britain has apparently decided that 200% is more appropriate. I think something higher than 75% is appropriate. Where exactly, I can't say. That is a big discussion.