HSBC Back In The Dog House Again

Last weekend, media reports cast an unflattering light on HSBC’s continued defiance to “straighten up and fly right” when it comes to assisting its foreign clients hide their accounts from taxing authorities in their home countries. The list of clients includes some you would least expect: global politicians, rock stars, arms dealers, and potential terrorists. Not surprisingly, this did not sit too well with the IRS.

According to a report from the International Consortium of Investigative Journalists, HSBC’s Swiss private banking division was complicit in assisting its foreign clients to “dodge” tax authorities in their home countries. Specifically, they were all too willing to gave them tips on how to evade paying European Union taxes on their bank accounts.

This report might just as well be the “icing on the cake” for HSBC, since it is the latest in a series of shocking reports that show how far HSBC was willing to go to help its foreign clients evade taxes. One such report that caught the ire of the U.S. government was a 2012 Senate report, revealing HSBC’s role in laundering money for Mexican and other Latin American drug cartels. As a result, HSBC was forced to pay a $ 1.9 billion fine and comply with a settlement. These recent developments have cast a shadow on HSBC’s compliance with that settlement.

HSBC attempted to appease the international community and assuage its concerns by announcing that its global banking business had recently “undergone a radical transformation.” In a statement, HSBC said, “We acknowledge that the compliance culture and standards of due diligence in HSBC’s Swiss private bank, as well as the industry in general, were significantly lower than they are today.”

The first person to come forward and blow the whistle on HSBC was Herve Falciani, a former employee of HSBC’s Swiss private banking division. Mr. Falciani provided French tax authorities with documents that were so damaging that they amounted to a “smoking gun.” French authorities, in turn, shared the documents with the UK, U.S., and Spain. But Falciani didn’t stop there. He also handed these documents over to the ICIJ.

The documents reveal how HSBC’s private bankers assisted miners, arms dealers, and governments hide their accounts from local tax authorities. What’s worse is that these individuals are known to be bankrolling some of Africa’s bloodiest conflicts.

The documents also reveal how HSBC bankers have assisted European clients dodge their European tax obligations: by transferring the ownership of such accounts from an individual – who would be liable for paying tax – to an entity, that wouldn’t.

HSBC’s Swiss bank stopped doing business with U.S. residents entirely, and the bank announced that it was going to reexamine its present compliance objectives and make changes.

HSBC said, “In the past, the Swiss private banking industry operated very differently to the way it does today. Private banks, including HSBC’s Swiss private bank, assumed that responsibility for payment of taxes rested with individual clients, rather than the institutions that banked them.”

This comes in the wake of the U.S. putting the full court press on Swiss banks to come clean about their role in assisting foreign clients to hide their foreign accounts or be prepared to pay hefty penalties. Faced with this ultimatum, not to mention the fact that the U.S. has secured several large penalties over the last few years, many Swiss banks have held up a white flag and begun waiving it in the air.

The second major bank that is in hot water with Uncle Sam is none other than UBS AG. It is under investigation in the U.S., despite having paid $ 780 million in fines and turning over the names and specific account details of thousands of U.S. clients going as far back as 2009.

Original Post By:  Michael DeBlis

As a former public defender, Michael has defended the poor, the forgotten, and the damned against a gov. that has seemingly unlimited resources to investigate and prosecute crimes. He has spent the last six years cutting his teeth on some of the most serious felony cases, obtaining favorable results for his clients. He knows what it’s like to go toe to toe with the government. In an adversarial environment that is akin to trench warfare, Michael has developed a reputation as a fearless litigator.

Michael graduated from the Thomas M. Cooley Law School. He then earned his LLM in International Tax. Michael’s unique background in tax law puts him into an elite category of criminal defense attorneys who specialize in criminal tax defense. His extensive trial experience and solid grounding in all major areas of taxation make him uniquely qualified to handle any white-collar case.


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