HSBC’s French clients ‘hid €5.8b’ from tax man

International banking giant HSBC helped around 6,000 rich French lawyers, artists, businessmen and even a World Cup winner dodge taxes, new explosive reports claim. HSBC's private bank has already been charged in France in connection to a major tax fraud probe.

HSBC's French clients 'hid €5.8b' from tax man
HSBC Private Bank helped thousands of French nationals dodge taxes, new revelations claim. Photo: AFP

French newspaper Le Monde revealed on Monday "breathtaking" figures of giant global tax evasion scheme involving up to €180 billion deposited by 100,000 wealthy individuals around the world.

The paper alleges the scheme "was conducted with the knowledge, and indeed the encouragement, of the world’s second largest bank, HSBC, via its Swiss subsidiary, HSBC Private Bank."

The bank had already been placed under formal investigation in France accused of "money laundering the proceeds of tax evasion" after former banker Hervé Falciani made previous leaks to tax authorities in 2008. 

But the latest revelations from Le Monde on Monday show the scale of the bank's operation, with thousands of clients from around the world, from celebrities to arms dealers and drug taffickers all on the list.

Le Monde, which was given a USB key containing the files by an anonymous source said the revelations "will shake the international financial industry to the core".

"The holders of the accounts are striking in their variety, Le Monde writes. "French surgeons wishing to launder undeclared fees rub shoulders with… Belgian diamond traders and Al-Qaeda funders."

When it comes to the French nationals implicated in the mass tax evasion scheme, Le Monde reveals there were around 6,300 of them, whose money was split between offshore accounts in the British Virgin Islands and Panama.

Having an account in Switzerland or even offshore is entirely legal as long as it's declared to the tax man, but according to investigators only 0.2 percent of French account holders declared them.

"The use of accounts with Swiss banks by French tax residents is almost exclusively for the aim of tax evasion," said French MP Christian Eckert, in his previous report on the scandal.

One average French nationals were depositing €2 million in offshore accounts. French authorities currently have around 60 cases open against people on the list.

According to the Guardian, one of a consortium of newspapers including Le Monde which has analyzed the data since September 2014, an HSBC manager in France Nessim-el-Maleh helped hide cash from drug dealers who sold marijuana to immigrants in the Paris suburbs.

Le Monde says that French investigators have calculated that the bank had assisted over 100,000 people and 20,000 companies hide some €180 billion in 2006 and 2007.

The French government has since passed on details of clients at the bank who were evading taxes to other countries, including Argentina, Belgium, Greece, Spain, the US and the UK.

HSBC under investigation in France

In November 2014 HSBC was placed under formal investigation in France with magistrates "examining whether the bank acted appropriately between 2006-07 in relation to certain clients of the bank who had French tax reporting requirements, as well as in relation to the way the bank offered its services in the country."

In France, being placed under formal investigation is the nearest equivalent to being charged, and occurs when an examining magistrate decides there is a case to be answered.

A judicial source told AFP last year that the bank was suspected of "benefiting from the gains of tax fraud" and "laundering funds of an illicit origin by allowing thousands of clients to hide them".

The source said the bank had used numerous trusts and shell companies to help wealthy clients conceal their assets.

Many French nationals on the list have already rectified their situation with the French tax authorities, including popular comedian Gad Elmaleh. French World Cup winner Christophe Dugarry was also on the list, with Le Monde claiming he deposited €2 million in an offshore account.

In all French authorities have recovered over €300 million over the four years it has been working on the case.

HSBC has responded to the reports with an admission in a statement to the ICIJ that it is no longer operating in the way it did in 2007.

Like other private banks it “assumed that responsibility for payment of taxes rested with individual clients, rather than the institutions that banked them.”

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HSBC to pay France €300million to avoid tax fraud trial

HSBC Private Bank, a Swiss unit of banking giant HSBC, has agreed to pay 300 million euros ($352 million) to avoid going to trial in France for enabling tax fraud, prosecutors said Tuesday.

HSBC to pay France €300million to avoid tax fraud trial
Photo: AFP

HSBC was accused last year of helping French clients to hide at least 1.67 billion euros from the tax authorities, according to a source close to the probe.

The deal struck between the financial crime prosecutor's office and the bank is a first in France under a new procedure that allows companies under
suspicion of corruption or dissimulation of tax fraud to negotiate a fine to stop a case from going to trial.

The deal does not include a guilty plea.

French prosecutors have now dropped the case against HSBC Holdings.

The case against HSBC was opened back in 2015 and was over an alleged global tax-dodging scheme that helped hundreds of French nationals and pothers around the world evade the tax man.

Investigators believe that HSBC's private banking division offered its customers several ways of hiding assets from the French taxman, notably via the use of offshore tax havens.

The banking giant was at first accused of failing in its supervisory role over its private banking division, but further investigation led to suspicions
that HSBC “participated actively in the fraudulent practices”, the source close to the investigation said.

The probe named the former chief executive of the bank's Swiss private banking arm, Peter Braunwalder, and another executive, Judah Elmaleh.

The case began when French authorities in late 2008 received files stolen by Herve Falciani, a former HSBC employee, whose disclosures sparked the so-called “Swissleaks” scandal on bank-supported tax evasion.

The French-Italian national — dubbed by some media as “The Edward Snowden of banking” — leaked a cache of documents allegedly indicating that HSBC helped more than 120,000 clients of a number of nationalities to hide 180.6 billion euros from tax authorities between November 2006 and March 2007.

He was sentenced in absentia in November in Switzerland to five years in prison. The leaked files led to investigations by tax authorities in several European countries including, in addition to France, Spain and Belgium.