France launches probe into HSBC over tax fraud

UPDATED: HSBC said on Thursday that it faces a formal criminal probe in France over an alleged global tax-dodging scheme that helped hundreds of French nationals and pothers around the world evade the tax man.

France launches probe into HSBC over tax fraud
HSBC private bank likely to face criminal trial in France. Photo: AFP

HSBC is to face a French criminal probe over tax dealings at its Swiss private banking arm, the British banking giant said on Thursday, adding that a 1.0-billion-euro ($1.1-billion) bail had been imposed.

HSBC said in a statement that: "It has been placed under formal criminal investigation by the French magistrates in connection with the conduct of HSBC's Swiss Private Bank in 2006 and 2007 for alleged tax-related offences" in a case which featured in the so-called "SwissLeaks" controversy.

The SwissLeaks affair erupted in February following investigations by international newspapers — led by Le Monde of France — using stolen documents supplied by former HSBC IT employee Herve Falciani.

That data indicated the bank helped over 120,000 clients to hide €180.6 billion from tax authorities.

Those revelations came among growing evidence that pledges by banks to halt illicit or irresponsible activities that led up to the 2008 financial crisis have not been fulfilled.

In February the British bank acknowledged that "we sometimes failed to live up to the standards the societies we serve rightly expected from us," but on Thursday it said the decision by French magistrates "is without legal basis" while the bail "is unwarranted and excessive".

HSBC said it would appeal the decision by the French magistrates and "defend itself vigorously in any future proceedings".

According to the investigations into Falciani's whistle-blowing data, HSBC allegedly arranged for more than five billion euros ($5.2 billion at current rates) to be tucked away in trusts, shell companies and offshore accounts for around 9,000 French clients.

An official close to the case said last month that investigating magistrates leading the French inquiry had obtained evidence indicating HSBC "benefitted from proceeds of financial fraud and, in organizing the obscuring of financial flows, laundered funds of illicit origins, allowing thousands of clients holding large accounts to hide them from the French tax administration."

The formal charges follow the failure to reach a plea bargaining deal between prosecutors and HSBC, which refused to pay the fine being sought, the source close to the inquiry said.

In certain instances, fines in plea bargaining arrangements can represent half of total sums believed to have been involved in illegal activities.

Several legal investigations into HSBC's Swiss unit are underway in Europe, including in Spain and Belgium.


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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.