Last updated: February 9, 2015 11:07 pm
HSBC faces the possibility of fresh legal action in the UK and US after the bank was hit by detailed allegations that it colluded in tax-dodging by clients of its Swiss operation.
ON THIS STORY
- Video HSBC Swiss tax avoidance revealed
- FT View An invitation to prosecute
- Timeline History of HSBC controversies
- Philip Augar HSBC’s travails
- Leaked HSBC files veil on bank secrecy
ON THIS TOPIC
- Political storm over HSBC intensifies
- Politicians press for HSBC clampdown
- Slideshow HSBC’s private bank furore
- HSBC in Swiss tax avoidance storm
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Europe’s biggest bank by assets could face criminal investigation in Britain after it was forced to admit its Swiss private bank may have held accounts for tax-evading customers after details of more than 100,000 of its clients were leaked to news organisations.
David Gauke, the UK Treasury minister responsible for tax matters, said the data were handed to HMRC, the UK tax authority, in 2010 by the French authorities “under very strict conditions” preventing the Revenue from sharing the data with other law enforcement agencies; that had now changed.
“Under these restrictions, HMRC has not been able to seek prosecution for other potential offences, such as money laundering,” Mr Gauke told MPs. “However, the French authorities have today confirmed that they will provide all assistance necessary to allow HMRC to exploit the data to its fullest.”
Meanwhile, the US Department of Justice could re-examine a deal that shields HSBC from prosecution for earlier infractions over money-laundering allegations.
In 2012, HSBC agreed to pay $1.9bn and entered into a deferred prosecution agreement over money-laundering allegations related to countries under US sanctions, such as Iran, and Latin American drug cartels. The tax disclosures could prompt officials to reopen the DPA and possibly scrap it.
UK government insiders said no decision to launch a criminal investigation had been taken. Any such move would be complicated by the fact that HSBC’s Swiss subsidiary was subject to Swiss jurisdiction.
HSBC declined to comment on potential UK action beyond repeating its assurance that it would work with all relevant authorities.
The bank rejected any suggestion that the US DPA could be reopened. “The DPA is a signed agreement that can only be ‘scrapped’ if HSBC breached it,” the bank said. “Conduct from 2005 to 2006 or indeed any conduct before December 2012 cannot be a breach of the DPA.”
The revelations to emerge this week included claims that HSBC’s Swiss unit handed large, untraceable bricks of cash in foreign currencies to clients and colluded with them to conceal “black” accounts from tax authorities, have provoked a political storm in several countries.
HSBC is one of about a dozen banks being investigated by the DoJ as part of a broad probe into banks in Switzerland that allegedly helped their clients avoid US taxes.Credit Suisse pleaded guilty in the case last year and paid a $2.6bn fine.
But HSBC could be in more trouble because of its multiple run-ins with the US authorities.
The DoJ is still investigating whether HSBC helped clients avoid US taxes, and, separately, whether the bankmanipulated foreign exchange markets.
In relation to those probes, officials could reopen the DPA, choose to impose other penalties, or none at all, people familiar with the case said. The agreement did not limit the DoJ in the tax probe.
The revelations could put additional pressure on the DoJ to be tough on HSBC in the pending probes.
“The recent revelations about HSBC’s efforts to shield individuals from the laws of the US and other nations are just the latest in a long list of troubling misdeeds by the bank,” said Congresswoman Maxine Waters, the senior Democrat on the House Financial Services Committee.
“While HSBC has paid billions in fines to the United States and other nations, it outrages me that not a single individual has been prosecuted or held accountable.”
The Labour opposition focused its attack on the appointment by David Cameron of Lord Green, former HSBC chief executive and chairman, as a trade minister in 2011 — after details of the Swiss tax evasion scandal became known.
Mr Gauke said: “Lord Green was a successful trade minister. There is no evidence to suggest he was involved or complicit in tax evasion activities.”
But the role of Lord Green in the affair will come under scrutiny from the powerful Commons public accounts committee, which is investigating tax avoidance and is due to question Lin Homer, the head of HMRC, on Wednesday.
“Either he [Lord Green] didn’t know and he was asleep at the wheel, or he did know and he was therefore involved in dodgy tax practices,” said Margaret Hodge, the committee’s chairman.
Lord Green declined to comment.
HSBC said in a statement: “We acknowledge and are accountable for past compliance and control failures.” It added: “We have taken significant steps over the past several years to implement reforms and exit clients who do not meet strict new HSBC standards.”
An international group of news outlets received leaked client bank account files that were stolen in 2007 by Hervé Falciani, an IT expert at HSBC’s Swiss operation, who later fled to France and handed the files to the French government.
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