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The US justice department is re-examining an agreement that shields HSBC from prosecution for earlier infractions as the agency investigates allegations that the bank colluded in tax-dodging by clients of its Swiss operation.
The biggest London-listed lender was this week forced to admit that its Swiss private bank may have held accounts for tax-dodging customers after bank accounts details of more than 100,000 of its clients were leaked to news organisations.
The revelations, including 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.
In the UK, a Treasury minister said the law might need to be changed to allow the authorities to prosecute senior bankers who “colluded” in tax evasion.
Danny Alexander, Treasury chief secretary, suggested there was a gap in the law: “Financial institutions who are proven to have colluded with tax evaders should face the full force of the law. If that means a change in the law, or new powers for regulators, that is what we will do.”
HSBC is one of about a dozen banks being investigated by 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. In 2012, the bank 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 DoJ is still investigating whether HSBC helped clients avoid US taxes, and, separately, whether the bank manipulated foreign exchange markets. The latest disclosures could prompt officials to reopen the deferred prosecution agreement or possibly scrap it. But they could also 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.
However, HSBC rejected any suggestion that the 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 latest 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.”
British ministers were under pressure on Monday to explain why the country’s authorities had not taken legal action against HSBC when the bank was facing criminal investigations and charges in France, Belgium, the US and Argentina.
Treasury officials said the UK was not prosecuting HSBC because the information was given to HM Revenue & Customs by the French authorities under a double taxation treaty, which forbids the data being passed to other agencies such as the Crown Prosecution Service. They said the data could only be used for tax collection purposes.
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.
David Gauke, the UK Treasury minister responsible for tax matters, 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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