Team of journalists from 45 countries unearths secret bank
accounts maintained for criminals, traffickers, tax dodgers, politicians
and celebrities
Secret documents reveal that global banking giant HSBC profited from
doing business with arms dealers who channeled mortar bombs to child
soldiers in Africa, bag men for Third World dictators, traffickers in
blood diamonds and other international outlaws.
The leaked files, based on the inner workings of HSBC’s Swiss private
banking arm, relate to accounts holding more than $100 billion. They
provide a rare glimpse inside the super-secret Swiss banking system —
one the public has never seen before.
The documents, obtained by the International Consortium of Investigative
Journalists via the French newspaper Le Monde, show the bank’s dealings
with clients engaged in a spectrum of illegal behavior, especially in
hiding hundreds of millions of dollars from tax authorities. They also
show private records of famed soccer and tennis players, cyclists, rock
stars, Hollywood actors, royalty, politicians, corporate executives and
old-wealth families.
These disclosures shine a light on the intersection of international
crime and legitimate business, and they dramatically expand what’s known
about potentially illegal or unethical behavior in recent years at
HSBC, one of the world’s largest banks.
The leaked account records show some clients making trips to Geneva to
withdraw large wads of cash, sometimes in used notes. The files also
document huge sums of money controlled by dealers in diamonds who are
known to have operated in war zones and sold gemstones to finance
insurgencies that caused untold deaths.
HSBC, which is headquartered in London and has offices in 74 nations and
territories on six continents, at first insisted that ICIJ destroy the
data.
Late last month, after being informed of the full extent of the reporting team’s findings, HSBC gave a
final response that
was more conciliatory, telling ICIJ: “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 written statement said the bank had “taken significant steps over
the past several years to implement reforms and exit clients who did not
meet strict new HSBC standards, including those where we had concerns
in relation to tax compliance.”
The bank added that it had refocused this part of its business. “As a
result of this repositioning, HSBC’s Swiss private bank has reduced its
client base by almost 70% since 2007.”
How the offshore banking industry shelters money and hides secrets has
enormous implications for societies across the globe. Academics
conservatively estimate that $7.6 trillion is held in overseas tax
havens, costing government treasuries at least $200 billion a year.
“The offshore industry is a major threat for our democratic institutions
and our basic social contract,” French economist Thomas Piketty, author
of
Capital in the Twenty-First Centurytold
ICIJ. “Financial opacity is one of the key drivers of rising global
inequality. It allows a large fraction of top income and top wealth
groups to pay negligible tax rates, while the rest of us pay large taxes
in order to finance the public goods and services (education, health,
infrastructures) that are indispensable for the development process.”
HSBC's questionable tax tactics
The secret files obtained by ICIJ — covering accounts up to 2007
associated with more than 100,000 individuals and legal entities from
more than 200 nations — are a version of the ones the French government
obtained and shared with other governments in 2010, leading to
prosecutions or settlements with individuals for tax evasion in several
countries. Nations whose tax authorities received the French files
include the U.S., Spain, Italy, Greece, Germany, Britain, Ireland,
India, Belgium and Argentina.
It’s not illegal in most countries to maintain offshore bank accounts,
and being identified as holding an HSBC Private Bank account is of
itself no indication of any wrongdoing. Some who are named in the files
may have had some connection to a Swiss bank account, such as a power of
attorney, while not owning the money in the account, or owning only a
share of it. Others in the files may not even have had a Swiss bank
account.
Swiss citizen Tina Turner in an ad for Swisscom.Hollywood
actor John Malkovich, for instance, said through a representative that
he knows nothing about an account listing his name and conjectured that
it might have to do with Bernard Madoff, the former stockbroker
convicted of fraud who handled some of his finances. A representative
for the British actress Joan Collins told ICIJ: “In 1993 my client
deposited funds into a bank account in London and subsequently
discovered that, without her instructions, the money had been
transferred to the Swiss account referred to in your letter.” The
representative added that no tax was avoided.
The rock star David Bowie responded to ICIJ media partner The Guardian
that he has been a legal resident of Switzerland since 1976. Tina
Turner, though seen by many as a quintessentially American singer, has
lived in Switzerland for nearly two decades and gave up her U.S.
citizenship in 2013.
In many instances the records do describe questionable behavior, such as
bankers advising clients on how to take a range of measures to avoid
paying taxes in their home countries — and customers telling bankers
that their accounts are not declared to their governments.
The reporting by ICIJ and a team of media organizations from 45 countries go deeper into the dark corners of HSBC than a
2012 U.S. Senate investigation,
which found that the bank had lax controls that allowed Latin American
drug cartels to launder hundreds of millions of ill-gotten dollars
through its U.S. operations, rendering the dirty money usable.
The Senate Permanent Subcommittee on Investigations’
extensive report on
HSBC also said some bank affiliates skirted U.S. government bans
against financial transactions with Iran and other countries. And HSBC's
U.S. division provided money and banking services to banks in Saudi
Arabia and Bangladesh believed to have helped fund Al Qaeda and other
terrorist groups, the report said.
A subcommittee staff source said Senate investigators had sought the HSBC Private Bank account records from HSBC whistleblower Hervé Falciani and
French authorities, but never received the data. The new documents show
the bank’s activity in many other parts of the world and reveal a new
range of questionable clients and actions by the bank.
The ICIJ revelations also come after The Wall Street Journal reported in
January that a progress report by the independent monitor appointed to
the bank, a synopsis of which is expected to be made public in April,
will show HSBC is
failing in its attempts to reform.
