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HSBC Private Bank hit by fraud charges in Paris

UPDATED: HSBC Private Bank, the Swiss subsidiary of British banking group HSBC, said on Friday it had been placed under formal investigation as part of a French tax fraud probe.

Published: 21 November 2014 13:39 CET
Updated: 21 November 2014 15:08 CET

HSBC Private Bank hit by fraud charges in Paris

Photo: Fabrice Coffrini/AFP

The bank said magistrates were "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.

The bank said it had been asked to deposit a bail bond of €50 million ($62 million), and would "continue to cooperate with the French authorities to the fullest extent possible".

Le Monde daily reported 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.

A judicial source told AFP earlier this 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.

The same subsidiary was charged this week in Brussels with fraud and money-laundering worth hundreds of millions of euros, mainly for helping diamond dealers in the industry's international hub of Antwerp evade Belgian taxes.

The charges were the latest in a series of international investigations into major banks looking at practices ranging from rigging of interest and currency exchange rates as well as mis-selling products.

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Card over cash? Why Germany is seeing a new payment preference

Germany has long been a very cash-based country, occasionally to the dismay of frustrated tourists at the Döner shop.

A few German phrases express the people’s love of physical money. There’s ‘only cash is true’ – Nur Bares ist Wahres. Or Bargeld lacht, literally meaning cash laughs, but used to imply that cash is what’s wanted, similar to ‘cash is king’ in English.

But the classic German preference for cash appears to be evolving, as the use of girocards is growing, even for small transactions.

How are girocards being used?

Girocard, an ATM and debit card service offered by German Banks, was designed to allow customers to use virtually all German ATMs and, increasingly, to make purchases at businesses.

READ ALSO: Ask an expert – Why is cash still so popular in Germany, and is it changing?

Last year, consumers in Germany used their Girocard more often than ever before for cashless payments. A total of €7.48 billion payment transactions with the plastic card were counted – 11.5 percent more than in the previous record year 2022, according to figures published by the Frankfurt-based institution Euro Card Systems.

Whether at the bakery, petrol station or supermarket, customers are increasingly pulling out their cards at the checkout, even for smaller amounts. As a result, the average amount paid with the Girocard fell from €42.34 to €40.69 within a year.

The rise of card payments in Germany

Contactless payment, which is possible with girocards and credit cards that have an NFC chip, got a boost during the Covid pandemic, as retailers promoted it for hygiene reasons.

But the use of card payments has continued to grow in Germany since then, boosted partly by the increasing use of girocards.

Promoting the use of girocards, some German banks have expanded their cards’ functions: Sparkassen, Volksbanken, or Raiffeisenbanken offer girocards for the digital wallet, for example.

Banks want to continue upgrading the payment card with further applications. For example, a project is being tested which would add an age verification function to girocards that would be useful when a customer is buying cigarettes.

On the retail side, it’s clear why the Girocard is preferred to other debit options.

“We see that debit cards from international providers cost up to four times more,” Ulrich Binnebößel, Head of the Payment Systems & Logistics Department at the German Retail Association (HDE) told DPA.

What’s the difference between the Girocard and other debit?

The Girocard is a strictly German phenomenon. It can be seen as the latest iteration of the EC card, which was created to consolidate payment systems following the unification of former East and West Germany.

In 1991 different debit card systems, including Eurocheque guarantee cards from former West Germany and Geldkarte ATMs from former East Germany, were unified into Eurocheque cards.

Then in 2001, the Eurocheque system was disbanded, but German banks continued to use the EC logo for “electronic cash’” cards, or EC cards. In 2007, the German Banking Industry Committee introduced Girocard as a common name for electronic cash and the German ATM network.

Girocards are only issued and accepted in Germany, so if you want to get one of your own, you’ll have to join a German bank, and shell out those notorious German banking fees.

READ ALSO: Why it’s almost impossible to find a free bank account in Germany

Alternatively, you can get by with internationally accepted debit cards provided by a bank in your home country, or otherwise by joining an app-based European banking service like N26.

But be warned, without the Girocard in hand, at some smaller retailers you may be told, “Leider nur Bargeld oder EC-Karte.”

With reporting by DPA

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