SHARE
COPY LINK

TAX EVASION

Banking giant HSBC fights another scandal

Europe's biggest bank HSBC is fighting off claims that it helped rich clients globally dodge taxes through its Swiss arm — the latest in a long line of scandals to hit the group.

Banking giant HSBC fights another scandal
Photo: AFP

With a quarter of a million employees, a market capitalization of nearly $200 billion (176 billion euros) and one of the world's most prominent advertising campaigns, HSBC is hard to miss.
   
While its brand is splashed across billboards and airports around the world, its reputation has been tarnished in recent years by a string of high-profile controversies.
   
Allegations emerged on Monday that HSBC's Swiss private bank division helped rich clients avoid millions of dollars in tax after an employee, Hervé Falciani, stole secret files in 2007 and turned whistleblower.
   
In 2012, HSBC agreed to pay out $1.92 billion to US authorities for oversight failures which meant Mexican drug traffickers could launder money through its accounts and banned transactions took place from Iran.
   
Last year, it was charged with manipulating a key inter-bank lending rate by the European Commission.
   
Its foreign currency traders were also implicated in a scheme to make money by rigging markets uncovered by Britain's Financial Conduct Authority last year.
   
"There is a deliberate strategy by the bank to appeal to wealthy clients around the world, particularly in Asia, where HSBC has a major presence in Hong Kong and Singapore," said Maxime Mathon, a spokesman for Paris-based equity research house AlphaValue.

Vast global reach

The financial behemoth is headquartered in one of London's tallest buildings, a vast skyscraper in the ultra-modern Canary Wharf office district.
   
But that belies its history, rooted in the British empire of the 19th century.
   
The Hongkong and Shanghai Banking Corporation Limited was set up in Hong Kong in 1865 by Thomas Sutherland, a Scotsman who saw a niche catering to local businesses.
   
It grew quickly across Asia, North America and Europe, becoming one of the world's major banks by the end of the 20th century.
   
It now has some 50 million clients in 74 different countries around the world.
   
Like most globalized banks, HSBC has a whole range of different operations, from high street retail banking to trading on global money markets and private banking, which helps some of the world's richest people make the most out of their money.
   
Since the 2008 financial crisis, attitudes have changed to what is permissible for banks to do in pursuit of the highest returns for their clients, experts say.
   
"This HSBC story is a legacy of what did exist in private banking before the financial crisis and that the governments around the world don't want to exist any more," said Arun Melmane, an analyst at investment bank Canaccord Genuity.
   
"These are offences but they were quite overlooked at that time by a lot of jurisdictions due to Swiss secrecy."
   
HSBC's Swiss banking arm insists it has undergone a "radical transformation" since 2008 to stop its services being used to evade taxes or launder money.
   
"Swiss private banking nowadays is not about saving taxes but about managing people's money," Melmane said.

See also: HERVE FALCIANI: MORE JAMES BOND THAN EDWARD SNOWDEN

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

TAX EVASION

Switzerland’s banks remain among the world’s most secretive

Despite the progress made over the years, the Swiss financial sector continues to be one of the least transparent in the world. But there is good news too.

Switzerland’s banks remain among the world’s most secretive
Switzerland remains one of the world's least transparent nations. Photo AFP

Switzerland is in the third place in the 2020 Financial Secrecy Index released by the non-governmental organisation (NGO) Tax Justice Network (TJN), which rates 133 nations based on their financial transparency.

Two other European countries, Luxembourg and the Netherlands, are also ranked among the top 10 least transparent nations on the TJN’s list.

Despite being in the third place, Switzerland ranks better this year than it did in the previous edition of the Index, which is released every two years — it slipped from the first to third place. The Cayman Islands and the United States took the first and second spots, respectively.

Switzerland reduced its risk of being an offshore haven for tax cheats by 12 percent, “finally improving enough to move off the top of the index”, TJN said. 

READ MORE: Switzerland's strangest taxes – and what happens if you don't pay them

This improvement is mainly due to Switzerland extending its international network for the automatic exchange of customer information to more than 100 countries. 

Also, in a referendum held last year, Swiss voters accepted the Federal Act on Tax Reform and AVS Financing (TRAF). This legislation introduced major changes in the Swiss tax system by ending some preferential tax schemes and replacing them with new regulations which are in line with international standards.

This tax reform prompted the European Union to change Switzerland's status from ‘tax haven' to one which is EU-compliant, removing strict controls on transactions within the EU. 

So why, despite all the reforms, does Switzerland still rank among the world’s least transparent nations?

According to a Swiss NGO Alliance Sud, wealthy people from poor countries can still hide their money here from the tax authorities of their home nations.

Alliance Sud noted that despite the progress made in the past years by Swiss financial institutions, “the fight against tax evasion remains insufficient”.

Switzerland is the world’s biggest centre for managing offshore wealth, with a quarter of global assets invested here.

For years, it has been placed on various lists of tax havens where wealthy foreigners could park their money. Faced with widespread criticism for this practice, Switzerland passed an anti-money laundering law in 1997 and introduced strict regulations against tax evasion.
 

 

 
 

 

SHOW COMMENTS