HSBC leaks

[Sheilbh]

Catalogue of malpractice endorsed by bankers laid bare in HSBC files
Swiss operation actively abetted clients in keeping accounts secret from tax authorities, at its height hiding $120bn in assets

David Leigh, James Ball, Juliette Garside and David Pegg
Sunday 8 February 2015 21.00 GMT

The HSBC files, the biggest banking leak in history, reveal the full scale of malpractice at its Swiss subsidiary. Recent court cases in the US and Europe have provided individual examples of the bank's wrongdoing, but the leaked files show how these cases were part of a persistent pattern of misconduct.

In one case that illustrates the bank's conduct, a wealthy British client, Stoke City football club director Keith Humphreys, frankly told his HSBC manager that his father's $430,000 (£280,000) Swiss account was "not declared" to the UK tax authorities.

Humphreys, whose wealth originated from the sale of a local supermarket chain, explained that one HSBC manager had already advised how to extract undeclared offshore money via a credit card.

"The credit card is thus used to enable the Humphreys family to make withdrawals from 'cash points' when they are outside the UK," he said.

The banker, who even brought paperwork to Humphreys' stately home in Cheshire because the client was uneasy about "walking around with a set of account-opening documents", recorded how Humphreys was also alarmed to hear a Swiss lawyer might realise he had a secret HSBC account. "This situation initially appeared to cause some disquiet to my hosts, though this later gave way to a more relaxed attitude with the sentiment that Genevan lawyers would be discreet, something that I did nothing to discourage."

On clinching arrangements in London, the bank manager wrote: "We subsequently repaired to the Ritz, for a very enjoyable lunch." Humphreys told the Guardian his father eventually had to repay about $224,000 (£147,000) for evading tax due to the UK.

Another customer, retired accountant Andrew Sebastian, also told the Guardian how he had now been made to pay about $64,000 (£42,000) in back tax, interest and penalties. HSBC in Switzerland had supplied him with £50,000 in sterling banknotes in the course of a year.

At its height, HSBC's secretive Swiss arm hid a total of $120bn (£78bn) in assets. These funds were collected from wealthy clients all over the world and have already led to criminal investigations and charges against the bank in France, Belgium, the US and Argentina. But in Britain, no legal action has been taken against HSBC and the evidence against it has never been made public until now.

The leaked Swiss HSBC files implicate the bank in apparent misbehaviour all over the world. One Australia-based HSBC client planned to share his "black" account with his daughter in London.

The bank noted: "The account is 'undeclared', a fact with which [she] may not be entirely at ease – as a compliance officer at Kleinwort Benson." The manager wrote that the account was also not declared "to the best of my knowledge" to the tax authorities in Australia.

HSBC was so keen to protect its clients, that it used a codename when phoning another prominent Australian financier, Charles Goode, then chairman of the ANZ bank in Melbourne, about his US$318,000 deposit. According to the files, HSBC instructed he "would like to be called Mr Shaw". Goode told the Guardian the use of a codename was the bank's idea, not his, and the deposit had long been left dormant by him. He says he has paid all tax due on the account.

Another HSBC manager wrote on the file of Irish businessman John Cashell (later to be convicted of a tax fraud): "His preoccupation is with the risk of disclosure to the Irish authorities. Once again I endeavoured to reassure him that there is no risk of that happening."

HSBC similarly recorded on the file of a British property developer: "He is very much concerned that ... client information could be exchanged ... I explained him that we are bound to CH [Swiss] banking secrecy which is one of the strictest in the world."

HSBC appears to have allowed executives of a textile firm to conceal unregistered "bearer share" certificates in a Swiss safe, which would have revealed who really owned the company. Bearer shares are banned in some countries, because of their potential for abuse.

The bank recorded: "In this safe are some very important documents (bearer share(s) which belong to the beneficial owner Mr DL from Israel. These shares are kept in a safe for tax reasons."

In a separate transaction, the bankers themselves recorded that they were uneasy when a Serbian businessman wanted to deposit €20m (£15m). But they merely asked him to act less conspicuously.

HSBC "explained that as per today the bank did not interfere in his money transfer transactions but would have preferred to reduce those activities on a lower scale. [He] understands our concerns and will use smaller amounts".

The bankers seem to have been reluctant to take risks personally. The files record that a wealthy owner of a London furniture store and holder of a secret HSBC Swiss account, demanded HSBC "help him get back money into the UK on a 'non-declared' basis" by carrying in bundles of cash."

HSBC offered instead to provide him or a colleague with sterling banknotes in Switzerland, recording, "what he decided to do with friends of his ... was his affair". In a revealing remark, an HSBC manager wrote on the files: "We made clear the difference between passive and active action on our part."

This tax evader also ended up repaying UK authorities, as part of a $205m (£135m) haul Britain has so far recovered from HSBC's tax-dodging customers. Chris Meares, then overall head of HSBC private banking, assured the Treasury committee in 2008: "We prohibit our bankers from encouraging or being involved in tax evasion."

But former tax inspector Richard Brooks, author of The Great Tax Robbery, who is interviewed about HSBC on BBC Panorama on Monday night, says: "I think they were a tax avoidance and tax evasion service. I think that's what they were offering. They knew full well that people come to them to doge their tax liabilities. There are very few reasons to have an offshore bank account, apart from just saving tax."

The HSBC files are being published in an international collaboration including the French daily Le Monde in Paris, which first obtained the data; the Washington-based International Consortium of Investigative Journalists; and BBC Panorama.

HSBC says it won't comment on many of the specific allegations because of ongoing criminal investigations and because of Swiss bank secrecy laws.

But HSBC also says it has now embarked on a radical clean-up of its Swiss act. It says it has not only introduced "strict controls" on cash withdrawals, but also ended the "hold mail service" (the practice of not sending giveaway letters to customers' home countries); and got rid of 70% of its previous customers.

"HSBC has implemented numerous initiatives designed to prevent its banking services being used to evade taxes or launder money."

Part two:

Cash pilgrims and bricks of money: HSBC Swiss bank operated like cash machine for rich clients
Cache of leaked data show how throughout 2005, scores of account holders arrived in Geneva, often emerging with currency foreign to Switzerland
David Leigh, James Ball, Juliette Garside and David Pegg
Monday 9 February 2015 14.00 GMT

Not far from the Jet d'Eau, the famous Lake Geneva fountain, a huge rooftop sign proudly declared: "HSBC Private Bank". Money didn't just talk here: it shouted. But the actual facts of what went on inside No 2, Rue Dr-Alfred-Vincent were less well publicised. Through its revolving doors, a stream of visitors slipped in and then out again with packets of cash in untraceable banknotes.

From information contained in leaked files from HSBC's Swiss subsidiary, the Guardian has been able to reconstruct a diary of a year in the life of HSBC's cash machine. Large cash transactions are a classic warning sign to bankers. But instead of blocking the withdrawals or even interrogating them, the bank repeatedly handed out packets of untraceable banknotes.

Specialist UK tax barrister Jolyon Maugham says: "Why on earth would you travel to Switzerland to take out sterling in cash? Why would you not just ask the Swiss branch to wire the money to your bank account in the UK? I struggle to see an answer to that question that doesn't involve you wanting to obscure from the UK tax authorities the fact that you have money in a Swiss bank account."

Only when these facts later leaked out did the bank reform. It says it now seeks to operate "strict controls" on withdrawals of more than £6,600.

Day by day, throughout 2005, a succession of holders of numbered accounts arrived, from the UK, France, Germany, Scandinavia, the US, Italy, Spain, Belgium and the Netherlands. They often emerged with currency of little use in Switzerland itself. These British pounds, euros, US dollars, even Danish krone, were for spending at home, or sometimes to buy villas and flats abroad.

Some clients have been frank that they were dodging tax. Retired accountant Andrew Sebastian, who collected a total of £50,000 cash that year, said that since the HSBC data leaked out, he had settled with HMRC for a payment of £42,722.

A British antiques dealer, Caroline Carrier, picked up £12,000 cash in April and another £12,000 in August. She told the Guardian the matter had been "settled legally" in 2010, and HMRC had now collected all the taxes due on her inherited account.

Others have denied wrongdoing or offered no explanation for their withdrawals when contacted by the Guardian. In the absence of any explanation, it is not possible to assess whether the withdrawals were for legitimate purposes.

Arlette Ricci, the Nina Ricci perfume heiress, had the equivalent of £15m in Swiss accounts. The bank provided her with 10 packets of €7,500 each throughout 2005, totalling about £60,000. She denies all wrongdoing.

Jewellery trader Harry Fane, younger son of the Earl of Westmorland, who had a total of up to £700,000 in HSBC Swiss accounts, confided to the bank that he wanted large sums of cash "to fund ongoing building work on his property in London". His lawyer told the Guardian his financial affairs were private, had been conducted entirely lawfully, the accounts were now closed and no tax was outstanding on them.

Hanne Tox, the widow of a Danish industrialist, did not respond to invitations to comment. She took away a total of 200,000 krone (about £21,000), from a £1.25m offshore trust account. According to the files, HSBC noted that all contact must go via a relative in London, "critical, as it is a criminal act having an account abroad non-declared".

Another Dane who collected cash in Switzerland was meat trader Torben Lenzberg. Lenzberg's Danish phone number on the bank file is marked "DO NOT CONTACT!" This again could suggest the bank was aware of a clash with Danish law. HSBC says it has since banned its Swiss "hold mail service" under which it kept all correspondence and made no giveaway phone calls. Lenzberg has not commented.

Another Briton, recorded as having a £2m share in an inherited trust fund, went half a dozen times to the bank's Zurich branch. She collected £70,000 over the year, insisting she wanted British low-denomination "used notes".

With untraceable cash, tax returns become voluntary. Former tax inspector Richard Brooks told the Guardian: "If you withdraw cash from a bank in Geneva or Zurich, there's no trail of that over here. Most rich individuals will get their accountants to fill in their tax returns. They'll be working from their banking records. But there's nothing for your accountant to see."

One particularly large handover by the bank of $100,000 (£66,000) to Swiss tax-resident diamond trader Beny Steinmetz was accompanied by an innocent explanation. He told the bank it was for travel expenses and fuel for trips to South Africa and Russia. (He says he fully complied with all applicable laws).

Eufemiano Fuentes, a Spanish doctor, later to be convicted of sports doping, whose offshore funds came from illegal doping of racing cyclists, withdrew a total of €265,000 in cash in the course of the year, claiming it was to buy a boat and to pay hospital bills for his daughter.

More normal withdrawals were equivalent to £10,000 to £20,000 a time. The UK cash pilgrims also included property traders, a diet clinic owner and a toy manufacturer. In one ingenious racket, HSBC manager Nessim Elmaleh pleaded guilty in 2013 to a deft laundering operation in which wealthy HSBC clients in Paris would get untraceable cash generated from the proceeds of big drug deals in the city. Elmaleh would reconcile the payments by transferring funds from the clients' accounts to those of the drug kingpins.

The files show the bank reassuring another Briton who collected £30,000 in cash "in a hurry", HSBC noted. "He was under the impression that the Swiss banking secrecy was being lifted and the family are therefore trying to remove their assets. I informed them that this was not the case and that they had no need to reduce their account so quickly."

The British owner of a furniture store in central London made clear his unlawful intentions. According to the leaked files, he said: "What is the point of having money 'offshore' if one cannot have access to it?"

The bank said he wanted "to have someone who would bring cash to him in the UK. He is not interested in the service that we could possibly provide him at HSBC Premier in Knightsbridge, as he would have to identify himself by passport! He said, 'I do know banks in your part of the world who are able to provide this service, using ... their representative in Panama to bring in cash.'"

But HSBC managers refused to courier such cash themselves across borders. They told him instead that they were prepared to offer "passive", but not "active" assistance.

Despite its self-protective caution, HSBC does however appear to have tipped its customers off to behaviour that might alert the taxman. In another case, a banker said two clients "asked about taking cash into the UK. I told them that the 'limit' was £10,000 – information obtained from HSBC Compliance in London who had spoken to HM Customs in 2003... If a person with funds in excess of £10,000 is stopped by HM Customs he had better have the right answers."

US surgeon Andrew Silva admitted in 2010 that HSBC's Swiss bank deliberately gave him "bricks" of $100,000 in notes, to secretly post home in a series of envelopes. According to court papers, the bank told its client not to wire money because that would "create a trail for US authorities". In a 2013 US prosecution, Vaibhav Dahake, a New Jersey businessman, similarly admitted HSBC bankers warned him not to carry in more than $10,000 in illegal funds, but to "stay below the radar".

US attorney Paul Fishman said at the time: "Bankers should encourage their clients to comply with the law, not advise them how to break it."

[Sheilbh]

Probably a headline most banks would like to avoid:

Leaked List Shows HSBC's Swiss Arm Helped Putin Allies, Drug Lords and Fugitives Hide

http://www.bloomberg.com/news/articles/2015-02-08/leaked-hsbc-list-shows-who-was-banking-on-swiss-secrecy

And Lord Lawson - Thatcher's Chancellor, creator of the Big Bang - has called for the banks to be broken up.

[Martinus]

Absolutely nothing will happen as a result. 

[Martinus]

Probably a headline most banks would like to avoid:

Leaked List Shows HSBC's Swiss Arm Helped Putin Allies, Drug Lords and Fugitives Hide

http://www.bloomberg.com/news/articles/2015-02-08/leaked-hsbc-list-shows-who-was-banking-on-swiss-secrecy

And Lord Lawson - Thatcher's Chancellor, creator of the Big Bang - has called for the banks to be broken up.

About a year ago another big bank (or was it also HSBC) was involved in knowingly laundering money of drug cartels, Iran and AQ. And nothing happened then either.

Holder's Doctrine (you cannot criminally prosecute banks' top brass as that would threaten the financial system) is alive and well.

[Sheilbh]

I'm with Iain Martin:
http://www.capx.co/megabanks-are-too-big-to-fail-bail-and-jail/

Also Marti should be sent to the guillotine

[Martinus]

I'm with Iain Martin:
http://www.capx.co/megabanks-are-too-big-to-fail-bail-and-jail/

Also Marti should be sent to the guillotine

I never said I agree with that. I was just stating the fact. Don't kill the messenger.

[CountDeMoney]

Also Marti should be sent to the guillotine

I never said I agree with that. I was just stating the fact. Don't kill the messenger.

No shit, Sheilbh.  It's just the way it is, and it's the way it's always going to be. 

No accountability?  No problem!

[Martinus]

The Brits are a curious bunch, by the way.

Their press is always so much sound and fury on anything from cheating, corrupt banks, to Russian oligarchs, to evil Saudis, to eavesdropping media moguls - you name it. Yet they are most unbashed in the fact that their entire economy is based on serving these crooks in every way imaginable. To be honest, I can't think of any other world power class government being so much in the pocket of big money - no matter where it comes from.

At least Americans, the French, Russians or the Chinese tend to prefer their own oligarchs. Only the Brits are a perfect whore.

[Sheilbh]

What can I say? We're not bigoted

[Razgovory]

Also Marti should be sent to the guillotine

I never said I agree with that. I was just stating the fact. Don't kill the messenger.

No shit, Sheilbh.  It's just the way it is, and it's the way it's always going to be. 

No accountability?  No problem!

He still should be sent to the Guillotine.

[Archy]

I see one positive note that apparently the swiss banks are feeling the heat yo comply an that apparently the swiss banking secrecy is crumbling

[Monoriu]

I can sleep well knowing that the HSBC managers are working hard for us shareholders 

[Martinus]

I can sleep well knowing that the HSBC managers are working hard for us shareholders 

I can't wait until the next CEO writes off all dubious assets, flushing the share price down the toilet together with your retirement plan. 

[Monoriu]

I can sleep well knowing that the HSBC managers are working hard for us shareholders 

I can't wait until the next CEO writes off all dubious assets, flushing the share price down the toilet together with your retirement plan. 

Why?  I'll simply buy more if the share price crashes.  HSBC absolutely dominates in HK (the "H" in HSBC is Hong Kong), and the majority of their profits come from here.  Their Swiss arm is probably not that significant even if it disappears.  Heck, their US arm was basically destroyed in 07/08 and they are still alive and kicking. 

[Martinus]

You are really a bizarre person. Sorry, I made myself a promise not to attack personally any posters, but you continue to astound me as probably the most pathetic, despicable git on Languish.

The most ironic part for me is that many people here are benefiting much more from the system than you are, but that does not stop them from discussing its less-than-stellar parts, whereas you seem to be buying the system's propaganda hook and sinker.

I would say that you are one of those people who would be first against the wall when the revolution comes, but that's probably not true - most revolutionaries would probably consider that a waste of a good bullet. That is assuming you actually would not have joined revolutionary tribunals and started to pass death sentences.