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HSBC could face prosecution, as Swiss Leaks fallout continues

Pressure is intensifying in multiple countries, as prosecutors consider charging the bank, and governments face questions.

Loretta Lynch. Photo: APGlobal banking giant HSBC is facing threats of criminal prosecutions and government inquiries in a number of countries, as public pressure for action increases following revelations the bank may have actively promoted tax-avoidance tactics to clients of its Swiss branch.

Released on Sunday night, ICIJ and Le Monde’s Swiss Leaks investigation created a storm of controversy and demands for official responses, as attention focused on both the bank’s alleged actions detailed in the leaked files, and various government agencies for perceived inaction on the issue of tax evasion.

In the US, attorney general nominee Loretta Lynch has warned that the Department of Justice could bring a criminal prosecution against the bank, while in the UK Prime Minister David Cameron has avoided questions about whether he’d asked former HSBC executive Stephen Green about tax avoidance at the bank before appointing him as trade minister in 2011. British officials received the leaked HSBC data from French authorities in 2010.

Pressure has intensified on both Cameron and Lord Green in the wake of the Swiss Leaks publications, as MPs question Lord Green’s role in, and the government’s knowledge of HSBC’s controversial tax tactics at its Swiss private bank. The Guardian reported the government was made aware of alleged tax evasion at the bank as early as 2011, contradicting claims from the Prime Minister’s office that his ministers were not aware of the issue until the weekend.

Chair of the Public Accounts Committee MP Margaret Hodge confirmed there would be an “urgent inquiry” by the committee, in which HSBC would be required to give evidence. She also questioned Lord Green’s role.

BBC Panorama reporter Richard Bilton, right, confronts UK Trade Minister Stephen Green. Photo: BBC"Either he didn't know and he was asleep at the wheel, or he did know and he was therefore involved in dodgy tax practices,” she said. "Either way he was the man in charge and I think he has got really important questions to answer."

The files, based on data leaked to French authorities from inside the Swiss branch of HSBC, included over 100,000 clients from 200 countries and territories, ranging from the United States to Eritrea. Since publication of stories began on Sunday night (GMT), ICIJ and its reporting partners have been fielding hundreds of enquiries about the project and the data.

In the U.S., the likely future attorney general, Loretta Lynch, opened the door to new criminal charges against HSBC. In 2012, HSBC reached a settlement and was fined $1.9bn over money-laundering with Mexican drug cartels and breaches of US sanctions.

“In the context of recent media reports,” Lynch wrote to members of the Judiciary Committee on Monday, a day after Swiss Leaks went live, the settlement “explicitly does not provide any protection against prosecution for conduct beyond what was described in the Statement of Facts.” The Guardian newspaper cited Justice Department sources stating that investigations into HSBC are still “very active,” suggesting new evidence of tax evasion, in particular, could be a target of renewed investigations

Touted U.S. Democratic presidential candidate Elizabeth Warren has called on prosecutors to “come down hard” if the bank is found to have colluded with tax evaders, according to ICIJ reporting partner the Guardian.

“The new allegations that HSBC colluded to help wealthy people and rich corporations hide money and avoid taxes are very serious, and, if true, the Department of Justice should reconsider the earlier deferred prosecution agreement it entered into with HSBC and prosecute the new violations to the full extent of the law,” Warren told the Guardian.

In response, HSBC told the Guardian: “The DPA is a signed agreement that can only be ‘scrapped’ if HSBC breached it,” the bank said in the statement. “Conduct from 2005 to 2006, or indeed any conduct before December 2012, cannot be a breach of the DPA.”

Within Switzerland itself, where ICIJ partners from a number of news outlets banded together for a joint investigation, political pressure also grew. While some media, trade groups, and regulators decried the Swiss Leaks revelations as “old news,", a former Swiss foreign minister and vice-president called on authorities to open a judicial enquiry into HSBC Private Bank (Suisse), calling it “the least that could be done” in response. Switzerland is seeking to prosecute Herve Falciani, the former HSBC employee accused of stealing files, but the country has not pursued the bank over alleged tax evasion.

Spain’s Minister of Finance, Cristobal Montoro, announced a government-led study into the possibilities of legal action against HSBC Private Bank (Suisse) over possible tax fraud, El Pais announced. In Belgium, a judge is considering issuing international arrest warrants for directors of HSBC’s Swiss branch, and in Tunisia the public prosecutor is also reportedly considering an investigation, while in France investigations into the files are ongoing.

Speaking to Spanish reporters, the OECD’s tax chief Pascal Saint-Ammans said: “With Swiss Leaks, it is game over.

By Tuesday, authorities in Germany, Greece, Finland, Norway and Denmark told reporters they would ask French officials, who were the first to obtain the files, for additional information.

In Ireland, Sinn Féin Leader Gerry Adams has also called for an investigation by the Dáil Public accounts committee, and questioned the Finance Minister Michael Noonan’s decision to appoint a former HSBC chief executive as a senior adviser to the government.

By early Monday, India’s Finance Minister had also promised to expand the country’s ongoing tax investigation to include any additional allegations raised by the Swiss Leaks project.

Back in France, HSBC whistleblower Hervé Falciani, who originally provided the data to French authorities, gave his first interview since the leak to the French daily newspaper Le Parisien on Tuesday. He described the 106,000 clients mentioned in the Swiss Leaks project as “the tip of the icerberg.” 

“The journalists only have a portion of the data,” he said. “The [French] tax authorities have way more. Several millions of transactions [between banks] are also listed in the documents that I handed over.”

He deplored that the systems in place to fight tax evasion were targeting particular clients having accounts in their own names, and not the more elaborated offshore accounts. Yet, he paid tribute to the work of the journalists who worked on Swiss Leaks. 

“It’s an important topic, that is not discussed enough nowadays,” he said. “Proportionally, we talk much more about terrorism. Yet the real terrorists, the ones who affect millions of people, that’s the world of finance.” 

He insisted on the need to protect whistleblowers, including financially. “Whistleblowers are made of flesh and blood, they have to be able to subsist, and their families too. If you don’t offer a financial protection to those with information of public interest, then we won’t be able to make democracy move forward.” 

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