HSBC in Wider ‘Criminal’ Tax Probe on Swiss Private Bank

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By Ben Stupples

HSBC Holdings Plc, Europe’s largest bank, is the focus of a wider tax probe in Belgium as part of a three-year criminal investigation into its Swiss subsidiary.

“In June 2017, Belgian authorities placed HSBC Holdings and HSBC Private Bank Holdings (Suisse) SA, a Swiss holding company, under formal criminal examination,” the London-based bank said in its half-year results, published July 31.

A spokeswoman declined to comment further.

The disclosure widens the scope of Belgium’s tax probe into HSBC, dating to November 2014, which concerns tax-related offenses from its Swiss private bank. It also comes as the bank deals with tax investigations in six major countries worldwide, including the U.S. and India.

$796 Million Provision

HSBC has made an accounting provision of $796 million for its tax investigations, it said July 31. The figure marks a 3 percent increase on the $773 million provision from its 2016 annual report.

Most of the tax authority investigations concern HSBC’s Swiss private bank. The subsidiary became the focus of a journalistic investigation after a whistle-blower leaked a cache of 60,000 files that showed how HSBC had helped wealthy customers hide their assets and avoid paying tax.

In the U.S., the Department of Justice and the Internal Revenue Service are investigating whether the subsidiary and an HSBC company in India committed wrongdoing with U.S. taxpayers.

In India, meanwhile, the Swiss branch and a Dubai subsidiary face prosecution on claims of helping four “Indian individuals and/or families” evade tax, according to HSBC’s half-year results.

“HSBC is cooperating with the relevant authorities,” it said July 31. “Due to uncertainties and limitations of these estimates, the ultimate penalties could be significantly higher than the amount provided.”

Panama Papers Leak

In addition to its tax investigations, HSBC has received requests for information from regulatory and law enforcement agencies on persons and entities linked to the Panama Papers data leak.

HSBC and its subsidiaries accounted for more than 2,300 shell companies registered through Mossack Fonseca & Co., the law firm at the center of the 2016 leak, according to the International Consortium of Investigative Journalists. These companies helped individuals hide assets and avoid tax.

Repeating previous warnings, the bank said July 31 it is too early to predict the resolution of the Panama Paper inquiries. The subsequent impact, however, could be “significant,” it added.

Half-Year Results

In its results for the year to June 30, HSBC’s pretax profit rose 13 percent to $6 billion, beating analysts’ expectations. It also announced a $2 billion share buy-back, doubling the amount that HSBC acquired from shareholders in the previous quarter in light of its strong capital position.

The results position HSBC well for the future, group chairman Douglas Flint said in a statement accompanying the July 31 results.

“Tackling financial crime remains both a priority and a key challenge,” Flint said. “We have made significant progress in detecting and preventing bad actors accessing the financial system but recognize this is a never-ending effort.”

To contact the reporter on this story: Benjamin Stupples in London at bstupples@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

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