The Tax Times: HSBC Faces $1.5B In Fines From Swiss Tax Evasion Probes

Wednesday, February 21, 2018

HSBC Faces $1.5B In Fines From Swiss Tax Evasion Probes

According to Law360, HSBC Holdings PLC could be hit with fines exceeding $1.5 billion from investigations around the world into allegations of tax evasion and money laundering at its Swiss private-banking subsidiary and other operations, according to the bank's annual report published Tuesday.

Tax agencies, regulators and law enforcement authorities in the U.S., Belgium, Argentina, India and Spain are investigating or reviewing HSBC Private Bank (Suisse) SA and other HSBC companies, the bank revealed. It warned investors that other jurisdictions could launch their own probes.

Allegations the bank is facing include tax evasion or tax fraud, money laundering and soliciting of unlawful cross-border banking, much of it centered on its Swiss private-banking unit.

"Management’s estimate of the possible aggregate penalties that might arise as a result of the matters in respect of which it is practicable to form estimates is up to or exceeding $1.5 billion," the annual report said. "Due to uncertainties and limitations of these estimates the ultimate penalties could differ significantly from this amount."

The International Consortium of Investigative Journalists and media partners around the world reported in 2015 on documents provided by a former bank employee that purportedly show HSBC’s Swiss arm helped clients get around tax authorities in their home countries and instructed them how to evade a European Union tax on bank deposits.

HSBC’s outgoing chief executive, Stuart Gulliver, said on Tuesday that the bank has worked hard to improve its compliance capabilities and has made preventing financial crime a priority for the group’s management.

We previously posted 146 Offshore Banks & Now Financial Advisors Are Turning Over Your Names To The IRS - What Are Your Waiting For? where we discussed that the IRS keeps updating its list of foreign banks which are turning over the names of their US Account Holders, who are now subject to a 50% (rather than 27.5%) penalty in the IRS’s Offshore Voluntary Disclosure Program (OVDP). This penalty is based on the highest account balance measured over up to eight years.

Under the program, banks are required to:

Make a complete disclosure of their cross-border activities;

Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;

Cooperate in treaty requests for account information;

Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;

Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and

Pay appropriate penalties.

These Banks, Financial Instructions and Foreign Financial Advisors have made substantial efforts to cooperate with the IRS investigation, including by:

facilitating interviews that their Office with employees, including top level executives;
voluntarily producing documents in response to the Office’s requests;
providing, in response to a treaty request, unredacted client files for the U.S. taxpayer-clients who maintained accounts at their Banks or Financial Instruction; and
committing to assist in responding to a treaty request that is expected to result in the production of un-redacted client files for U.S. taxpayer-clients who maintained accounts at these Banks and Financial Instructions and with these Foreign Financial Advisors.