HSBC in tax dodging scandal

BY Richard Summerfield

British banking group HSBC Bank plc is facing potential legal action in both the US and the UK over claims that the bank conspired with clients of its Swiss subsidiary, helping them avoid paying tax in the run up to the financial crisis.

According to a number of leaked bank account files, HSBC helped over 100,000 clients across 203 countries to hide around $118bn worth of assets. The documentation, which was leaked to a number of global media outlets, has sparked an outpouring of outrage across Europe, the US and elsewhere. Though the relevant tax authorities have had access to the leaked files since 2010, HSBC’s misconduct is only now being made public.

Prosecutors in the US have begun to intensify their investigations into HSBC’s conduct given the revelations, and are now looking into allegations that the bank may also have manipulated currency rates as part of its wider malfeasance. The US Department of Justice may also choose to re-evaluate the $1.9bn deferred prosecution agreement reached with the bank in 2012 as a result of the leak. In the UK, the bank may face possible criminal charges.

In many respects, the HSBC revelations are indicative of a dubious culture permeating the banking sector, and the latest revelations will do little to convince the public that banking and financial institutions can be trusted. With many of the wounds from the financial crisis still raw, HSBC’s alleged collusion with tax dodging clients will undoubtedly provide a significant setback for those attempting to clean up the industry’s image. As the UK’s general election is mere months away, the issues of tax avoidance and corporate misconduct are likely to remain high on the political agenda in the short term.

Given the potentially damaging nature of the revelations, HSBC has moved swiftly to calm the quickening storm. In a statement the bank said, “We acknowledge that the compliance culture and standards of due diligence in HSBC’s Swiss private bank, as well as the industry in general, were significantly lower than they are today. At the same time, HSBC was run in a more federated way than it is today and decisions were frequently taken at a country level.”

News: HSBC could face U.S. legal action over Swiss accounts

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