February 19, 2015 08:44
Geneva prosecutors have raided the Swiss office of the British banking giant HSBC and announced a criminal investigation into accusations it was laundering money.
The raid was taking place at the offices of HSBC Private Bank Switzerland, according to a statement released Wednesday by Geneva's prosecutor.
Prosecutors said they were investigating criminal charges of "aggravated money laundering" against the bank, but stressed the probe could be broadened to include "physical persons suspected of committing or participating in acts of money laundering."
Earlier this month, the U.S.-based International Consortium of Investigative Journalists and several media organizations found that the Swiss arm of HSBC, Europe's largest bank, helped clients in more than 200 countries avoid taxes and hide hundreds of millions of dollars in assets. Those clients included drug traffickers, arms dealers and celebrities.
The reports were based on documents stolen by a former HSBC employee in 2007 and given to French authorities who shared them with other countries. The leaked documents contain details about more than 100,000 clients from around the world -- both individuals and legal entities.
According to the ICIJ report, academic studies estimate that $7.6 trillion is held in overseas tax heavens, preventing governments from collecting about $200 billion a year in tax revenues.
HSBC responded to the report by saying its compliance efforts have been insufficient. The bank said it has undergone a "radical transformation" in recent years and now enforces more stringent reporting requirements.
The new revelations may trigger calls for closer oversight of sophisticated tax avoidance by the wealthy and multinational companies, a key political issue in Britain and across Europe.
According to Paris-based economist Tomasz Michalski, the latest allegations against HSBC's Swiss unit in particular, which is already facing probes by French and Argentinian authorities, are of unprecedented magnitude.
"It is not only passive tax evasion, that they kept money for people on their accounts without asking any questions, it was actually active encouragement of tax evasion, active money laundering and also related [to], for example, arms traders, drug dealers, [and] dictators," he said. "So the affair is potentially much more serious."
In a statement Wednesday, HSBC Private Bank said it has cooperated with Swiss authorities since the data theft. In response to the reports last week, its CEO Franco Morra said it had shut down accounts of clients who did not meet its high standards.
HSBC is not the first bank to come under scrutiny in recent years. U.S. authorities have fined several financial institutions, including Swiss banks UBS and Credit Suisse, for helping U.S. citizens evade taxes.
"I think this is also going to happen to HSBC, in a sense they are going to have to pay a lot of fines, a lot of people are going to be fired, probably some may face criminal investigation," Michalski said, adding that the 2008 financial crisis has led to a tougher regulatory environment, and that cash-strapped countries are paying greater attention to individual and corporate tax evaders.
Some information for this report comes from AP, AFP and Reuters.
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