Wednesday, April 17, 2013

HSBC Hogs the Limelight Again

The revelation that HSBC Holdings Plc (HSBA)’s Swiss private bank was an “open door” for money laundering and terrorist finance should not come as a surprise. On Monday, Hervé Falciani, a computer services specialist with HSBC Private Bank (Suisse) N.A., who supervised data migration on individual accounts said that managers wilfully failed to exercise controls – so what is new with HSBC? It seems that he was increasingly troubled by the bank’s dubious practices and for two years beginning in 2006, Falciani mirrored account information onto his laptop. HSBC, Europe’s largest bank by market value became aware only in 2008 that Falciani had stolen details on 24,000 accounts and secured an international arrest warrant issued by Swiss authorities. Falciani, a dual French-Italian citizen whom neither country would extradite, was picked up in Nice and when French prosecutors, acting on behalf of Swiss police, searched his home and seized his laptop, they discovered files on 130,000 alleged tax evaders.

Rather than arresting Falciani, they opened an investigation into the alleged tax evaders. When French authorities let it slip to the media that had files on some 3,000 Swiss HSBC account holders and that they would prosecute, they recuperated some €1.2 billion ($1.5 billion) in unpaid taxes from profligate citizens.

In the interim, a diplomatic row ensued; Switzerland accused France of using stolen data and the French countered, threatening to have Switzerland added to the OECD Tax Haven Black List. Over Swiss objections, then Finance Minister Christine Lagarde shared the data with tax officials in cooperating countries.

Arrested in Barcelona on July 01, Swiss authorities demanded Falciani’s extradition to Switzerland where he faces charges of data theft and violation of bank secrecy laws. If convicted, Falciani faces a three-year prison term and a fine that could top €200,000 ($253,000).

It has been reported that the Spanish public prosecutor will oppose the Swiss extradition request because Falciani’s actions do not constitute a crime in Spain, said prosecutor Dolores Delgado.

[Moves against Falciani by the Swiss government are reminiscent of the US Justice Department’s 2008 prosecution of UBS whistleblower Bradley Birkenfeld. A former UBS banker in Switzerland, Birkenfeld blew the lid off a massive scheme by the bank to illegally hide 19,000 US client accounts squirreled away in dodgy offshore tax havens for purposes of money laundering and tax fraud. The IRS had calculated that the total cost in lost revenue stolen from the American people by wealthy elites may be in excess of $100 billion annually].

What Falciani did was commendable because as he himself put it, it was his “civic duty.” Already, the villainous bank has earned notoriety for its past transgressions – read my last post on HSBC dated December 26, 2012 at this link

HSBC is unrepentant and even more so, recalcitrant! When news of the Falciani leak went public, Alexandre Zeller, the chief executive of HSBC’s Swiss subsidiary said at the time, “We deeply regret this situation and unreservedly apologize to our clients for this threat to their privacy.”  But press reports failed to mention whether HSBC apologized to European taxpayers for the role they played in continent-wide tax fraud.

The international exposure on this rogue bank will hopefully make its own customers aware of how much HSBC values integrity. Maybe it should go for a re-positioning exercise to take advantage of its odious infamy. Instead of “The world’s local bank” tagline, it should perhaps shout out its famous services, i.e. money laundering, tax fraud, et cetera. HSBC has found its own niche in this lucrative business!

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