In a lengthy dispute over its tax obligations, HSBC has agreed to pay France approximately 300 million Euros (£269 million) following the French government’s alleged claims that the Swiss banking giant had helped its rich clients evade taxes in the country.
The investigation stemmed from loads of data with confidential information on HSBC’s French clients offered to the government by Hervé Falciani, a former IT specialist at the Swiss bank who leaked client information for 2006 and 2007.
According to Parquet National Financier (PNF), the French agency in charge of investigating financial crimes, the investigation looked into roughly 1.6 billion Euros in assets owned by French citizens that were “discovered as a result of the seizure and the exploitation of computer documents found at the home in France of a former employee of HSBC in January 2009.”
As explained by a source involved in the case, HSBC was originally charged with failure to monitor its private banking service.
However, following a deeper look into HSBC’s role and the leaked documents, it was alleged that the bank “participated actively in the fraudulent practices.”
Bloomberg reports that a judge involved in this case said the final deal involves “a penalty of about 158 million euros and damages and interest of about 142 million euros.”
HSBC Tax Fraud Case Dismissed
In a statement to Reuters, HSBC said, “The investigation regarding HSBC Holdings has been dismissed,” and remains satisfied with the resolution of “this legacy investigation which relates to conduct that took place many years ago.”
The Swiss bank also admitted to the existence of “historical control weakness at the Swiss Private Bank on a number of occasions and has taken firm steps to address them.”
A French lawyer linked to the case believes this decision will wrap up the case “provided the bank pays what they have to pay.”
“I think they are going to pay very quickly and then the case is over,” he added.
Despite this reprieve, two senior HSBC officials are still under investigation and might be indicted.
Peter Braunwalder, HSBC’s Swiss private bank’s former CEO, and Judah Elmaleh are both being looked into by French authorities.
In any case, as reported by the Financial Times, this decision marks the first of its kind “entered into under the Judicial Convention of Public Interest, a law comparable to deferred prosecution agreements used in the US.”
More Tax Fraud Trouble for Swiss Banks?
Back in February 2017, HSBC disclosed that it was being investigated for tax fraud and tax evasion in multiple jurisdictions across the globe.
In its 2016 annual report, the Swiss bank said, “Various tax administrations, regulatory and law enforcement authorities around the world, including in the US, France, Belgium, Argentina and India, are conducting investigations and reviews of HSBC Swiss Private Bank and other HSBC companies in connection with allegations of tax evasion or tax fraud, money laundering and unlawful cross- border banking solicitation.”
UBS Group’s French branch is also in a drawn-out battle with the French government over its tax obligations and may face trial for tax fraud and a potential fine of close to 4.9 billion Euros.