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Swiss Bank Leak the “Biggest in History” – Reveals These Rich Tax Fraudsters

This is a syndicated repost published with the permission of Money Morning - We Make Investing Profitable. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.

A Swiss bank leak of 30,000 accounts pin fraud and other illegal practices on HSBC Holdings Plc. (NYSE ADR: HSBC), the world’s second-largest bank.

“It’s banking – the business of banking. The bigger they are, the more corrupt they are,”Money Morning Capital Wave Strategist Shah Gilani said Monday.

Leaked files reveal secret accounts and details of more than 100,000 clients from more than 200 countries around the world. Account holders include arms dealers, criminal blood diamond merchants, drug cartels, Hollywood elite, royalty, and “the heirs to some of Europe’s biggest fortunes.”

It’s “the biggest banking leak in history,” according to The Guardian.

News of the Swiss bank leak hit Sunday evening. A Feb. 8 report from the International Consortium of Investigative Journalists (ICIJ) in Washington compiled and released the leaked files.

The Washington-based organization worked in tandem with news outlets BBC, The Guardian, and French newspaper Le Monde. More than 140 journalists from 45 countries pored over the files.

“These revelations confirm that banking secrecy has been used to avoid taxation,” European Union spokeswoman for tax affairs Vanessa Mock said Monday.

The History of the Swiss Bank Leak

Hervé Falciani Swiss bank

The documents in question were actually leaked back in 2008. A (former) HSBC employee named Hervé Falciani turned whistleblower and handed them over to the French government.

French authorities then shared the files with various governments worldwide. In fact, the U.S. Justice Department fined HSBC a record (at the time) $1.92 billion based on the information in 2012.

The difference today is journalists now have full access to the files – and so does the public.

Swiss Bank Leak Reveals Thriving Fraud Market for the Rich

All kinds of misbehavior show up in HSBC’s leaked accounts. They include:

  • Permitting international criminals to hold accounts.
  • Using illegal tax avoidance strategies for wealthy clients.
  • Sheltering undeclared accounts from authorities (holding a secret bank account isn’t illegal per say, but it is when used to hide cash to dodge taxes.)

It sounds like HSBC performed almost no background check for new customers – if they had a lot of money. These files show that criminals came into the bank, put down cash, and opened accounts without anyone asking too many questions.

Just look at these examples from the leaked Swiss bank files…

In one transaction, HSBC employees wrote of uneasiness when a Serbian businessman wanted to deposit roughly $22.7 million (20 million euros). However, they simply told him to be less conspicuous. HSBC “explained that as per today the bank did not interfere in his money transfer transactions but would have preferred to reduce those activities on a lower scale. [He] understands our concerns and will use smaller amounts.”

One secret account holder, the wealthy owner of a London furniture store, demanded HSBC “help him get back money into the U.K. on a ‘non-declared’ basis by carrying in bundles of cash.” Instead, the bank said it would provide him, or a friend, with sterling banknotes in Switzerland. “What he decided to do with friends of his … was his affair. We made clear the difference between passive and active action on our part.”

And a London-based financier – whom the bank codenamed “Painter” – and his partner were advised on how to cheat the Italian tax. “The risk for the couple is, of course, that when they return to Italy the U.K. tax authorities will pass on information on them to the Italian tax authorities. My own view on this was that … there clearly was a risk.”
These are just a few examples of some illicit activities contained in the leaked files. You can go through them yourself on this page, set up by the ICIJ.

Any Consequences for HSBC on Swiss Bank Leak News?

HSBC faces criminal investigations and charges in the United States, France, Belgium, and Argentina as a result of the Swiss bank leak. No action has yet been taken in Britain.

HSBC’s official response was to take “full responsibility” – but not really.

It distinguished itself from its Swiss subsidiary, claiming that branch is “focused on a very different client base and had a significantly different culture to HSBC. The business acquired was not fully integrated into HSBC, allowing different cultures and standards to persist.” HSBC also stated times have changed, and its organization at the time of the leak is much different than it is today.
“Banks are criminal enterprises,” Gilani said Monday. “Allow me to add an additional adjective: banks are ‘protected’ criminal enterprises. The get caught doing what they do, and simply pay the government toll-takers that protect individuals from going to jail and institutions from being shut down.”

Just look at Stephen Green (now Lord Green), who was in charge of HSBC during the period the leaked files cover. After serving as Chief Executive of HSBC, he went on to become Group Chairman. In 2010, he left HSBC to become minister of trade and investment for British Prime Minister David Cameron. He served for three years.

Green will not speak of his time at HSBC. “As a matter of principle I will not comment on the business of HSBC, past or present,” he told the BBC Monday. And Green has never been prosecuted for wrongdoing in his work there.

HSBC stock was down 1.38% on the New York Stock Exchange midday Monday on the Swiss bank leak news. Shares were down 1.64% in London.

More Big Bank Misconduct: In January, the SEC came down on UBS Group AG (NYSE: UBS) for breaking client confidentiality, among other illegalities. It slapped UBS with a record $14.4 million fine. But is the SEC really on the side of public welfare – or is it in bed with UBS itself? Read Gilani’s breakdown of the “absurd” UBS fine here…

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The post Swiss Bank Leak the “Biggest in History” – Reveals These Rich Tax Fraudsters appeared first on Money Morning 

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