Leaked files reveal how HSBC Switzerland helped customers to hide millions from the taxman

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Posted in:Banking and Finance|February 16, 2015 | Join the mailing list

HSBC are at the forefront of the latest banking scandal as it has been revealed that their Swiss subsidiary helped wealthy customers on a worldwide scale hide millions of dollars of assets and “black accounts” from the taxman.

The leaked secret records were stolen in 2007 by Hervé Falciani an IT expert working for HSBC in Geneva. The records purport that the Swiss subsidiary of HSBC aided 8,844 British customers to store $21.7 billion (£14.3 billion) away from the taxman between
the period of 2005 and 2007. A report by The Guardian states that during the period of 2005 to 2007 HSBC’s Swiss private bank:

•    Aggressively marketed schemes to enable customers to avoid European taxes
•    Colluded with customers to conceal undeclared “black accounts” from their domestic tax authorities
•    Failed to carry out the proper level of caution when providing accounts to high risk individuals such as international criminals, corrupt businessmen and politically linked figures and their families; and
•    Allowed clients to withdraw “bricks of cash” in foreign currencies with little use in Switzerland.

The leaked files demonstrate that the Swiss Bank proactively sought out high net worth individuals in 2005 to market schemes that assisted customers in avoiding the newly introduced taxes levied on Swiss savings accounts of EU citizens’ which was part of a
Swiss/EU treaty brought in to tackle secret offshore accounts.
 
Whilst only just leaked to the public, tax authorities have had confidential access to the files since 2010 and to date, only one UK resident has been convicted. Michael Shanley, a property developer, admitted evading £430,000 of inheritance tax and paid £494,444
in fines and costs in 2012. The Bank also helped Emanuel Shallop (subsequently convicted of trading in “blood diamonds”); a leaked memo reveals astonishingly  that the Swiss Bankers were aware of his potential criminal involvements “We have opened a company
account for him based in Dubai…. The client is currently being very careful because he is under pressure from the Belgian tax authorities who are investigating his activities in the field of diamond tax evasion”.

Lord Stephen Green, chief executive and group chairman of HSBC during the period in question, was appointed a Conservative trade minister in 2010 in the House of Lords. MPs last week questioned the government in their choice in appointing Lord Green, at a time
when HMRC was already aware of the leaked secret cache of documents.

Margaret Hodge, chairman of the public accounts committee, stated that she was astounded by the actions of Lord Green, who has declined to comment. Ms Hodge is quoted in the Times “Either he didn’t know and he was asleep at the wheel, or he did know and he
was therefore involved in dodgy tax practices. Either way he was man in charge, and I think he has got really important questions to answer”.

The leak brings the question whether there will now be a demand for further UK prosecutions to be brought against evaders. There has already been speculation that HSBC may be guilty of a felony under US Tax law.

Berg are currently investigating a number of potential claims on behalf of various customers who were targeted by avoidance scheme managers and advisers with at times aggressive marketing of unlawful and ineffective tax avoidance schemes and who are faced with
substantial losses as a result of potentially negligent advice. The problems caused as a result are put into even greater focus by the new procedures for “Accelerated Payment Notices” whereby recipients of such notices are require to “pay now, dispute later”.

The issues highlighted in this latest revelation are reflective of the magnitude of the tax avoidance scheme problem and Berg shall continue to monitor and report on developments.

For more information about any of the above or for practical advice on this or any other aspect of banking and financial disputes, please contact the Berg Banking Litigation Team on 0161 829 2599 or email
Damian Carter at
damianc@berg.co.uk.

(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg or any of its partners or employees. Professional legal advice should
be obtained before taking, or refraining from taking, any action as a result of this article.) 

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