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December 11, 2019

HSBC Swiss arm fined $192.4m in US tax evasion case

HSBC Swiss private banking division has agreed to pay $192.35m to the US authorities to resolve charges that it helped affluent US clients dodge taxes.

HSBC Private Bank (Suisse) confessed to conspiring with its staff, US clients, third-party and wholly-owned fiduciaries to aid tax evasion. The misconduct occurred over a period of 10 years, from 2000 to 2010.

In 2007, the banking unit managed undeclared assets worth around $1.26bn for its clients in the US.

Of the settlement amount, the bank will pay $60.6m in restitution to the Internal Revenue Service (IRS), $71.8m in civil forfeiture, and a penalty of $59.9m.

US Department of Justice Tax Division acting deputy assistant attorney general Stuart Goldberg said: “HSBC Switzerland conspired with U.S. accountholders to conceal assets abroad and evade taxes that every American must pay.

“Banks, asset managers and other financial firms enable such crimes – and we will hold these institutions to account, right along with the taxpayers that use them to facilitate and disguise illegal activities.”

In this case, the banking unit and DoJ signed a deferred prosecution agreement (DPA), under which criminal charges against the bank will be initially deferred for three years if the bank shows good conduct.

The DPA also mandates the bank to cooperate with the DoJ and IRS.

HSBC Private Bank (Suisse) CEO Alex Classen said: “We are pleased to resolve this legacy matter.

“Over the past decade we have strengthened our compliance function, enhanced our control framework and put in place a comprehensive client tax transparency policy.”

Legal issues over the years

In August 2019, HSBC’s Swiss private banking unit was fined nearly €300m to resolve tax evasion charges in Belgium.

In 2017, the unit was hit with a fine of €300m to resolve tax evasion allegations in France.

The banking unit was also fined HKD400m ($51.2m) for systemic failures in selling structured products linked to collapsed US investment bank Lehman Brothers between 2003 and 2008.

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