(The Indian Express)- Secret documents reveal that global banking giant HSBC profited from doing business with arms dealers who channelled mortar bombs to child soldiers in Africa, bag-men for Third World dictators, traffickers in blood diamonds and other international outlaws.
The leaked files, based on the inner workings of HSBC’s Swiss private banking arm, relate to accounts holding more than US$100bn. They provide a rare glimpse inside the super-secret Swiss banking system — one the public has never seen before.
The documents, obtained by the International Consortium of Investigative Journalists (ICIJ) via the French newspaper Le Monde, show the bank’s dealings with clients engaged in a spectrum of illegal behaviour, especially in hiding hundreds of millions of dollars from tax authorities.
They also show private records of famed football and tennis players, cyclists, rock stars, Hollywood actors, royalty, politicians, corporate executives and old-wealth families.
These disclosures shine a light on the intersection of international crime and legitimate business, and they dramatically expand what’s known about potentially illegal or unethical behavior in recent years at HSBC, one of the world’s largest banks.
The leaked account records show some clients making trips to Geneva to withdraw large wads of cash, sometimes in used notes. The files also document huge sums of money controlled by dealers in diamonds who are known to have operated in war zones and sold gemstones to finance insurgencies that caused untold deaths.
HSBC, which is headquartered in London and has offices in 74 nations and territories on six continents, at first insisted that ICIJ destroy the data.
Late last month, after being informed of the full extent of the reporting team’s findings, HSBC gave a final response that was more conciliatory, telling ICIJ: “We acknowledge that the compliance culture and standards of due diligence in HSBC’s Swiss private bank, as well as the industry in general, were significantly lower than they are today.”
The written statement said the bank had “taken significant steps over the past several years to implement reforms and exit clients who did not meet strict new HSBC standards, including those where we had concerns in relation to tax compliance.”
The bank added that it had refocused this part of its business. “As a result of this repositioning, HSBC’s Swiss private bank has reduced its client base by almost 70% since 2007.”
How the offshore banking industry shelters money and hides secrets has enormous implications for societies across the globe. Academics conservatively estimate that US$7.6trn is held in overseas tax havens, costing government treasuries at least US$200bn a year.
“The offshore industry is a major threat for our democratic institutions and our basic social contract,” French economist Thomas Piketty, author of Capital in the Twenty-First Century told ICIJ. “Financial opacity is one of the key drivers of rising global inequality. It allows a large fraction of top income and top wealth groups to pay negligible tax rates, while the rest of us pay large taxes in order to finance the public goods and services (education, health, infrastructures) that are indispensable for the development process.”
In dark corners of HSBC, questionable tax tactics
The secret files obtained by ICIJ — covering accounts up to 2007 associated with more than 100,000 individuals and legal entities from more than 200 nations — are a version of the ones the French government obtained and shared with other governments in 2010, leading to prosecutions or settlements with individuals for tax evasion in several countries.
Nations whose tax authorities received the French files include the US, Spain, Italy, Greece, Germany, Britain, Ireland, India, Belgium and Argentina.
It’s not illegal in most countries to maintain offshore bank accounts, and being identified as holding an HSBC Private Bank account is of itself no indication of any wrongdoing. Some who are named in the files may have had some connection to a Swiss bank account, such as a power of attorney, while not owning the money in the account, or owning only a share of it. Others in the files may not even have had a Swiss bank account.
Hollywood actor John Malkovich, for instance, said through a representative that he knows nothing about an account listing his name and conjectured that it might have to do with Bernard Madoff, the former stockbroker convicted of fraud who handled some of his finances.
A representative for the British actress Joan Collins told ICIJ: “In 1993 my client deposited funds into a bank account in London and subsequently discovered that, without her instructions, the money had been transferred to the Swiss account referred to in your letter.” The representative added that no tax was avoided.
The rock star David Bowie responded to ICIJ media partner The Guardian that he has been a legal resident of Switzerland since 1976. Tina Turner, though seen by many as a quintessentially American singer, has lived in Switzerland for nearly two decades and gave up her US citizenship in 2013.
In many instances the records do describe questionable behaviour, such as bankers advising clients on how to take a range of measures to avoid paying taxes in their home countries — and customers telling bankers that their accounts are not declared to their governments.
The reporting by ICIJ and a team of media organisations from 45 countries go deeper into the dark corners of HSBC than a 2012 US Senate investigation, which found that the bank had lax controls that allowed Latin American drug cartels to launder hundreds of millions of ill-gotten dollars through its US operations, rendering the dirty money usable.
The Senate Permanent Subcommittee on Investigations’ extensive report on HSBC also said some bank affiliates skirted US government bans against financial transactions with Iran and other countries. And HSBC’s US division provided money and banking services to banks in Saudi Arabia and Bangladesh believed to have helped fund Al Qaeda and other terrorist groups, the report said.
Later in 2012, HSBC agreed to pay more than US$1.9bn to settle US criminal and civil investigations and entered into a five-year deferred-prosecution agreement.
A subcommittee staff source said Senate investigators had requested the HSBC Private Bank account records obtained by ICIJ and been refused by the bank’s management. The new documents show the bank’s activity in many other parts of the world and reveal a new range of questionable clients and actions by the bank.
The ICIJ revelations also come after The Wall Street Journal reported in January that a progress report by the independent monitor appointed to the bank, a synopsis of which is expected to be made public in April, will show HSBC is failing in its attempts to reform.
International reporting team finds an international cast
The documents obtained by ICIJ are based on data originally smuggled away by a former HSBC employee-turned-whistleblower, Hervé Falciani, and handed to French authorities in 2008. Le Monde obtained material from the French tax authority investigation into the files and then shared the French tax authority’s material with ICIJ with the agreement that ICIJ would pull together a team of journalists from multiple countries that could sift through the data from all angles.
ICIJ enlisted more than 140 journalists from 45 countries, including reporters from Le Monde, the BBC, The Guardian, 60 Minutes, Süddeutsche Zeitung and more than 45 other media organisations (including The Indian Express).
The reporters found the names of current and former politicians from Britain, Russia, Ukraine, Georgia, Kenya, Romania, India, Liechtenstein, Mexico, Tunisia, the Democratic Republic of the Congo, Zimbabwe, Rwanda, Paraguay, Djibouti, Senegal, the Philippines and Algeria, among others.
They found several people on the current US sanctions list, such as Selim Alguadis, a Turkish businessman alleged to have supplied sophisticated electrical goods to Libya’s secret nuclear weapons project; and Gennady Timchenko, a billionaire associate of Russian President Vladimir Putin and one of the main targets of sanctions imposed on Russian individuals and businesses in response to the annexation of Crimea and the crisis in eastern Ukraine.
The files do not state either Alguadis’ or Timchenko’s exact roles in relation to the Swiss accounts. A spokesman for Timchenko said the reasons for the sanctions were “far-fetched and deeply flawed” and that his client has “always been fully compliant with all tax related matters”.
Some clients linked to millions and sometimes tens of millions of dollars in their accounts are politically-connected figures such as Rachid Mohamed Rachid, the former Egyptian trade minister who fled Cairo in February 2011 amid the uprising against Hosni Mubarak.
Rachid, who is listed as having power of attorney over an account worth US$31mn, was convicted in absentia for alleged profiteering and squandering public funds.
Other names in the files include the late Frantz Merceron, the alleged bag-man for the late former Haitian President Jean Claude “Baby Doc” Duvalier, who was accused of having looted up to US$900mn before fleeing his country, and Rami Makhlouf, whose cousin and close associate, Syrian President Bashar Al Assad, over the past three years has helped cause the deaths of tens of thousands of his citizens in the country’s civil war.
Merceron is listed as an attorney on a US$1.3mn account belonging to his wife. Makhlouf is listed as a beneficial owner on multiple accounts. The files feature people who figure in legal proceedings, such as Vladimir Antonov, the former owner of English football club Portsmouth FC, who faces trial in Lithuania over an alleged €500mn bank fraud; Margulan Seisembayev, a Kazakh banker accused by the Alliance Bank of looting its assets; and Tancred Tabone, the former head of the Malta state oil company Enemalta, who is facing prosecution for allegedly demanding bribes.
In a statement, Tabone’s lawyer said his client denies all charges and added that he “has formally authorised the Swiss authorities to provide all that information. … His fiscal affairs in that respect are in order.” Antonov is listed as a beneficial owner on an account worth US$65mn. Seisembayev is listed as beneficial owner of multiple accounts.
In a reflection of the sheer variety of names in the data, others who appear are Li Xiaolin, the daughter of former Chinese Premier Li Peng, famous for his role in the Tiananmen Square massacre; Joseph Fok, a judge on Hong Kong’s highest court; and Prince and Princess Michael of Kent, the beloved cousin of Queen Elizabeth II of England and his wife.
The account that can be linked to the prince and princess was held in the name of their company, Cantium Services Limited. A representative for the couple said the account “never received nor held any funds” and was closed in 2009.
Li Xiaolin is listed, along with her husband, as a beneficial owner of an account that held US$2.5mn. Fok is listed as the holder of an account that was closed in 2002. They did not respond to requests for comment.
The files reflect a spectrum of royalty, from King Mohammed VI of Morocco to the Crown Prince of Bahrain, Prince Salman bin Hamad bin Isa Al Khalifa, to dozens of members of Saudi Arabia’s ruling family. Many were partial or full beneficial owners of accounts. The role of the King of Morocco was not specified.
Business figures and political donors from the US include the financier and philanthropist S Donald Sussman, whose account predated his marriage to Democratic Congresswoman Chellie Pingree of Maine; the billionaire owner of the Victoria’s Secret lingerie chain, Les Wexner, who in 2012 donated US$250,000 to a super PAC supporting former Republican presidential candidate Mitt Romney; and the Israeli diamond-dealing Steinmetz family.
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