Former senior executives at HSBC later went on to take up positions in Ireland

Data on thousands of accounts were taken from Geneva-based bank

A team of journalists from 45 countries has unearthed secret bank accounts maintained for criminals, traffickers, tax dodgers, politicians and celebrities.

 

HSBC, which is one of the world’s most profitable banks, has been at the centre of a number of major controversies over recent years and has made provision to pay more than $1 billion in expected fines.

The bank regularly reports more than five times that amount in quarterly pre-tax profits. It is listed on the London, Hong Kong, New York, Paris and Bermuda stock exchanges.

Two top HSBC executives during the 2000s subsequently took up important work in Ireland in the wake of the bank crash.

Former HSBC chief executive Michael Geoghegan was commissioned by Minister for Finance Michael Noonan to produce a review of the National Asset Management Agency. And senior executive David Hodgkinson served as executive chairman and, subsequently, chairman of AIB before stepping down late last year.

HSBC paid a $1.9 billion fine in the US in 2012 to settle allegations it facilitated money laundering by drugs traffickers and allowed terrorists to shift money into the US banking system.

The bank was the subject of a major probe by the US Senate Permanent Subcommittee on Investigations, during which the idea of withdrawing the bank’s licence to operate in the US was aired.

In its findings in July 2012, the subcommittee said the bank’s poor money-laundering controls exposed the US financial system to a wide array of drug-trafficking and terrorist financing risks.

The subcommittee chairman, Senator Carl Levin, said HSBC used its American bank as a gateway to the US financial system for HSBC affiliates providing US dollar services to clients while playing “fast and loose” with US banking rules.

The US system was, as a result, exposed to “Mexican drug money, suspicious travellers’ cheques, bear share corporations and rogue jurisdictions,” Levin said.

“If an international bank won’t police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the US bank being used to aid and abet that illicit money.”

Mexican money

Among the issues examined by the probe were the movement of $7 billion in cash from the US HSBC affiliate in Mexico into the US HSBC bank, “raising red flags that the volume of dollars included proceeds from illegal drug sales in the United States.”

After the bank paid its record-making fine to settle allegations being investigated by the authorities in New York, the state assistant attorney general said that Mexican drug traffickers had deposited hundreds of thousands of dollars each day in HSBC accounts.

The controversy over the bank’s operations in Switzerland began after a former IT employee there, Hervé Falciani, took 65 gigabytes of data from the bank’s systems. The data later ended up with the French authorities.

The data on thousands of accounts belonging to more than 100,000 individuals and companies worldwide, was shared by the French authorities with other tax authorities around the world.

France has since alleged that the Swiss HSBC aided tax evasion by French citizens and companies, as has Argentina and Belgium. The amount of tax evasion and avoidance believed to have been revealed by the sharing of the data with world tax authorities is estimated to run into billions of euro.

The allegations made against the Swiss branch include using offshore entities to assist clients in evading tax. The Belgians are investigating up to 1,000 accounts, a good number of which involve diamond merchants based in Antwerp (HSBC at one stage bought a bank which specialised in this area).

Argentina has alleged that the bank used offshore entities to assist clients in tax evasion. The authorities there are looking at more than 4,000 accounts linked to Argentines, with the total sum involved being approximately $3 billion.

The amount of money allegedly being sheltered from the French authorities has been estimated at about $5 billion.

Allegations

HSBC has said it is co-operating with the authorities in France and Belgium in relation to the allegations. Last year it appeared to deny the allegations made by Argentina.

As well as the US money- laundering and Swiss tax scandals, the bank has also been associated with controversies surrounding the mis-selling of products and the rigging of foreign exchange rates. It has, as a result, had to invest hugely in what it has called compliance costs.

Last year the bank’s chief executive, Stuart Gulliver, said redress and fines arising from the scandals would continue to hit profits, but that the bank was “still phenomenally profitable and cash generative in spite of those things”.