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HSBC List Shows Clients From Bowie to Drug Lords Banked on Secrecy

Sunday, 08 February 2015 09:49 PM

The private-banking unit of HSBC Holdings Plc made significant profits for years handling secret accounts for an array of criminals, from drug cartels and arms dealers to tax evaders and fugitive diamond merchants, according to a report released Sunday by an international news organization.

HSBC is among a handful of banks to face criminal prosecution in recent years for its role in a Swiss banking system that allowed depositors to conceal their identities, and in many cases dodge taxes or launder ill-gotten cash.

The report, prepared by the Washington-based International Consortium of Investigative Journalists, revealed for the first time the massive sweep of HSBC's private-banking arm as of 2007, when it controlled $100 billion in assets and served a swath of wealthy depositors from the elite to the illicit.

The report is based on a list of HSBC clients from around that time that a onetime employee took from the bank and turned over to European officials, sparking tax investigations from Argentina to France, Belgium and Greece. While some of the list's names have emerged before, Sunday's report drew from a more comprehensive list of accounts associated with more than 100,000 people and legal entities from more than 200 nations.

Depositors included royal families and convicted cocaine dealers, ambassadors and terror suspects, entertainers and elected officials, corporate executives and athletes. To these and other clients, the bank actively promoted its accounts as an efficient way to hide assets from tax collectors, according to the report.

'Radical Transformation'

HSBC, in a written response to the report, said its compliance efforts had been insufficient. It pointed out that the bank had undergone "a radical transformation" since 2007 and now enforced far more stringent reporting requirements.

"HSBC has initiated numerous initiatives designed to ensure that its banking services are not used to evade taxes or launder money," the statement said. London-based HSBC operates in more than 70 countries and has a private-banking unit located in Geneva.

The report said the bank held deposits for controversial figures such as the political operative for the late Haitian President Jean-Claude "Baby Doc" Duvalier, who was accused of embezzling hundreds of millions before fleeing his country, as well as fugitives like diamond dealers Mozes Victor Konig and Kenneth Lee Akselrod, whose names appear on the wanted list run by Interpol, the international police agency.

Putin Ties

Other depositors have appeared on U.S. sanction lists, including Russian oligarch Gennady Timchenko, a billionaire whose close ties to Russian President Vladimir Putin put him in the U.S.'s sights after Russia annexed Crimea. Anton Kurevin, a spokesman for Timchenko's Volga Group, declined to comment.

Disclosures about HSBC's clients are the latest blow to the Swiss private banking system, which once offered near- impenetrable privacy to depositors. Most countries don't forbid citizens from holding offshore accounts, and many are used for legitimate purposes. Among many entertainers who held accounts, according to the report, was rock star David Bowie, a Swiss citizen. It didn't accuse him of wrongdoing. A spokesman for Bowie didn't respond to emails seeking comment.

The accounts also attracted depositors eager to shield their money from creditors, ex-spouses, political opponents and law-enforcement agencies.

Diplomatic Pressure

Over the past several years, investigations by the Internal Revenue Service and U.S. Justice Department have used the threat of criminal prosecution and financial sanctions to pressure UBS Group AG and Credit Suisse Group AG to pay fines and turn over the names of thousands of depositors. Diplomatic pressure persuaded the Swiss government to enact stricter reporting regulations.

The HSBC leak began as a rogue operation by a computer technician, Herve Falciani, who left the company in 2008 with five disks of confidential information. A self-described whistleblower, Falciani provided details on the 100,000-plus accounts to French Finance Minister Christine Lagarde, now head of the International Monetary Fund. She passed details from the cache -- which came to be known as the Falciani List or Lagarde List -- to governments around the world.

When some account-holders' names emerged during the financial crisis, the narrative of banks helping the wealthy avoid taxes fueled political tensions, especially in Europe where many governments were preaching austerity and slashing social services.

Investigators in various European countries have said the information in the leaks has helped them collect billions of dollars in unpaid taxes. The IRS, which according to French officials also received the HSBC depositors lists, has declined to say how much in unpaid taxes it has recovered from HSBC depositors. In 2013, however, HSBC reached a $1.9 billion deferred-prosecution deal with the Justice Department to resolve claims it enabled Latin American drug cartels to launder money.

Royal Accounts

The ICIJ report also found that HSBC was a popular bank among royalty. Its clients included King Mohammed VI of Morocco, dozens of members of the Saudi royal family and Prince Salman bin Hamad Al Khalifa of Bahrain.

Chakib Laroussi, a media affairs adviser at Morocco's court, said he wasn't authorized to comment. On Wednesday, le360.ma, a Moroccan news site seen as aligned with royal perspective, published LeMonde queries about the king's accounts and cited a foreign exchange regulator saying they are ''perfectly legal and authorized.''

Bahrain and Saudi Arabia have no taxes to avoid, and it's legal in both places to hold foreign accounts. A spokesman for the Bahraini government said the crown prince's only connection to the HSBC account was through a minority investment in a regional hedge fund that deposited money there. He didn't control the fund's financial activities, and the Swiss account didn't provide any tax advantage, the spokesman said.

Industrial Espionage

Falciani has become a divisive figure in Europe and is called "the man who makes the rich tremble" by the French press. The Swiss government accuses him of trying to sell the purloined account information in Lebanon and is attempting to extradite and prosecute him on charges of industrial espionage and violating bank secrecy laws. Falciani has said his prosecution was part of an "agenda" by the Swiss government to protect banks.

The ICIJ, which partners with publications around the world, said it got access to the depositor list through its collaboration with the French newspaper LeMonde, which obtained them from sources in the French government.

HSBC has said it now accepts that part of its responsibility as a bank is to help ensure that its clients are law abiding and paying taxes and to close the accounts of those who aren't. "As a result of this repositioning, HSBC's Swiss private bank has reduced its client base by almost 70% since 2007," the bank's written statement said.

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The private-banking unit of HSBC Holdings Plc made significant profits for years handling secret accounts for an array of criminals, from drug cartels and arms dealers to tax evaders and fugitive diamond merchants, according to a report released Sunday by an international...
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Sunday, 08 February 2015 09:49 PM
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