Still struggling with the legacy of past tax evasion scandals, HSBC warned that it could be open to fresh penalties of as much as $1.5 billion from claims that its Swiss private bank arm helped clients circumvent their taxes.
The British-based bank has already made a $3.2 billion impairment for past misdeeds related to suspected client wrong-doing.
Various tax administration, regulatory and law enforcement authorities around the world, including in the US, Belgium, Argentina, India and Spain are conducting investigations and reviews of HSBC Private Bank (Suisse) and other HSBC companies in connection with allegations of tax evasion or tax fraud, money laundering and unlawful cross-border banking solicitation, the bank said, in its annual report.
HSBC noted that it continued to cooperate in ongoing investigations by the US Department of Justice and the US Internal Revenue Service regarding whether HSBC companies and employees, including those associated with HSBC Swiss Private Bank and an HSBC company in India, acted appropriately in relation to certain customers who may have had US tax reporting obligations.
In France, HSBC Swiss Private Bank reached an agreement with the French public prosecutor to resolve its investigation. Under the terms of the settlement, HSBC Swiss Private Bank agreed to pay EUR 300 million in fines and damages. The investigation into HSBC Holdings was dismissed without further proceedings.
The Belgian authorities have placed HSBC under formal criminal examination on similar grounds.
The Argentine tax authority has initiated a criminal action against various individuals, including current and former HSBC employees reflecting allegations of tax evasion and conspiracy to launder undeclared funds.
Elsewhere, the Indian tax authority has issued a summons and request for information to an HSBC company in India, alleging abetting tax evasion of four different Indian individuals and/or families.
All these cases have been recognised in a provision of $604 million, as of the end of 2017, the bank said.
Management’s estimate of the possible aggregate penalties that might arise as a result of the matters in respect of which it is practicable to form estimates “is up to or exceeding $1.5 billion, including amounts for which a provision has been recognised,” it said.
It cautioned: “Due to uncertainties and limitations of these estimates, the ultimate penalties could differ significantly from this amount. In light of the media attention regarding these matters, it is possible that other tax administration, regulatory or law enforcement authorities will also initiate or enlarge similar investigations or regulatory proceedings.”
Stuart Gulliver, HSBC’s outgoing chief executive declared the bank had moved on from the mistakes of the past.
"We have implemented global standards and financial controls to the highest levels," Mr Gulliver said on a media call, after its annual results. "HSBC is in a stronger and better position today to protect itself from bad actors than we were in 2010."
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