French prosecutor publishes 300 million euro settlement with HSBC over laundering allegations

The French National Financial Prosecutor has just published its agreement with HSBC Private Bank (Suisse) detailing an investigation that followed allegations of money laundering and tax evasion. The bank has made a 300 million euros public interest court settlement, backed by HSBC Holdings.

“The agreement means finality for HSBC on historical issues. It recognizes that we have put a lot of measures related to financial crime in place since then,” a HSBC Holdings spokesman said.
As specified in the agreement with the National Financial Prosecutor of the Paris first instance court, HSBC Private Bank (Suisse) has paid 300 million euros, including a public interest fine of 158 million euros and damages to the French government of 142 million euros.

The bank has not signed up to any kind of compliance programme to follow up on this, the group spokesman said. The applicable French code of criminal procedure, however, imposes obligations that could have included submitting to such a compliance programme for up to three years.
In the agreement, the National Financial Prosecutor of the Paris first instance court says HSBC Group has declared it has put in place strict financial crime, regulatory compliance and tax transparency standards. The group has reinforced the enforcement of these rules through global compliance teams.

HSBC Private Bank (Suisse) has indicated in the agreement that it changed its senior management, with a new chief executive, a
new head of regulatory compliance and a new head of financial crime compliance. Numerous clients were shown the door and a tax transparency policy was established an implemented for existing clients, and the firm has ceased providing certain services to its clients such as “holdmail”.

As outlined in the agreement, the investigation opened in April 2013 at the request of the Paris Public Prosecutor. It related to allegations characterised as unlawful financial or banking solicitation of French prospects, organized money laundering of the funds received through illicit financial or banking solicitation and organized money laundering of the proceeds of tax evasion.

The investigation followed the seizure of electronic documents in January 2009 found within the French domicile of a former IT employee of HSBC Private Bank (Suisse). The HSBC Holdings spokesman said that stolen documents had given rise to events.

The investigations revealed that for several years, and in any event in 2006 and 2007, HSBC Private Bank (Suisse) had knowingly aided and abetted French taxpayers, who wished to avoid paying taxes. Certain bank employees had knowingly assisted clients, who were French taxpayers in concealing assets or income from the French tax authorities.

HSBC Private Bank (Suisse), through some employees, relationship managers and asset managers, advised numerous French taxpayer clients to transfer assets to accounts held in the name of offshore entities, many registered in the British Virgin Islands or Panama. The aim was in many cases to avoid the effect of the European Savings Directive, providing for a withholding tax for clients.

HSBC Group had established policies prohibiting assistance in tax fraud and providing for anti-money laundering rules. The HSBC group said it was run in a federated way, with many decisions taken at the level of each operating entity, and that up until 2010, its compliance culture was less developed than today.

HSBC Private Bank (Suisse) has not acknowledged any criminal liability.

Published 29-Nov-2017 by
 Alex Davidson, Regulatory Intelligence

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