HSBC Holdings plc HSBC released a statement yesterday disclosing a formal criminal investigation initiated against it by the French magistrates. The probe pertains to the alleged wrongdoing by HSBC’s Swiss Private Bank in 2006–2007 related to tax matters.
Though no charges have been placed, HSBC has been asked by the French authorities to submit a bail amount of €1 billion ($1.1 billion). However, the bank considers these assertions “without legal basis” and the fine as “unwarranted and excessive.” Moreover, the bank plans to defend itself in any proceedings going forward.
HSBC’s Swiss unit has been hit by several probes and charges including the accusations of aiding wealthy clients to evade taxes and obscure assets worth millions of dollars. These claims were accepted by the bank after media reports were spurred by documents obtained by the French newspaper Le Monde from the International Consortium of Investigative Journalists (“ICIJ”).
The documents were handed over to the European law enforcement authorities by a former employee, Herve Falciani, which triggered the investigation. These files described incidents where HSBC‘s Swiss private banking unit regularly permitted its clients to withdraw a large amount of cash (mostly in foreign currencies), marketed schemes that enabled wealthy clients to avoid European taxes and colluded with clients to hide clandestine accounts from domestic tax authorities.
Depositors at HSBC‘s Swiss unit included royal families, convicted drug dealers, ambassadors, terror suspects, elected officials, corporate executives and athletes. Moreover, the company is already facing criminal investigations and charges in France, Belgium, the U.S. and Argentina, owing to the leakage of files.
Last year, the Swiss banking giant UBS AG UBS also had to shell out 1.1 billion euro imposed on it by the French authorities. UBS has been under investigations by the French authorities on potential charges of illegally soliciting clients in France to open Swiss accounts for hiding undisclosed wealth in the period between 2004 and 2012.
Currently, HSBC carries a Zacks Rank #5 (Strong Sell). Some better-ranked foreign banks include BBVA Banco Francés S.A. BFR and Grupo Financiero Galicia S.A. GGAL. Both these stocks sport a Zacks Rank #1 (Strong Buy).
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