Crooked Swiss Bank HSBC Guilty Of Helping Brutal Dictators, Drug Traffickers, Arms Dealers


HSBC’s Swiss banking arm has spent several years under fire for doing what we all know Swiss banks always did. They knowingly helped people evade taxes, and they also helped many of the world’s worst people. The Swiss banking industry has always been very secretive and protective of its clients, and it took a major, investigative report and a whistleblower to bring what HSBC was up to into the light.

The darker side of HSBC’s clientele.

NPR confirms that sports figures, businesspeople, royalty, world leaders, and more, all around the world, have or had accounts with HSBC. But not all of their clients at the time this data went public were on the up and up. They also included brutal dictators, traffickers, arms dealers, and other criminals. HSBC made money off of some of the world’s worst atrocities. The documents cover a large time period, reaching up to 2007.

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A story by the International Consortium of Investigative Journalists (ICIJ), which is where much of this information is coming from, says:

Secret documents reveal that global banking giant HSBC profited from doing business with arms dealers who channeled mortar bombs to child soldiers in Africa, bag men for Third World dictators, traffickers in blood diamonds and other international outlaws.

The leaked files, based on the inner workings of HSBC’s Swiss private banking arm, relate to accounts holding more than $100 billion. They provide a rare glimpse inside the super-secret Swiss banking system — one the public has never seen before.

HSBC’s secrecy hid tax evaders, as well.

We’ve known for a long time that the Swiss banking system is one of the offshore tax havens that our own wealthy, here in the U.S., like to use to avoid paying their fair share in taxes. But, because HSBC is that secretive, they actually first insisted that the ICIJ destroy their information, rather than report it.

The French government got hold of some of this information in 2010, according to the Wall Street Journal, and shared it with other governments, leading to both prosecutions and settlements with people hiding money at HSBC. The data relates to more than 100,000 people in 200 countries who have some connection to the banks.

The ICIJ article reports that HSBC said that, back then, they did business on the assumption that it was their clients’ responsibility to accurately report their finances to their governments for tax purposes. If that were true, that would be one thing, and a major oversight on their part at worst.

The files, however, show that clients were actually advised on how to avoid their tax liabilities altogether. HSBC also took advantage of a tax loophole in the EU’s tax code that changed individuals into corporations for the purposes of avoiding paying their taxes.

Many of HSBC’s secretive clients are, or were at the time, major political donors.

Many of these people donate to Republicans and Democrats in the U.S., and to politicians and parties throughout Europe, too. Some of these people are even current and former politicians. Is it any wonder we’re having so much trouble crafting laws that will make these people actually pay their taxes? Americans want laws that will hurt the people who make the laws. The horror.

As the ICIJ points out, though, just having an offshore bank account is not evidence of wrongdoing. Despite the fact that there are over 100,000 names, not all of those people are guilty of even evading taxes, let alone some of the other things the ICIJ found. Whether they’re in the wrong depends on how they used their accounts, or even knew about them. For instance, some people have a connection to HSBC accounts through, say, a power of attorney, but don’t own or control the money that’s actually in the account.

Others, particularly celebrities, said there were accounts in their names that they were unaware of. There is an account in the name of John Malkovich that his representative said he knew nothing about. He believes that it might have something to do with the disgraced ponzi-schemer, Bernie Madoff, though, because Madoff handled some of his finances for him at the time.

Tax evasion on the scale of HSBC’s clients has serious implications for income inequality and national budget problems.

On the other hand, there are those who knew exactly what they were doing, and the implications there are terrible. The Frontier Group, a private equity firm, estimates that offshore tax havens cost states almost $40 billion in 2011, and cost the U.S. government as much as $150 billion. $150 billion in extra revenue, from taxes that are already owed (as opposed to new taxes) could go a very long way.

The same is true for clients the world over, and has huge implications for things like income inequality, too. The ICIJ quoted French economist, Thomas Piketty, as saying:

Financial opacity is one of the key drivers of rising global inequality. It allows a large fraction of top income and top wealth groups to pay negligible tax rates, while the rest of us pay large taxes in order to finance the public goods and services (education, health, infrastructures) that are indispensable for the development process.

And that’s just the effect of tax evasion. To help hide blood money, and help dictators and arms dealers finance insurgencies and wars, is unconscionable.

HSBC says that, since this data leak first began coming to light, they have changed their ways.

HSBC released a statement, after the ICIJ refused to destroy the data and their findings, which said, in part:

We acknowledge that the compliance culture and standards of due diligence in HSBC’s Swiss private bank, as well as the industry in general, were significantly lower than they are today.

They also said that they had “taken significant steps over the past several years to implement reforms and exit clients who did not meet strict new HSBC standards, including those where we had concerns in relation to tax compliance.”

It’s been illegal for banks in Switzerland to disclose data about their customers since 1934. That’s a culture that’s hard to change, and that law led to the situation we have today. Perhaps, though, with a data leak this huge, Switzerland will do something on its own to ensure that its banks help their clients comply with tax law, rather than evade it. It would also be nice if these banks stopped helping the worse people of the world.

Featured image via If You Only News

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