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HSBC's Swiss private bank agreed to pay US$192.4 million in penalties and forfeiture to end a long-running inquiry in which it admitted to conspiring with US taxpayers to help them avoid paying taxes on as much as US$1.26 billion in undeclared assets, the US Department of Justice said on Wednesday.
HSBC Private Bank (Suisse) agreed to cooperate fully with the Justice Department and the Internal Revenue Service in the investigation and will enter into a deferred prosecution agreement in which it will avoid criminal charges if the Swiss unit shows "good conduct" for a period of three years.
The agreement is the latest in an inquiry that has stretched for more than a decade by US authorities and other countries into undeclared assets held by wealthy individuals and families in bank accounts in Switzerland.
The investigations have forced open the once secret world of Swiss banking after UBS agreed to pay US$780 million in 2009 and disclose names of wealthy American account holders as part of the US inquiry. It also has caused a number of Swiss institutions to stop servicing American clients.
"HSBC Switzerland conspired with US account holders to conceal assets abroad and evade taxes that every American must pay," said Stuart M. Goldberg, acting deputy assistant attorney general in the Justice Department's tax division.
It is also the latest settlement by HSBC Private Bank (Suisse) over undeclared assets. The Swiss private bank agreed to pay 300 million euros (US$332.7 million) in 2017 to end an inquiry by French authorities into tax evasion by French citizens and agreed in August to pay 294 million euros (US$326 million) to settle a criminal inquiry by Belgian authorities over similar conduct.
"We are pleased to resolve this legacy matter. Over the past decade we have strengthened our compliance function, enhanced our control framework and put in place a comprehensive client tax transparency policy," Alex Classen, chief executive of HSBC Private Bank (Suisse), said in a statement. "Today the Swiss subsidiary operates under new management and is focused on a smaller set of markets and clients."
As part of the agreement, HSBC's Swiss private bank will pay US$60.6 million in restitution, US$71.9 million in forfeiture and US$59.9 million in penalties.
The Justice Department said the penalty takes into account the fact HSBC self-reported the conduct, provided client identifying information to tax authorities, extensively cooperated and implemented remedial measures to protect against future use of its services to evade taxes.
The settlement comes as HSBC interim CEO Noel Quinn looks to put his stamp on the bank as he hopes to keep the top job permanently. Quinn is expected to unveil his strategic plan for the bank before it reports its annual results in February, but has already accelerated plans to cut costs at the lender and shaken up its top management.
HSBC Private Bank (Suisse) admitted to conspiring with its employees, US clients and others to assist US taxpayers in evading taxes and filing false tax returns between 2000 and 2010, the Justice Department said. At their peak in 2007, the undeclared accounts held US$1.26 billion in assets.
To conceal assets from US authorities, the Swiss private bank used a variety of methods, including code names, numbered accounts and accounts in names of nominee entities in the British Virgin Islands, Liechtenstein and Panama to conceal the true ownership of the accounts, the Justice Department said.
Bankers also travelled to the US to recruit and meet clients, including a trip by one banker to Design Miami, an art event in Florida, to seek new clients, the Justice Department said.
In 2008, after the US began a criminal investigation into UBS, HSBC Private Bank (Suisse) began restricting cross-border business with US clients, but did not immediately cease that business. In some cases, bankers assisted clients in closing their accounts in a manner that allowed them to continue to conceal their offshore assets, the Justice Department said.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.