HSBC Charged with Being “Tax Evasion Service” for Int’l Criminal Ring

According to the analysis of clandestine files belonging to British banking giant HSBC, it appears that the Swiss banking branch of the conglomerate played a pivotal role in assisting affluent depositors evade taxes on their mega million. A report released on Sunday, Feb 8, by a cadre of  reporters representing the International Consortium of Investigative Journalists (ICIJ) indicated that HSBC provided accounts to international criminals, corrupt businessmen, politicians and celebrities.

“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,” ICIJ reported.

I24 News reported that the documents made public by the ICIJ which has ties with the US based Center for Public Integrity revealed that an “estimated 6,500 Israelis held about $10 billion in secret bank accounts at the Geneva branch of HSBC between 1988 and 2007; this ranked Israel as sixth in the list of countries with the most money hidden in the Swiss accounts.”

The Israeli daily newspaper Haaretz reported that “of the accounts which to belong to Israelis, 17 had more than $100 million, an estimated 200 had $10 million or more, and 1,350 had at least $1 million.”  The report added that of those individuals listed who had affiliations with Israel, only half of them had Israeli citizenship.

Among the well-known names mentioned in the report were Israeli-Canadian oil trader Jonathan Kollek, diamond dealer Benny Steinmetz, and celebrity Rabbi Yoshiyahu Pinto, according to the i24 report.

The ICIJ files also listed an estimated 40 meetings by HSBC bankers and their clients in Israel. These meetings would have put HSBC in violation of Israeli regulations.

“As a rule, the representative of a foreign bank that has no branch in Israel who comes here is prohibited from engaging in the activities conducted by a banking corporation, under the Banking Law (Registration),” Haaretz reported Yoav Soffer, a Bank of Israel spokesman as saying. “Nevertheless, from the Banking Law’s perspective, providing information or advice is permissible.”

In another interesting twist on the story, information has been released that the late billionaire banker Edmond Safra had sold “his holdings in Republic New York Corporation and Safra Republic Holdings (that specialized in private banking) to the HSBCt which took their “wealthy international clients” and transferred them to the HSBC private bank, which it established in Switzerland in 1999.” According to the ICIJ, Safra received $10.3 billion for his holdings.

Safra’s ancestors had established a banking industry in their native Syria and after moving to Brazil, the younger Safra established banks there as well as in Switzerland and the United States.

Subsequent to the sale of his Republic Bank holdings, information trickled forth from the bank that showed Safra was “linked to seven HSBC accounts, four of which closed between 1999 and 2006 and which held as much as $5.3 million by 2006-07.”  .

The data that was leaked also revealed that as of 2006-2007, “Safra’s wife Lily Safra had access to a numbered account set up less than a month after Safra’s death in 1999 and to various other accounts linked to her husband.”

One of the accounts held up to $5.3 million in 2006-07.

The lion’s share of Safra’s wealth was apparently kept in other financial institutions and this figure only represented a fraction of his great fortune,

Published reports indicate that a spokesman for Lily Safra told the consortium of international journalists that any accounts held by her or the Edmond J. Safra Foundation “would have been opened solely for normal, legal purposes of managing family and business matters”.

Safra died at the age of 67 in a bizarre fire at his luxury penthouse in Monaco, known as a tax haven for the rich. His American nurse was convicted for deliberately setting the fire, in the hopes of staging a rescue and becoming a hero. She was sentenced to ten years in jail.

Safra’s name appears with 60 other people being profiled as account holders at HSBC’s Swiss banking arm. The list includes politicians, businessmen, industrialists, an alleged arms dealer, diplomats, sports figures and celebrities.

Names in the files include people sanctioned by the United States, including Turkish businessman Selim Alguadis and Gennady Timchenko, an associate of Russian President Vladimir Putin targeted by sanctions over Ukraine.

Alguadis told the ICIJ it was prudent to keep savings off-shore, while a spokesman for Timchenko said he was fully compliant with tax matters.

Former Egyptian trade minister Rachid Mohamed Rachid, who fled Cairo during the 2011 uprising against former president Hosni Mubarak, is listed as having power of attorney over an account worth $31 million, according to the files. He did not respond to requests for comment from the ICIJ.

Other individuals named include the late Frantz Merceron, an associate of former Haitian president Jean Claude “Baby Doc” Duvalier, and Rami Makhlouf, cousin of Syrian President Bashar al-Assad. Makhlouf did not respond to a request for comment from the ICIJ.

Among the list of celebrities named were designer Diane von Furstenberg, who told the ICIJ the accounts were inherited from her parents, and model Elle Macpherson, whose lawyers told the ICIJ she was fully in compliance with UK tax law.

Motorcycle racer Valentino Rossi, listed as having $23.9 million in two accounts, said he had regularized his tax situation with Italian authorities.

Formula One businessman Flavio Briatore is connected to 38 bank accounts that held as much as $73 million between 2006-2007, according to the ICIJ.

The information is culled from files leaked to the French government by IT expert Hervé Falciani, a former employee turned whistle blower of the Geneva bank.  The information was shared with other countries in 2010, leading to a series of prosecutions for tax evasion.

The files were subsequently obtained by French newspaper Le Monde, which shared the information with ICIJ.

HSBC did not immediately respond to a request for comment, but told the ICIJ: “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.”

Richard Brooks, a former tax inspector, told the BBC: “I think they were a tax avoidance and tax evasion service. I think that’s what they were offering.”

HSBC Private Bank, the Swiss subsidiary of the British banking group, is under formal investigation in a French probe into tax fraud.

In 2012, HSBC paid a record $1.9 billion fine in a settlement in a money laundering case, after a US Senate investigation found it was used to launder hundreds of millions of dollars for Mexican drug cartels.