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February 13, 2015

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HSBC Again Under Investigation by U.S. Justice Department

U.S. authorities may revisit a 2012 deferred prosecution agreement with HSBC due to new allegations that the bank helped wealthy individuals hide money and evade taxes.

Over the weekend, an international group of media outlets reported on a massive cache of files showing how HSBC’s Swiss arm helped wealthy clients evade taxes and hide millions. Their activities included handing out untraceable bricks of currency and advising clients on how to conceal assets from domestic tax authorities. The files also reveal the names of prominent individuals with Swiss accounts, including royal families, politicians, former dictators, billionaires, athletes, and convicted drug dealers from around the world. In a written response to the report, HCBC admitted that its compliance efforts in the past were insufficient. However, they claim that the bank has since undergone “a radical transformation.”

The files were provided to various European nations in 2009, after an HSBC employee turned whistleblower. These countries shared the information with U.S. authorities. Recently, this whistleblower was indicted in Switzerland for violations of bank secrecy laws. He is currently living in Spain, which refuses to extradite him.

The Department of Justice has investigated several banks as part of its ongoing crackdown on offshore tax evasion. Most notably, several officials from UBS were criminally indicted in the United States, and the bank. Wegelin & Co., Switzerland’s oldest bank, shut down after pleading guilty to criminal charges in the United States, and some of its employees are also facing charges.

In 2012, HCBC agreed to pay a record $1.9 billion fine after it was found to have helped launder hundreds of millions of dollars for Mexican drug cartels. Senator Elizabeth Warren, a prominent critic of the 2012 agreement, has called for the government to “come down hard” on the bank, and British lawmakers also plan to open an inquiry.

Offshore Accounts/International Tax Disputes