According to reports, Geneva Switzerland’s public prosecutor conducted a raid on the lakeside office of HSBC following a criminal inquiry being opened regarding allegations of aggravated money laundering. In just one week, this is the second time HSBC has been hit.
HSBC is the largest lender in Europe and after details surfaced to the media pertaining to the way its Swiss private bank assisted well-to-do clients avoid paying taxes, regulators stepped in. As stated by the Swiss prosecutor, after the allegations came out, an investigation into HSBC was launched but this could involve individuals as well.
In a formal statement, Yves Bertossa, the public prosecutor in Geneva confirmed that the bank’s premises were being searched in an effort led by Attorney General Olivier Jornot. In light of the allegations, customers and investors associated with HSBC received an apology over the failings of the Swiss business.
A spokesperson for the bank also stated that operations had been completely changed since the debacle. Even so, an investigation into HSBC’s current behavior would still be done.
Since 2008, HSBC’s Swiss unit has been a major focus. At that time, a former IT employee left Geneva with multiple files that reportedly prove client tax evasion. This information was passed onto tax authorities throughout the world by French officials.
As a result, officials in the United States started their own criminal investigation while magistrates in France put HSBC under formal investigation. Allegations are also being reviewed by authorities in Argentina, Belgium, and Austria.
HSBC’s private bank maintains operations in London, Hong Kong, and Switzerland while Peter Boyles, Chief Executive, works from the office in Geneva. At that location, several hundred people are still employed. In a statement from HSBC, the spokesperson claimed the bank is cooperating fully with authorities in Switzerland and have been since 2008 when data theft was unveiled.
In 2011, FINMA, a Swiss financial regulator, investigated HSBC, criticizing the bank’s internal controls. In a recent statement, FINMA said they were fully aware of what the prosecutor in Geneva is doing and have been in touch with HSBC regarding the new allegations.
The primary concern of HSBC is that authorities in the United States may reopen a deferred prosecution agreement with the bank from 2012. After it was discovered that HSBC had helped hundreds of millions of dollars in illegal drug money get through the US financial system, the bank was fined almost $2 billion.
As imagined, practices at HSBC and whether tax authorities have pursued wrongdoers hard enough has sparked a major political riff in Britain. Stuart Gulliver, Chief Executive with HSBC said that the new allegations are extremely painful and more than likely will overshadow annual results.
Both Gulliver and Douglas Flint, HSBC Chairman, are scheduled to testify on February 25 before British lawmakers regarding the Swiss scandal.