Daily Management Review

HSBC to pay record fine in money laundering case


The money laundering scandal at HSBC's Swiss arm has forced the British bank to pay a record fine to the Geneva authorities to escape a criminal inquiry in the country even while it is being prosecuted in other countries simultaneously.

British multi-national banking firm HSBC has been mandated by Geneva authorities to pay a record 27.8million pounds fine in the probe on money laundering at the bank’s Swiss subsidiary.
The bank has also been given a final warning by the authorities without any mandate for further prosecution or publishing of the probe findings. The fine is the biggest ever to be levied by the Geneva authorities for money laundering and the chief prosecutor in the case has called upon the regulators to reform Switzerland’s much popular and the very maligned secretive banking system.
HSBC was notified of the charges in April and had to reach a settlement with the authorities which would be close to the profits the bank obtained by processing the funds. The role of HSBC was revealed by the International Consortium of Investigative Journalists and subsequently the bank’s Swiss branch was raided. Sensitive data from around 30,000 accounts at HSBC's Swiss arm were leaked in 2007 to the French tax officials who later handed it on to the UK tax authorities. The bank’s evasion details reached the forefront in February, when the documents were released to press. It is noted that around 50 media outlets around the world have obtained the data and are currently rallying to bring out the details on their respective country’s nationals who had accounts with the Swiss arm of HSBC.
HSBC’s official statement on the fine said: “The investigation conducted by the public prosecutor of the canton of Geneva into HSBC Private Bank (Suisse) has been formally closed today. The investigation found that neither the bank nor its employees are suspected of any current criminal offences”. The bank also noted that there will not be any criminal prosecution meted out by Geneva authorities, mostly due to the way Swiss law has been framed on the matter of money laundering.
HSBC also independently settled an investigation by the Securities and Exchange Commission in the US by agreeing to pay a $12.5 million fine. The bank is now facing criminal charges in Belgium and Argentina. In France also the bank is under criminal inquiry and was ordered to post a bail of around $1.1 billion in April, which the bank declined. The French authorities estimate that around 3,000 French clients have used the Swiss arm of HSBC to illegally transfer money from 2006 to 2007.
The skeletons from HSBC’s closet has also created a stir in the Swiss parliament. The left-wing parties including the Green party and the Social Democratic party questioned the government on the efficacy of the Swiss Financial Market Supervisory Authority (FINMA).  The left-wing Social Democratic Party has also decided to submit questions to parliament about the scandal involving the Geneva branch of the British bank.

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