Swissleaks: there can only be a ‘before’ and an ‘after’ for the highly secretive world of Swiss private banking as the revelations on some of the seedier inner workings of an important name in that industry, HSBC Private Bank, the Washington-based ICIJ (International Consortium of Investigative Journalists) made public on its website on Sunday 8 February 10 pm CET – whilst its partners in the international press (mostly newspapers, some of which are prestigious names) started to publish a series of articles relating to the leaks – are likely to go down in history, for Swiss banks that is, as the equivalent of Snowden’s NSA whistleblowing revelations.
Screenshot of the ICIJ’s Swiss leaks: ‘Explore countries, people and stories’
The so-called ‘Swiss leaks’ are in fact a series of journalistic reports based on the computer data (65 gigabytes in all according to one source) that Hervé Falciani, a Franco-Italian national who worked as an IT technician at HSBC Private Bank in Geneva from March 2006 until December 2008, sneaked away on thousands and thousands of customers of the group’s Swiss private banking arm. The ‘Swiss leaks’ comprise not only bank account data (which a journalist affiliated to the ICIJ ‘project’ claims that in some cases they go back as far as 1988 and that they extend until April 2007), but also notes and reports drawn up by the private banking relationship managers at HSBC’s Swiss unit during the course of their professional activity in 2005. The articles that make use of this highly sensitive information are being published both on the ICIJ’s own website (in the format of multimedia reports and ‘stories’) and as traditional journalistic articles on the websites of the partner news organisations (e.g. The Guardian, Le Monde, Le Temps, etc).
The ICIJ, the self-described international consortium of investigative journalists, claims that it practises a form of ‘watchdog journalism, focusing on issues that do not stop at national frontiers: cross-border crime, corruption and the accountability of power’. Previous ICIJ investigations that centred on such topics include ‘Luxembourg leaks: global companies’ secrets exposed’, released on 9 December 2014, and ‘Offshore; secrecy for sale: inside the global offshore money maze’, started on 25 November 2012, amongst others. According to the consortium’s ‘about us’ page, the ICIJ’s aims are ‘to bring journalists from different countries together in teams – eliminating rivalry and promoting collaboration […] to be the world’s best cross-border investigative team’ and ‘to report, edit and produce ground-breaking multimedia reports that adhere to the highest standards of fairness and accuracy’.
What is sure is that the revelations have sent ripples through the banking and political worlds, not only in Switzerland but also abroad because of the global reach of HSBC’s activities – the group, whose headquarters are in London, has offices in 74 countries and some 52 million customers (source: HSBC). These ripples might turn into a fully-fledged political storm in many countries because the leaks revealed that several former or even current members of the political establishment of several countries had for the period under investigation one or several accounts at HSBC Private Bank. The ICIJ also discloses that political donors had bank accounts at HSBC’s Swiss private bank (its website gives several names) and even alleges that ‘HSBC Private Bank (Suisse) continued to offer services to clients who had been unfavourably named by the United Nations, in court documents and in the media as connected to arms trafficking, blood diamonds and bribery’ (it cites names and cases). For the UK, there is the possibility of a severe political fallout for the present resident at 10 Downing Street ahead of May’s general election. In its timeline of what it calls the HSBC files, The Guardian mentions the following series of events:
July 2010: The Financial Times reports that HSBC had asked the French courts to prevent the country’s tax authority handing files to HMRC [Her Majesty’s Revenue & Customs].
August 2010: The prime minister, David Cameron, meets with HSBC chairman Stephen Green ‘to discuss economic issues’.
September 2010: Cameron meets Green a second time ‘to discuss economic issues’. The government announces Green is to be appointed as trade minister. The business secretary, Vince Cable, says: ‘In Stephen we will be appointing a minister with a long career as a leading international banker, one of the few to emerge with credit from the recent financial crisis, and somebody who has set out a powerful philosophy for ethical business.’
Based on the information leaked by Hervé Falciani to the French tax authorities (who then passed it on to the French newspaper Le Monde, which in turn decided to work on the information with the ICIJ so as ‘to ensure that it would be treated as completely and accurately as possible’), several articles (for instance, ‘Swiss bank aggressively pushed way for clients to avoid new tax’, The Guardian, 10 February) also point out that relationship managers at the Swiss private banking arm of HSBC pursued a rather aggressive approach as regards helping its customers avoid taxes. In particular, to allow them to circumvent the EU-wide European savings directive (ESD) which had come into force in 2005, relationship managers at the Swiss arm of HSBC went as far as having their customers exploit a key ‘loophole’ in the new legislation, namely that it applied only to individuals, not to corporations (anything to do with the Luxembourg leaks?). So by setting up offshore vehicles in far-flung places such as the British Virgin Islands, the Bahamas or Panama (the usual culprits in such schemes), the customers of HSBC Private Bank who had accepted to do so did not have to pay the withholding tax on the income from savings interest (even though it would not have been much, if I dare say so). Of all the revelations made so far under the Swissleaks ‘project’, these are the most likely to lead to criminal prosecution in several countries, in my opinion.
This is not the first time that the UK-based banking group makes the headlines for the wrong reasons. In December 2012, HSBC agreed to pay a hefty fine of USD1.9 billion to the US to settle the Department of Justice’s probe into money laundering with Mexican drug cartels and breaches of US sanctions for having done business with customers in Iran, Libya, Sudan, Burma and Cuba. HSBC was thus able to avoid criminal charges (to the dismay of some very powerful voices in the US, for instance that of Elizabeth Warren), which would have cost the group its banking licence in that country. Last year, HSBC’s name appeared together with the names of 5 other banks as part of the probe conducted by the UK’s Financial Conduct Authority into currency market rigging, which could lead to aggregate fines of GBP2bn. Also in 2014, the Belgian and the French authorities announced investigations into money laundering and tax evasion at HSBC’s Swiss private bank. Authorities in Virginia (USA) have also initiated legal proceedings against HSBC over mortgage bonds claimed to have been fraudulently rated AAA and which were sold by several big banks (thirteen in all) to investors based in that state, including the Virginia Retirement System.
Anne Mette Skipper, ‘Switzerland, the banks and dirty money’, Sept. 2001
As for the Swiss banks, they have been afflicted by a much longer history of negative publicity with several ‘affairs’ having made the international headlines. Amongst many other such examples, one can mention the Chiasso scandal (illegal dealings with Italian tax dodgers) in 1976, various high profile cases of money laundering, the Jewish dormant assets, assets funnelled into Swiss banks by dictators or other ‘politically exposed persons’ (e.g. Marcos of the Philippines, Mobutu of Zaire, Abacha of Nigeria, ‘Baby Doc’ of Haiti, Ben Ali of Tunisia, Gbagbo of Ivory Coast, Mubarak of Egypt), UBS’s tax avoidance schemes for wealthy US citizens (as revealed by the whistleblower Bradley Birkenfeld), the same schemes at Wegelin & Co (which led to the demise of what had been Switzerland’s oldest private bank) and at Credit Suisse, and so forth.
Although in all fairness, one has to point out that the ‘ICIJ allegations have yet to be confirmed’ as Matthew Allen of Swissinfo.ch remarked and that the data and information leaked to the public go back to almost a decade (2007 at the latest) with HSBC Private Bank having cleaned up its act since then (drastic reduction in the number of accounts held at the Swiss bank, implementation of ‘a robust, sustainable anti-money laundering and sanctions compliance programme’, as cited in the bank’s press release), the so-called ‘Swiss leaks’ are bound to have a detrimental effect on assets under management (to the benefit of rival financial centres such as Hong Kong, Singapore, the Bahamas, Panama, I would expect) and subsequently on employment levels at Swiss banks, thereby accelerating the ongoing trend towards a lower contribution of banking to national GDP (roughly 10%). This trend is poised to gain further momentum when the final nails are hammered into the coffin of Swiss banking secrecy with the coming into force of the treaty on automatic exchange of information between tax authorities in 2018.
So why all the fuss over the ‘Swiss leaks’ now given that the data were handed to the French tax authorities already in late 2008 and that, for instance, both the UK and France have been able to impose fines (GBP130m and EUR180m respectively according to the FT and Le Monde) on their tax evading nationals who had accounts at HSBC Private Bank? I see two main reasons. One is that the ICIJ is keen to carry on with its agenda (leaking information that has to do with ‘cross-border crime, corruption and the accountability of power’, in keeping with its offshore and Luxembourg leaks) whilst probably hoping to have an effect on the outcome of the general election (Labour instead of Tories) in the UK (a major player in the world financial system) in May of this year. The second is that the partner news organisations were hoping to capitalise on the layperson’s resentment at the banks as a result of the financial meltdown of 2008-9 and the economic crisis that followed and that, therefore, they were prepared to engage in some bank bashing to grab readers’ attention at a time of socio-economic pain for many. Whatever the reasons, one thing is sure: if the banks behaved properly, there would simply be no need for such ‘leak reporting’ or ‘dirty laundry journalism’, however voyeuristic and morally reprehensible it may be.
The only response so far from HSBC to the allegations
Links to the main news organisations’ websites with ‘Swiss leaks’-related articles
- ICIJ’s ‘Swiss leaks’ website; FAQ (published on 12 February)
- The Guardian’s section, called the HSBC files
- The section at the French newspaper Le Monde
- The website put up by five Swiss news organisations (Le Temps, Le Matin Dimanche, L’Hebdo, Tages-Anzeiger, SonntagsZeitung), available at Swissleaks.net
Links to specific articles
- ‘Banking giant HSBC sheltered murky cash linked to dictators and arms dealers’, Swiss leaks, ICIJ, 8 February 2015
- ‘« SwissLeaks » : the backstory of a worldwide investigation’, Serge Michel, Fabrice Lhomme et Gérard Davet, Le Monde, 8 February 2015
- ‘«SwissLeaks», ou l’investigation commandée’, Myret Zaki, Bilan, 10 February 2015
- ‘Des fichiers Falciani aux révélations SwissLeaks’, Matthieu Hoffstetter, Bilan, 10 February 2015
- ‘La liste des évadés fiscaux d’HSBC en Suisse aurait été falsifiée’, Gérard Davet et Fabrice Lhomme, Le Monde, 23 July 2012
- ‘HSBC: quatre ans de tergiversations autour de fichiers controversés’, no author, Le Monde, 23 April 2013
- ‘Evasion fiscale chez HSBC : des personnalités françaises dans les fichiers suisses’, Gérard Davet et Fabrice Lhomme, Le Monde, 27 January 2014
- ‘La «liste HSBC» a permis au fisc de récupérer 186 millions d’euros’, Jonathan Parienté, Le Monde, 11 July 2013
- ‘HSBC revelations are an invitation to prosecute’, FT View, Financial Times, 9 February 2015
- ‘HSBC and Falciani: How it happened’, Matthew Allen, Swissinfo, 9 February 2015
- ‘MPs knew of HSBC Swiss tax evasion claims in 2011’, Patrick Wintour, The Guardian, 10 February 2015
- ‘Fugitives, aides and bagmen: HSBC’s “politically exposed” clients’, David Leigh, James Ball, Juliette Garside and David Pegg, The Guardian, 12 February 2015
POSTSCRIPT (15 February 2015)
HSBC has finally (almost a week later) issued a statement (an apology – ‘We must show we understand that the societies we serve expect more from us. We therefore offer our sincerest apologies.’ – available here)…the adjective ‘Swiss’ appears eight times out of four hundred and forty-seven words (according to Microsoft’s ‘Word count’). Could this be viewed as an attempt to deflect responsibility? 😉