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Jessica Fino 15 Nov 2017 12:51pm

HSBC settles charges over French tax fraud

HSBC has settled charges with French authorities in an ongoing tax evasion case related to its Swiss private banking unit

Following a three-year investigation, French prosecutors ordered the bank to pay €300m (£269.7m) for helping clients evade tax.

HSBC's Swiss private bank was accused of offering hundreds of wealthy clients help in hiding cash and evading tax, after whistleblower Hervé Falciani leaked documents exposing the alleged wrongdoing.

Falciani, a former IT worker at HSBC, was convicted and sentenced to five years by a court over the biggest information leak in banking history, after he compiled a list of around 130,000 holders of secret Swiss bank accounts.

Switzerland’s federal prosecutor initially requested that Falciani receive a six-year jail sentence – the longest request to date – on the grounds of data theft, aggravated industrial espionage and violating commercial banking secrets.

The scandal saw HSBC’s group chairman Douglas Flint and group CEO Stuart Gulliver appear before the Treasury Select Committee (TSC) in 2015.

While Flint admitted to a “terrible list” of past wrongdoings, he and Gulliver insisted that Falciani had stolen the data.

The Parquet National Financier (PNF) said more than €1.6bn worth of assets was involved in the scheme and that the data was “discovered as a result of the seizure and the exploitation of computer documents found at the home in France of a former employee of HSBC in January 2009”.

One person familiar with the matter told the Financial Times, “This is finished provided the bank pays what they have to pay. I think they are going to pay very quickly and then the case is over.”

However, two former directors at the bank still face possible legal action, the PNF said.

HSBC said it was pleased to resolve the investigation and had “publicly acknowledged historical control weaknesses at the Swiss Private Bank on a number of occasions and has taken firm steps to address them”.

It added that the investigation regarding HSBC Holdings had been dismissed.

HSBC pointed out that this was the first agreement entered into under the Judicial Convention of Public Interest, which was introduced in France in late 2016. The new law determined that such an agreement did not entail any finding of guilt against the other party.

Earlier last month, Mark Johnson, former head of HSBC Bank foreign exchange cash trading, was found guilty in the US of nine counts of fraud, from which he and co-conspirators raised more than $7m.

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