HSBC sets aside $773 mn against global tax fraud probes

Global Banking major HSBC has set aside $773 million (Rs5,200 crore) on account of investigations being conducted by regulatory and law enforcement authorities across various jurisdictions including US, France and India on HSBC Private Bank (Suisse) and other HSBC firms in connection with allegations of tax evasion or tax fraud, money laundering and unlawful cross-border banking solicitation.

In its recently released annual report for the year 2016, the bank also admitted that in February 2015, the Indian tax authority issued summons and requested for information from a HSBC company in India (See: HSBC under probe in India over tax evasion, money laundering).

It further said that in August 2015 and November 2015, HSBC companies received notices issued by two offices of the Indian tax authority (HSBC transactions under probe in India), alleging that the authority had sufficient evidence to initiate prosecution against HSBC Swiss Private Bank and an HSBC company in Dubai for allegedly abetting tax evasion of four different Indian individuals and/or families.

The authorities have asked the HSBC companies to ''show why such prosecution should not be initiated''.

The bank clarified that both HSBC Swiss Private Bank and the HSBC company in Dubai have responded to the show cause notices.

The investigation in India is not a case in isolation as several jurisdictions are investigating the banks role in various cases. ''Various tax administration, regulatory and law enforcement authorities around the world, including in the US, France, Belgium, Argentina and India, are conducting investigations and reviews of HSBC Private Bank (Suisse) SA ('HSBC Swiss Private Bank') and other HSBC companies in connection with allegations of tax evasion….,'' the bank said.

These probes surrounding allegations of impropriety across various jurisdictions are likely to have a significant impact on the bank's balance sheet.

''HSBC is cooperating with the relevant authorities. As on December 31, 2016, HSBC has recognised a provision for these various matters in the amount of $773m,'' said the bank in its annual report.

The bank further disclosed that it has received requests for information concerning entities believed to be linked to Mossack Fonseca & Co, a Panama-based law firm. The issue had created a storm last year amid reports that hundreds of Indians had indulged in alleged tax violations via offshore tax havens with the help of Mossack Fonseca.

Meanwhile, the bank said that it is also cooperating in ''ongoing investigations by the DoJ and the US Internal Revenue Service regarding whether certain HSBC companies and employees, including those associated with HSBC Swiss Private Bank and an HSBC company in India, acted appropriately in relation to certain customers who had US tax reporting obligations''.