HSBC pays penalty to avoid Swiss prosecution

Swiss prosecutors on Thursday closed an investigation into allegations British banking giant HSBC's Geneva branch helped clients evade millions of dollars in taxes, after the bank agreed to pay tens of millions in compensation.

HSBC pays penalty to avoid Swiss prosecution

“We ended the procedure following a deal with the bank, which will pay 40 million francs ($43 million),” Olivier Jornot, attorney general in the Swiss canton of Geneva, told reporters.
In a statement, the Geneva prosecutor's office said the bank had “rapidly agreed to begin paying an amount aimed at repairing the illegal acts committed in the past.”
Geneva authorities opened the probe in February as the so-called Swissleaks scandal exploded following the publication of secret documents claiming the bank assisted many wealthy clients in thwarting the taxman.
The agreed 40-million-franc compensation marks the largest amount ever paid in Geneva, Jornot said.
Geneva lead prosecutor Yves Bertossa meanwhile explained that “it is difficult to prove acts of money laundering. That is why we preferred to go with a negotiated solution.”
HSBC hailed the agreement, saying “the investigation found that neither the bank nor its employees are suspected of any current criminal offences.”
“The bank has fully cooperated with the investigation throughout and will not face criminal charges,” it said in a statement.
The bank insisted that it had in recent years “undergone a radical transformation,” and had “implemented numerous initiatives designed to prevent its banking services being used to evade taxes or launder money.”
Bertossa said no current employees at the HSBC Geneva offices would face prosecution, but did not rule out future probes of former employees.

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Switzerland’s banks remain among the world’s most secretive

Despite the progress made over the years, the Swiss financial sector continues to be one of the least transparent in the world. But there is good news too.

Switzerland’s banks remain among the world’s most secretive
Switzerland remains one of the world's least transparent nations. Photo AFP

Switzerland is in the third place in the 2020 Financial Secrecy Index released by the non-governmental organisation (NGO) Tax Justice Network (TJN), which rates 133 nations based on their financial transparency.

Two other European countries, Luxembourg and the Netherlands, are also ranked among the top 10 least transparent nations on the TJN’s list.

Despite being in the third place, Switzerland ranks better this year than it did in the previous edition of the Index, which is released every two years — it slipped from the first to third place. The Cayman Islands and the United States took the first and second spots, respectively.

Switzerland reduced its risk of being an offshore haven for tax cheats by 12 percent, “finally improving enough to move off the top of the index”, TJN said. 

READ MORE: Switzerland's strangest taxes – and what happens if you don't pay them

This improvement is mainly due to Switzerland extending its international network for the automatic exchange of customer information to more than 100 countries. 

Also, in a referendum held last year, Swiss voters accepted the Federal Act on Tax Reform and AVS Financing (TRAF). This legislation introduced major changes in the Swiss tax system by ending some preferential tax schemes and replacing them with new regulations which are in line with international standards.

This tax reform prompted the European Union to change Switzerland's status from ‘tax haven' to one which is EU-compliant, removing strict controls on transactions within the EU. 

So why, despite all the reforms, does Switzerland still rank among the world’s least transparent nations?

According to a Swiss NGO Alliance Sud, wealthy people from poor countries can still hide their money here from the tax authorities of their home nations.

Alliance Sud noted that despite the progress made in the past years by Swiss financial institutions, “the fight against tax evasion remains insufficient”.

Switzerland is the world’s biggest centre for managing offshore wealth, with a quarter of global assets invested here.

For years, it has been placed on various lists of tax havens where wealthy foreigners could park their money. Faced with widespread criticism for this practice, Switzerland passed an anti-money laundering law in 1997 and introduced strict regulations against tax evasion.