NEUCHÂTEL, Switzerland — Founded in 1991 in London, HSBC Holdings Inc., the second largest bank in the world, has been lately the target of multiple critics around the world.
Since December 2008, many European countries including France, Belgium and England have been investigating on the documents provided by the now famous Hervé Falciani, a junior computer analyst from HSBC Private Bank in Switzerland. These leaks are said to contain sensitive data on bank accounts owned by over 130,000 wealthy individuals suspected to be tax evaders.
In 2012, the bank was harshly denounced and fined by the United States with the disclosure of sensitive data that proved HSBC's involvement in processing through Mexico drug-trafficking treasures. Further examinations also found information on bank accounts related to "high risk" clients such as former Egyptian President Hosni Mubarak, former Tunisian leader Ben Ali and Syria’s President Bashar. Even more shocking, three of the Saudi Arabian clients were also members of the “Golden Chain”, a list of twenty names that are known to have been closely related to Osama bin Laden.
These reports were initially silently kept in the hands of a few governments, but became public once the French newspaper “Le Monde” decided to publicize them in 2014, igniting what the media now calls the “Swiss Leaks” case. Ever since, thousands of tax evasion files have been pouring out and in February 2015, HSBC shamelessly apologized through adverts on national newspapers.
This case attained such attention not only for the shocking client base HSBC was serving but because 180.6 billion euros (approximately $195.1 billion) had escaped fiscal taxation by being transferred to Geneva on behalf of 20,000 offshore companies.
The system that left the world aghast was the most common employed for tax evasion purposes: the Swiss branch had been opening Swiss bank accounts hidden through fake offshore companies for wealthy individuals to benefit from Switzerland's advantageous taxation policies. They were consciously abetting individuals in defrauding their governments.
You might be asking why this is such a big deal for the French government since this kind of fraud occurs everywhere and all the time. The core issue is that Switzerland has the greatest amount of data for which the French government has been fighting throughout the past two decades now. And we are not talking about a couple of million euros. French institutions are in fact asking for more transparency concerning the fate of the approximate 4.5 billion euros, according to a member of France’s National Finance Committee, that are sleeping in those Swiss bank accounts.
Judging by these figures, it is reasonable to think that the French taxation system was deeply handicapped and pushed the government to launch a series of investigations in the hope of driving some of those illegal funds back to their original country. Some countries, like England were successful in doing so. The New York Times in fact, reported that the British national tax agency “clawed back 135 million British pounds (or about $201.8 million) from some of the 3,600 Britons identified as using the Geneva branch of HSBC”.
Unfortunately, the French government is yet to recover its treasures but has proceeded in putting HSBC under formal investigation for tax fraud.
What is important to acknowledge are the social implications of such robust tax evasion. One of the big issues arising is a fundamental one and regards social equality. The more money that flees fiscal legality the higher the disparity among individuals.
“Financial opacity is one of the key drivers of rising global inequality,” French economist Thomas Piketty said. “It allows a large fraction of top income and top wealth groups to pay negligible tax rates, while the rest of us pay large taxes in order to finance the public goods and services (education, health, infrastructures) that are indispensable for the development process."