Friday, October 30, 2020

HSBC agrees to 300 million euro settlement of Belgian tax fraud case: prosecutors

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HSBC’s (HSBA.L) Swiss private banking arm has agreed to pay nearly 300 million euros ($336 million) to settle a tax fraud case in Belgium, Belgian prosecutors said on Tuesday, the latest blow for the Alpine state’s banking sector from the EU.

The settlement comes after a French court in February ordered UBS (UBSG.S), another Swiss lender, to pay 4.5 billion euros in penalties for illegally soliciting clients and laundering the proceeds of tax evasion.

UBS, which is under investigation in Belgium for a similar case, denies the charges.

Swiss banks have been exposed to such legal challenges since 2004, when Bern agreed to apply a European Union tax on the savings income of its lenders’ EU clients.

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The Belgian prosecutors said in a statement that HSBC was “charged by a prosecutor in 2014 for serious and organized tax fraud, forgery and falsification of records, money-laundering and illegal use of financial intermediaries.”

Related: Nigeria accuses HSBC of money laundering, helping to loot country

They alleged that HSBC helped and encouraged the avoidance of the EU savings tax by creating off-shore companies in Panama and other tax havens in the Caribbean for wealthy Belgian clients “with no other purpose but to hide money”.

A spokesman for HSBC declined to comment.

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The prosecutors also said that the bank had made and committed to a significant overhaul of its practices to counter financial crime risks following the allegations.

European Union governments have stepped up their pressure on banks and tax havens in recent years after a string of media revelations, including of the so-called Panama Papers, exposed tax avoidance and evasion schemes that helped the wealthy to avoid paying taxes in the bloc.

The Belgian prosecutors said that under the settlement, which needs to be endorsed by Belgian judges, HSBC had agreed to pay 294.4 million euros to the Belgian state for losses in tax revenues caused by the alleged illegal activities carried out by the bank since 2013.

The prosecutors estimated that money transferred to these financial vehicles could amount to several billions of dollars.

More than a thousand Belgian taxpayers could have used the illegal schemes set up by HSBC, prosecutors said, which also said the bank was mostly serving clients active in the Antwerp diamond business.

In addition to the tax fraud, the prosecutors’ statement said part of the illegal transfers could have involved money laundering without providing further details.

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