A Federal Reserve official could not confirm Tuesday that the central bank has taken action against HSBC for its tax evasion activities in Switzerland, after US officials received evidence over four years ago that the bank was helping American clients engage in the illegal practice.
Maryann Hunter, a high-ranking Fed supervisor and and regulator, said that she couldn’t comment on ongoing investigations at a Senate Banking Committee hearing when questioned by Sen. Sherrod Brown (D-Ohio), but noted that the body has pursued three enforcement actions against the multinational bank.
Those actions, she said, pertained to enforcement taken in 2012 related to the Bank Secrecy Act and money laundering, a separate order issued in 2011 concerning mortgage practices, and a 2010 cease-and-desist decree pertaining to compliance risk management.
Brown, the ranking member of the committee, described the evidence of tax evasion–first reported by The Guardian, Le Monde, “60 Minutes” and the Washington-based International Consortium of Investigative Journalists—as providing the basis for “very serious accusations” and “in some cases, more than accusations.”
Hunter said that the Fed agrees with Brown’s assessment. The ranking members noted that members of the committee would be watching the body to determine whether it properly investigates the matter.
On Monday, Brown told The Guardian that he intended to press federal officials about “its actions–or lack thereof–upon learning of these allegations.”
“If the charges are true, the same institution that was first caught violating US sanction laws and laundering money for Mexican drug cartels could then escape accountability for promoting widespread evasion of US tax laws,” he said, referring to a $1.9 billion settlement the bank agreed to after it was caught facilitating black market industries.
Brown also stated that he intended on querying the Justice Department and Internal Revenue Service about how it responded when presented with information of HSBC’s tax evasion scheme.
The report on HSBC’s activities revealed that the bank helped customers with 30,000 accounts conceal about $120 billion in assets. Almost 10 percent of those accounts “were connected to the US,” The Guardian noted Monday, “providing the IRS with a trail of evidence of potential American taxpayers who may have been hiding assets in Geneva.”
Under examination from Brown, Hunter confirmed Tuesday that the Fed “generally may be aware”of other federal agencies’ investigations of banks but refused to comment specifically about the HSBC case.
“I take that to mean there’s a good chance that you have had this, that the Fed has had this information for quite some time,” Brown responded
The information pertains to activity that took place between 2006 and 2007, and was first provided in 2010 to French law enforcement officials by a rogue whisleblowing data expert. The French government subsequently made the IRS privy to the records. Federal officials from the Justice Department and the IRS have been probing HSBC since, The Guardian noted, “but the scale of those inquiries remain unclear.”
The same year that the data expert, Hervé Falciani, turned the sensitive information over to French officials, HSBC’s Swiss arm stopped doing business with US residents.
The story comes at an awkward time for the Obama administration. Its choice to be the next Attorney General, Loretta Lynch, oversaw the aforementioned money laundering and sanction-busting settlement while serving as US Attorney in Brooklyn.
As The Sentinel noted on Jan. 29, that deferred prosecution deal required HSBC to implement sweeping reforms in order to avoid criminal charges. The Justice Department is currently reviewing a completed independent report on the bank’s activities to determine if it complied with the terms of deal. Those conclusions will be made public in April.
During her confirmation hearing late last month, Lynch made a point of differentiating herself from current Attorney General Eric Holder, who has openly fretted about the macroeconomic consequences of bringing criminal charges against high profile Wall Street executives.
“No individual is too big to jail and no one is above the law,” she said.
