HSBC Sheltered Cash Dictators and Arms Dealers

Academics conservatively estimate that $7.6 trillion is held in overseas tax havens, costing government treasuries at least $200 billion a year.

Secret documents reveal that global banking giant HSBC profited from doing business with arms dealers who channeled mortar bombs to child soldiers in Africa, bag men for Third World dictators, traffickers in blood diamonds and other international outlaws.The leaked files, based on the inner workings of HSBC’s Swiss private banking arm, relate to accounts holding more than $100 billion.

They also show private records of famed soccer and tennis players, cyclists, rock stars, Hollywood actors, royalty, politicians, corporate executives and old-wealth families.

The leaked account records show some clients making trips to Geneva to withdraw large wads of cash, sometimes in used notes. The files also document huge sums of money controlled by dealers in diamonds who are known to have operated in war zones and sold gemstones to finance insurgencies that caused untold deaths.

In a written statement, the bank had “taken significant steps over the past several years to implement reforms and exit clients who did not meet strict new HSBC standards, including those where we had concerns in relation to tax compliance.”

The bank added that it had refocused this part of its business. “As a result of this repositioning, HSBC’s Swiss private bank has reduced its client base by almost 70% since 2007.”

HSBC’s questionable tax tactics

The secret files obtained by ICIJ - covering accounts up to 2007 associated with more than 100,000 individuals and legal entities from more than 200 nations - are a version of the ones the French government obtained and shared with other governments in 2010, leading to prosecutions or settlements with individuals for tax evasion in several countries. Nations whose tax authorities received the French files include the U.S., Spain, Italy, Greece, Germany, Britain, Ireland, India, Belgium and Argentina.

(It’s not illegal in most countries to maintain offshore bank accounts, and being identified as holding an HSBC Private Bank account is of itself no indication of any wrongdoing).

The reporting by ICIJ and a team of media organizations from 45 countries go deeper into the dark corners of HSBC than a 2012 U.S. Senate investigation, which found that the bank had lax controls that allowed Latin American drug cartels to launder hundreds of millions of ill-gotten dollars through its U.S. operations, rendering the dirty money usable.

Later in 2012, HSBC agreed to pay more than $1.9 billion to settle U.S. criminal and civil investigations and entered into a five-year deferred-prosecution agreement.

An international cast of clients

The documents obtained by ICIJ are based on data originally smuggled away by a former HSBC employee-turned-whistleblower, Hervé Falciani, and handed to French authorities in 2008. Le Monde obtained material from the French tax authority investigation into the files and then shared the French tax authority’s material with ICIJ with the agreement that ICIJ would pull together a team of journalists from multiple countries that could sift through the data from all angles.

ICIJ enlisted more than 140 journalists from 45 countries, including reporters from Le Monde, the BBC, The Guardian, 60 Minutes, Süddeutsche Zeitung and more than 45 other media organizations.

Some clients linked to millions and sometimes tens of millions of dollars in their accounts are politically-connected figures such as Rachid Mohamed Rachid, the former Egyptian trade minister who fled Cairo in February 2011 amid the uprising against Hosni Mubarak. Rachid, who is listed as having power of attorney over an account worth $31 million, was convicted in absentia for alleged profiteering and squandering public funds.

Other names in the files include the late Frantz Merceron, the alleged bagman for the late former Haitian President Jean Claude “Baby Doc” Duvalier, who was accused of having looted up to $900 million before fleeing his country, and Rami Makhlouf, whose cousin and close associate, Syrian President Bashar al Assad, over the past three years has helped cause the deaths of tens of thousands of his citizens in the country’s civil war. Merceron is listed as an attorney on a $1.3 million account belonging to his wife. Makhlouf is listed as a beneficial owner on multiple accounts.

China Premier in the Net with the Prince of Kent

In a reflection of the sheer variety of names in the data, others who appear are Li Xiaolin, the daughter of former Chinese Premier Li Peng, famous for his role in the Tiananmen Square massacre; Joseph Fok, a judge on Hong Kong’s highest court, and Prince and Princess Michael of Kent, the beloved cousin of Queen Elizabeth II of England and his wife.

The account that can be linked to the prince and princess was held in the name of their company, Cantium Services Limited. A representative for the couple said the account “never received nor held any funds” and was closed in 2009. Li Xiaolin is listed, along with her husband, as a beneficial owner of an account that held $2.5 million. Fok is listed as the holder of an account that was closed in 2002. They did not respond to requests for comment.

The files reflect a spectrum of royalty, from King Mohammed VI of Morocco to the Crown prince of Bahrain, Prince Salman bin Hamad bin Isa Al Khalifa, to dozens of members of Saudi Arabia’s ruling family. Many were partial or full beneficial owners of accounts. The role of the King of Morocco was not specified.

Business figures and political donors from the U.S. include the financier and philanthropist S. Donald Sussman, whose account predated his marriage to Democratic Congresswoman Chellie Pingree of Maine; the billionaire owner of the Victoria’s Secret lingerie chain, Les Wexner, who in 2012 donated $250,000 to a super PAC supporting former Republican presidential candidate Mitt Romney; and the Israeli diamond-dealing Steinmetz family. The Wall Street Journal reported in 2007 that the Steinmetz family’s venture capital firm Sage Capital Growth paid generous allowances for speeches and other services to Rudy Giuliani, the former New York mayor lauded as an organized crime and corruption fighter who later unsuccessfully pursued the Republican presidential nomination.

Many of the accounts were held by companies in offshore tax havens such as the British Virgin Islands, Panama or in the remote Pacific island of Niue, rather than by the individuals who owned the money. Thousands more used de-identified, numbered accounts.

In the documents an HSBC employee refers to one of Australia’s most prominent corporate figures, Charles Barrington Goode, by his initials.

At the time of the note, Goode was the chairman of ANZ bank, one of Australia’s biggest. In his other role in politics, Goode was called by a senator during debate in the Australian Parliament in 2001 “a man who is the bag carrier, the fundraiser, for the Liberal party,” the current ruling party of the Australian Prime Minister, Tony Abbott.

Two foundations that Goode has been publicly associated with in Australia - The Cormack Foundation and Valpold Pty Ltd - gave more than Aus$30 million to the Victoria branch of the Liberal Party between 1998 and 2013, according to filings with the Australian Electoral Commission.

In another instance, an HSBC employee wrote this note in the file of Irish businessman John Cashell, who would later to be convicted of a tax fraud in his native country: “His pre-occupation is with the risk of disclosure to the Irish authorities. Once again I endeavoured to reassure him that there is no risk of that happening.” Cashell did not respond to requests for comment.

The documents record that day by day throughout 2005, clients arrived in Switzerland to make cash withdrawals in British pounds, Euros, Swiss francs, U.S. dollars, even Danish krone - sometimes asking for small used notes.

One of those being provided with cash supplies of dollars and euros was Arturo del Tiempo Marques, a property developer sentenced in 2013 to a seven-year jail sentence in Spain for smuggling cocaine. He controlled up to 19 HSBC accounts containing more than $3 million. He did not respond to requests for comment.

In one transaction, the British business tycoon Richard Caring, accompanied by security, was depicted in September 2005 collecting more than five million Swiss francs in cash.

Clinton Foundation

The files show Caring, a major donor to British politics, transferring $1 million to the Clinton Foundation, a nonprofit set up by the former U.S. President Bill Clinton with the stated mission to “strengthen the capacity of people in the United States and throughout the world to meet the challenges of global interdependence.”

The donation to the Clinton Foundation was requested in December 2005. The previous month, Caring funded a champagne and caviar extravaganza at Catherine the Great’s Winter Palace in St Petersburg, Russia, flying in 450 guests to be entertained by Sir Elton John and Tina Turner and addressed by Bill Clinton. The event raised more than £11 million for a children’s charity.

A number of other prominent donors to the Clinton Foundation appear in the files, including the Canadian businessman Frank Giustra and German motor racing superstar Michael Schumacher, a seven-time Formula One champion. A representative of Schumacher, who is listed as a beneficial owner of an account closed in 2002, told ICIJ that he is a long-term resident of Switzerland.

The records show Giustra is the only person listed in an HSBC account holding more than $10 million in 2006/2007, although his role in the account is not specified

The New York Times reported in 2008 that Giustra donated to the Clinton Foundation shortly after Bill Clinton accompanied Giustra on a trip to Kazakhstan in 2005. When they landed, Nursultan A. Nazarbayev, who has served for decades as Kazakhstan’s president, met his two visitors over a sumptuous midnight banquet.

The Times reported that Clinton made a public declaration of support for Nazarbayev that was at odds with the stance of the U.S. government and of Clinton’s wife, then-Senator Hillary Rodham Clinton, who had criticized Kazakhstan’s record on human rights. Two days later, corporate records showed, Giustra’s company won the right to buy into three state-owned uranium projects in Kazakhstan.

Both Clinton and Giustra told the Times that Giustra traveled with Clinton to Kazakhstan to see first-hand the foundation’s philanthropic work. A spokesman for Clinton told the newspaper that the former president was generally aware of Giustra’s mining interests in Kazakhstan but did nothing to help those interests.