HSBC files: Swiss bank hid money for suspected criminals

Documents detail customers who faced allegations including drug-running, corruption, doping and money laundering

This article is the subject of a legal complaint made on behalf of Anura Perera.

HSBC’s Swiss bank concealed large sums of money for people facing allegations of serious wrongdoing, including drug-running, corruption and money laundering, leaked files reveal.

Despite being legally obliged since 1998 to make special checks on high-risk customers, the bank provided accounts for clients implicated in six notorious scandals in Africa, including Kenya’s biggest corruption case, blood diamond trading and several corrupt military sales.

HSBC also held assets for bankers accused of looting funds from former Soviet states, while alleged crimes by other account holders include bribery at Malta’s state oil company, cocaine smuggling from the Dominican Republic and the doping of professional cyclists in Spain.

The Swiss bank also held accounts for “politically exposed people” – defined as senior political figures or their relatives at heightened risk of involvement in corruption, money laundering, or avoiding international sanctions – with little evidence of any extra scrutiny of their activities.

The bank’s involvement varies from case to case, the files show. Sometimes, the secret accounts appear to have been directly used for allegedly corrupt transactions. In others, HSBC continued to provide banking services to individuals facing public allegations of wrongdoing. Other examples merely highlight how the secrecy of the Swiss banking system attracted people engaged in wrongdoing.

Presented with this evidence by the Guardian, HSBC now admits that after it purchased the Geneva bank in 1999 “too many … high-risk accounts were maintained” and the “compliance culture and standard of due diligence” were low.

The bank refused to discuss the details of individual clients, but said it had taken action to address the problems. It had closed the accounts of people who could not demonstrate compliance with tax obligations, stopped offering accounts in jurisdictions where proper due diligence was impossible and tightened up its “know your customer” and anti-money laundering procedures to “ensure a more complete consideration of a new client’s source of wealth”.

This is not the first time HSBC has been criticised for failing to check its clients properly. In the US, a 2012 US Senate committee report was highly critical of HSBC’s poor money laundering controls, accusing managers of disregarding links to terrorist financing. They singled out the group’s dealings with wealthy Saudis.

One of the most striking cases detailed in the leaked Swiss files involves Kenyan businessmen Deepak Kamani and Anura Perera, whose accounts were kept open by HSBC despite them being named in a highly publicised anti-corruption report in 2006.

Investigator John Githongo, who later fled Kenya after ministers failed to support him, alleged the two men were the beneficiaries of contracts signed off by Kenyan politicians.

The HSBC files detail payments to their offshore entities, called First Mercantile Securities Corporation, Midland Finance & Securities Ltd, and Infotalent Ltd.

Notes on Perera’s HSBC records discuss a quarterly payment of “1mio” from the Kenyan government into his account, apparently delayed because of a shortage of state funds.

Separately, Kamani’s notes show the bank kept his account open despite the allegations: “We spent some time discussing the ‘compliance’ issue facing this account. The clients again reiterated that there was no substance to the press reports that have been appearing in the press over the past nine months. They mentioned that only UBS and HSBC had raised the compliance issue in any meaningful way.

“UBS have now closed the accounts for the client and the clients seemed pretty upset with this development. We explained to the clients that while we had discussed with compliance the issue, we continue to operate the account as has been normal over the past three years.”

Swiss and Kenyan investigators are still probing the deals. A spokesman for Perera denied any wrongdoing. Requests for comment to Kamani were not returned.

In another African corruption case, HSBC handled £20m in accounts controlled by Jeffrey Tesler, a small-scale London lawyer. Tesler, who was eventually jailed in the US, was fronting for the then president of Nigeria, General Sani Abacha, and other local politicians in a corrupt gas plant deal.

Tesler’s HSBC account for Tristar Investments Ltd had an obscure address in the Seychelles. He was publicly named as a bribery suspect in 2004. But in 2007, HSBC was still operating Tristar and Tesler family accounts.

In Malta, Tancred Tabone, ex-head of the state oil company, was charged in 2013 with alleged corruption dating back to 2005. Two HSBC accounts are named in the allegations.

HSBC also set up a Jersey offshore trust into which Tabone deposited $1m (£650,000). He planned to transfer in more funds, the bank wrote enthusiastically, noting “the potential is evaluated [at] over US$10m”, noting Tabone was “personally known by … HSBC Malta”.

Tabone’s lawyer said: “Insofar as the criminal proceedings are concerned, he denies all charges against him.” She added that Tabone has “formally authorised the Swiss authorities to provide all that information … His fiscal affairs in that respect are in order.”

The HSBC files also contain details of accounts held by other unsavoury individuals engaged in a broad range of activity.

Diamonds
The files show the bank provided services to a circle of African diamond traders who broke the law. They included Emmanuel Shallop, jailed for six years by an Antwerp court for importing illicit Angolan conflict diamonds in 2001-02. Shallop, also alleged to have dealt with Sierra Leone rebels, hid almost £2m in an HSBC account. Shallop had been named in connection with illicit diamond trading activities as early as 2001, in a UN report on conflict diamonds discussing his receiving payments “through a bank in Geneva”.

When he visited Geneva to switch cash into a Dubai-registered entity in 2005, HSBC openly noted: “The customer is currently being very careful, because he is under pressure from the Belgian fiscal authorities investigating his activities in the field of diamond tax evasion.”

HSBC also provided general accounts for directors of Omega Diamonds, a Belgian firm named in the same 2001 UN report. Two directors’ accounts contained at least £860,000 and £1.75m respectively. A third Omega shareholder was linked to general accounts with values totalling £47m.

The company paid $195m (£126m) to Belgian tax authorities in March 2013 after being found to have shifted profits from the import of misvalued diamonds from Congolese mines and Angola into Dubai.

Their lawyers say there was a civil, not a criminal, settlement of the tax dispute, which was with the Omega firm, not any of the three individuals.

“The tax settlement does not refer to or constitute any illicit activity on the part of Omega Diamonds and is based on the international principles of profit allocation,” the lawyers said. They added that neither the directors nor Omega “have admitted or been found guilty of any criminal wrongdoing, and the settlement with the Belgian authorities does not constitute any admission of criminal guilt.”

Belgian official sources say HSBC has now entirely shut down its special unit previously targeting diamond dealers, called Medis.

Banks
A number of east European bankers accused of misconduct were given Swiss accounts by HSBC. They include Vladimir Antonov, currently fighting extradition from the UK, who is accused of looting £400m from the Lithuanian Snoras bank.

HSBC files record Antonov as being “in negotiation to buy an executive jet”. Snoras assets of $63m (£41m) were also shifted into to an HSBC account, according to the leaked files. They were then used to back a loan to Antonov’s own Cyprus company, Panatrones Holdings. His lawyers said: “Mr Antonov is subject to several restraining orders and … injunctions.” They added that he held his Swiss accounts “for business reasons and because Swiss banks provide a better level of client care and are much more flexible than any UK banks”.

Margulan Seisembayev, a Kazakh banker, was accused by the Alliance bank in 2011 of misusing its assets, allegedly in an attempt to boost the bank’s share price. Offshore entities with HSBC Swiss accounts were allegedly used to obtain loans, and up to $184m was held by HSBC in Switzerland. Alliance announced in 2012 it would seek to recover its assets in civil proceedings both in Kazakhstan and overseas. Seisembayev did not respond to requests for comment.

A third banker is Sergey Maksimov, from Ukraine, who has faced attempts by the VAB bank in the UK and the US to recover $78m following allegations that he arranged loans to his own connected companies. Maksimov had almost $1.5m in an HSBC account in Geneva. His lawyer told us: “My understanding is that there are no criminal charges.”

In Greece, prominent businessman Lavrentis Lavrentiadis is facing trial in absentia for allegedly looting loans from the Proton bank and for attempting to murder a business associate with a bomb in a flower pot.

He was provided with two HSBC Swiss accounts worth up to $4m, for entities registered in the Bahamas and in the remote Pacific island of Niue.

Arms dealers
HSBC accounts also played a role in the notorious BAE corruption cases involving arms deals.

Turki bin Nasser, a member of the ruling Saudi family, and his “business manager”, the Lebanese politician Mohammad Safadi, had more than $60m of assets in HSBC accounts. Prince Turki, as head of the Saudi air force, was named in 2004 as the biggest secret beneficiary of a $92m BAE slush fund.

The arms giant oiled the wheels of the vast al-Yamamah arms deal with gifts, cars, holidays and cash. The UK’s Serious Fraud Office attempted in 2006 to access the Swiss accounts held by Safadi and others, but that led to a scandal when the then prime minister, Tony Blair, ordered the criminal investigation closed down.

In another case, BAE secretly passed $10m via HSBC to a local middleman, Shailesh Vithlani, to obtain a radar contract. “It stank and was always obvious that this useless project was corrupt,” protested Claire Short, the UK’s development secretary at the time.

BAE moved money into Vithlani’s Panama entity, Envers Trading Corporation. As the cash flowed in, an HSBC manager met Vithlani in Dar es Salaam, Tanzania, and advised him how best to invest it. BAE was subsequently convicted of accounting offences in relation to the Vithlani transactions, and paid a £30m ($46m) penalty.

In a third case, Fana Hlongwane – close to South Africa’s ANC government – was named in 2008 by the Serious Fraud Office as a confidential BAE agent. The SFO said in published statements sent to South African prosecutors that Hlongwane received BAE money through disguised offshore intermediaries to promote arms deals. The South African government decided not to pursue the case.

HSBC is now revealed to have operated Swiss accounts for Hlongwane as an agent for three other US multinational companies. They contained more than $10m in 2006.

In 2014, Hlongwane provided an affidavit to an inquiry into the contracts, denying “any evidence implicating myself and/or my companies in any corruption or wrongdoing”.

In a separate arms case unrelated to BAE, an Italian businessman of Syrian origin, Fouzi Hadj, was accused in 2003 by the UN and Human Rights Watch of gun-running for Liberian rebels.

His Guinean company, Katex Mines, had an HSBC account in which assets of more than $7m were hidden. The account was not blocked until May 2005 and closed in 2006. Fouzi was arrested in 2011 and sentenced to six years in Italy for a separate fraud.

Drugs
Drug-running was carried out by some HSBC clients, both in the Caribbean and in Mexico.

Arturo del Tiempo Marques was a Spanish property developer operating in the Dominican Republic and a valued HSBC customer controlling up to 19 separate accounts, which in 2006-07 contained assets equivalent to £2.5m.

However, one of his shipping containers of construction materials, sent from the Dominican Republic to Spain, was found in 2010 to contain more than a tonne of cocaine, hidden behind a false panel. He is currently serving a seven-year prison sentence in Spain.

Marques was one of a number of HSBC customers regularly making large cash withdrawals from the Swiss bank. In May 2005, he withdrew €55,000 (£40,000) in cash. Just two weeks later in June he took out $50,000 (£32,000). A few months later in December that year, he took out still more bricks of cash, totalling €60,000.

Because HSBC’s Mexican division allowed drug cartels to launder $881m (£572m) in cash, the bank has already paid $1.9bn penalties in the US in 2012. The bank even widened the windows at some of its branches so that larger boxes of money could fit through. The bank’s “stunning failures of oversight”, the US Department of Justice said, “caused it to be the preferred financial institution for drug cartels and money launderers.”

Doping
Another client with a lucrative sideline was Eufemanio Fuentes, from Spain – described in bank records as a “doctor for cyclists”. He was granted an HSBC account in 2003 for his British Virgin Islands offshore entity Codes Holding Ltd, an account which had amassed more than £200,000 by 2006.

However, as early as 2004, Fuentes was named among a group of doctors allegedly re-injecting racing cyclists with souped-up blood, the same practice Lance Armstrong admitted to last year after years of denial. Fuentes was raided in 2006 and eventually convicted in Spain of running a doping business through Codes Holding.

Waste disposal
UK waste disposal operator Adrian Kirby, who illegally conspired to spy on his environmental critics, was first interviewed by London police in February 2005. In May, he went to Switzerland to set up an HSBC trust structure registered in the Cook Islands that would “[p]rotect his assets from future creditors wishing to sue him personally” and from inheritance tax.

There is no suggestion that Kirby was using his Swiss account to engage in tax avoidance or evasion.

Later he moved £1m from the sale of the waste firm into his Swiss account, “as he wants to take all his cash out the UK asap. This is in relation to his official move out of the UK (residency in CH[Switzerland]).”

Two years later he was sentenced to six months in prison for conspiracy to intercept phone calls.