HSBC’s Swiss compensation – not much for the bank but a big deal for Geneva
Chief prosecutor for canton’s decision to investigate despite inaction by other Swiss regulators shows power struggle within establishment
The £28m HSBC will pay in “compensation” to the Swiss authorities following a money laundering investigation may be no more than a drop in the lake for Europe’s biggest bank, but it is a big deal for Switzerland.
The man of the hour is Olivier Jornot, chief prosecutor for the canton of Geneva. In February, ten days after revelations in the Guardian and dozens of other newspapers about tax evasion at HSBC’s Swiss subsidiary, he ordered a raid on its Geneva offices. That process came to a conclusion on Thursday.
“We are not here to make a Guinness world record but this is the biggest sum ever collected by the canton of Geneva in a judicial matter,” Jornot told a press conference.
His decision to launch a probe in the face of almost total inaction by other Swiss regulators is the clearest manifestation yet of the power struggle within the Helvetic establishment, a battle for control that is slowly beginning to tear the veil of secrecy that has protected the country’s banking industry for generations.
With billions in illicit funds already moved out of the country following crackdowns in America and elsewhere, Switzerland appears to be inching towards reform. Earlier this month, the government began publishing the names of those suspected of tax evasion by their countries of residence.
Now, Geneva’s chief prosecutor has called for the power to bring his city’s bent bankers to justice.
Jornot said: “This affair demonstrates the weakness of Swiss law at the point where funds enter the system. When we have a law that doesn’t punish financial intermediaries accepting doubtful funds then we have a problem. This problem dates from long before the HSBC affair.”
The day before Jornot’s investigators swept through HSBC’s offices, Switzerland’s federal prosecutor Michael Lauber, who has a national remit, had given interviews saying it would be inappropriate for the state to take action against HSBC given the revelations were based on stolen data.
Remember, Switzerland has issued an international arrest warrant for the HSBC whistleblower, Herve Falciani. The French are refusing to hand him over, but a Swiss court is still preparing to try him in absentia.
Jornot’s investigators focused on HSBC’s compliance team – those responsible for ensuring its bankers followed the law. They seized files on some 20 customers, internal audits from 2004 to 2014, anti-money laundering manuals and the emails of those in the compliance team.
From this material they compiled four dossiers, concerning a racket to launder money from the trafficking of moroccan cannabis, another to launder money from Chinese mafia counterfeiters in Spain, and an un-named Mexican “well known to certain cartels”. The fourth case had been exposed by the Swissleaks investigation, coordinated by the International Consortium of Investigative Journalists.
The evidence was enough for the Swiss authorities to conclude that “organisational failings” at the bank were to blame for money laundering violations. Instead of embroiling his city in costly legal action, Jornot negotiated a “compensation” payment from HSBC, reflecting the wrong done to Geneva and profits made by the bank from illicit funds.
While this latest penalty is a drop in the ocean compared to the $1.9bn imposed on HSBC by the US Department of Justice in 2012 for similar offences, Jornot reckons he has secured a “bon deal”.
