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HSBC Swiss Unit to Pay $192M to DOJ for Resolving Tax Probe

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HSBC Holdings’ (HSBC - Free Report) Swiss unit, HSBC Private Bank (Suisse) SA will be paying $192.4 million (£150 million) to the U.S. Department of Justice (“DOJ”). The penalty is related to a probe into allegations of helping its U.S. clients evade taxes. Markedly, the Swiss unit has admitted to the charges.

The amount is fully provisioned and thus, will have no adverse impact on HSBC’s financials.

Alex Classen, CEO of HSBC Private Bank (Suisse) SA, said “We are pleased to resolve this legacy matter. Over the past decade we have strengthened our compliance function, enhanced our control framework and put in place a comprehensive client tax transparency policy.”

The charges pertain to the Swiss unit’s business conduct between 2000 and 2010. The firm helped U.S. clients hide offshore assets and income, evade tax obligations, and file false tax returns with the IRS.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Department of Justice’s Tax Division said, “HSBC Switzerland conspired with U.S. accountholders to conceal assets abroad and evade taxes that every American must pay.”

In a “statement of facts,” HSBC’s Swiss unit accepted that it had helped more than 700 clients to hide nearly $800 million in assets from the IRS. The firm provided several traditional banking services like “advising clients to withdraw less than $10,000 to avoid reporting requirements,” and offering different type of cards to access funds, which aided clients to evade tax payments.

The company advised clients to transfer the money to off-shore shell companies. These companies — based in Liechtenstein, Panama and the British Virgin Islands — exist solely for tax-evasion purpose.

Other than HSBC, global banks like Credit Suisse (CS - Free Report) and UBS Group AG (UBS - Free Report) have also resolved tax evasion changes levied by the DOJ.

This is not the first time that HSBC’s Swiss unit has been prosecuted on similar charges. Earlier in 2017, the firm had paid €300 million ($330.6 million) to settle French investigation.

Encouragingly, the legacy dispute resolution will help HSBC to focus on core operations and improve operating efficiency amid a challenging operating backdrop.

Shares of HSBC on NYSE have lost 10.7% so far this year against the industry’s 4.4% growth.


Currently, HSBC carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked foreign bank is Barclays (BCS - Free Report) , holding a Zacks Rank of 2. The company’s earnings for the current year have moved 4.5% upward over the past 60 days. Its shares have rallied 18.4% year to date.

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