HSBC Agrees to Pay $192 Million to Resolve Tax Evasion Scheme

In a move to resolve allegations of tax evasion, Swiss bank HSBC Private Bank has agreed to pay $192 million to the Department of Justice (DOJ) last week. The bank entered into a deferred prosecution agreement with the DOJ, admitting that it conspired with employees, third-party fiduciaries, and US clients to defraud the United States concerning taxes, commit tax evasion, and file false federal tax returns.

Allegations and Settlement

According to the agreement, between 2000 and 2010, HSBC Switzerland held approximately 720 undeclared US client relationships, worth more than $800 million at its peak in 2002. By 2007, the bank had amassed a staggering $1.26 billion in undeclared assets for US clients.

As part of the settlement, HSBC will pay:

• $60.6 million to the Internal Revenue Service (IRS) as unpaid taxes resulting from the tax evasion scheme.
• $71.85 million in gross fees earned on its undeclared accounts between 2000 and 2010, which will be forfeited.
• An additional $59.9 million in penalties.

IRS Whistleblower Program

The IRS Whistleblower Office offers rewards to informants who report tax evasion and fraud, allowing them to report allegations confidentially and have their identity protected. Eligible whistleblowers can receive up to 30% of the recovered funds if their allegations result in a successful prosecution.

Consequences of Tax Evasion

The case serves as a stark reminder of the risks associated with tax evasion schemes, particularly those involving Swiss banks. The US government continues to crack down on such activities, and individuals who engage in these practices can face severe consequences, including:

• Fines
• Imprisonment

HSBC’s settlement is a significant example of the consequences of engaging in illegal tax activities. It highlights the importance of compliance with tax laws and regulations, and serves as a warning to others considering similar schemes.