HSBC 2015 Annual Report Download - page 453

HSBC HOLDINGS PLC
451
Strategic Report Financial Review Corporate Governance Financial Statements Shareholder Information
Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of these lawsuits,
including the timing or any possible impact on HSBC, which could be significant.
Tax-related investigations
HSBC continues to cooperate in ongoing investigations by the DoJ and the US Internal Revenue Service regarding whether
certain HSBC companies and employees, including those associated with HSBC Private Bank (Suisse) SA (‘HSBC Swiss Private
Bank’) and an HSBC company in India, acted appropriately in relation to certain customers who had US tax reporting
obligations. In connection with these investigations, HSBC Swiss Private Bank, with due regard for Swiss law, has produced
records and other documents to the DoJ. In August 2013, the DoJ informed HSBC Swiss Private Bank that it was not eligible for
the ‘Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks’ since a formal investigation had
previously been authorised.
In addition, various tax administration, regulatory and law enforcement authorities around the world, including in Belgium,
France, Argentina and India, are conducting investigations and reviews of HSBC Swiss Private Bank and other HSBC entities in
connection with allegations of tax evasion or tax fraud, money laundering and unlawful cross-border banking solicitation. HSBC
Swiss Private Bank has been placed under formal criminal examination by magistrates in both Belgium and France. In February
2015, HSBC was informed that the French magistrates are of the view that they have completed their investigation with
respect to HSBC Swiss Private Bank and have referred the matter to the public prosecutor for a recommendation on any
potential charges to be brought, whilst reserving the right to continue investigating other conduct at HSBC. In April 2015, HSBC
Holdings was informed that it has been placed under formal criminal investigation by the French magistrates in connection
with the conduct of HSBC Swiss Private Bank in 2006 and 2007 for alleged tax offences, and a €1bn bail was imposed. HSBC
Holdings appealed the magistrates’ decision and, in June 2015, bail was reduced to €100m. The ultimate financial impact of
this matter could differ significantly, however, from the bail amount of €100m.
In Argentina, in November 2014, the Argentine tax authority filed a complaint against various individuals, including current and
former HSBC employees, alleging tax evasion and an unlawful association amongst HSBC Swiss Private Bank, HSBC Bank
Argentina, HSBC Bank USA and certain HSBC employees, which allegedly enabled numerous HSBC customers to evade their
Argentine tax obligations. In addition, the Argentine Congress convened a special committee to investigate similar allegations,
as well as issues related to allegations of Argentine income tax evasion more broadly. The committee issued its final report in
December 2015.
In India, in February 2015, the Indian tax authority issued a summons and request for information to an HSBC company in
India. In August 2015 and November 2015, HSBC entities received notices issued by two offices of the Indian tax authority,
alleging that the Indian tax authority had sufficient evidence to initiate prosecution against HSBC Swiss Private Bank and its
Dubai entity for abetting tax evasion of four different Indian individuals and/or families and requesting that the HSBC entities
show why such prosecution should not be initiated.
With respect to each of these ongoing matters, HSBC is cooperating with the relevant authorities in a manner consistent with
relevant laws. There are many factors that may affect the range of outcomes, and the resulting financial impact, of these
investigations and reviews, which could be significant.
In light of the media attention regarding these matters, it is possible that other tax administration, regulatory or law
enforcement authorities will also initiate or enlarge similar investigations or regulatory proceedings.
London interbank offered rates, European interbank offered rates and other benchmark interest rate investigations
and litigation
Various regulators and competition and law enforcement authorities around the world, including in the UK, the US, the EU,
Switzerland, South Korea and elsewhere, are conducting investigations and reviews related to certain past submissions made
by panel banks and the processes for making submissions in connection with the setting of Libor, Euribor and other benchmark
interest rates. As certain HSBC companies are members of such panels, HSBC has been the subject of regulatory demands for
information and is cooperating with those investigations and reviews.
In May 2014, HSBC received a Statement of Objections from the European Commission (the ‘Commission’), alleging anti-
competitive practices in connection with the pricing of euro interest rate derivatives. The Statement of Objections sets
out the Commission’s preliminary views and does not prejudge the final outcome of its investigation. HSBC responded to
the Commission’s Statement of Objections in March 2015, and a hearing before the Commission took place in June 2015. A
decision by the Commission is pending.
In addition, HSBC and other US dollar Libor panel banks have been named as defendants in a number of private lawsuits filed
in the US with respect to the setting of US dollar Libor. The complaints assert claims under various US laws, including US
antitrust and racketeering laws, the US Commodity Exchange Act (‘CEA’), and state law. The lawsuits include individual and
putative class actions, most of which have been transferred and/or consolidated for pre-trial purposes before the United
States District Court for the Southern District of New York (the ‘New York District Court’).
In March 2013, the New York District Court overseeing the consolidated proceedings related to US dollar Libor issued a
decision in the six oldest actions, dismissing the plaintiffs’ federal and state antitrust claims, racketeering claims, and unjust
enrichment claims in their entirety, but allowing certain of their CEA claims that were not barred by the applicable statute of