By Noémie Bisserbe
PARIS--French magistrates have put HSBC Holdings PLC under
formal investigation as part of a widening probe into whether the
U.K. bank helped rich French people evade taxes, prosecutors said
Thursday.
Magistrates are looking into whether the bank helped recruit
customers in France, possibly breaching laws authorizing only
French-registered lenders to sign up customers in the country, and
was complicit in laundering the proceeds of tax fraud, said an
official at the French national financial prosecutor.
The bank has been asked to deposit a bond of 1 billion euros
($1.1 billion) to cover potential penalties, the official said.
HSBC said the French magistrates' decision was "without legal
basis" and the bond was "unwarranted and excessive." The bank said
it would appeal and "defend itself vigorously in any future
proceedings."
Any bail, should it be due, would have to be paid by June 20th,
according to a person familiar with the matter. This would probably
incur a provision in the company's forthcoming earnings, the person
added.
A deepening probe in France could be a fresh blow to HSBC, which
has been receiving unwelcome attention for years following a well
publicized data theft by a former employee and the opening of a
criminal investigation by U.S. authorities into its alleged aiding
of tax evasion. If condemned by the court, the bank could be hit
with a large fine or even lose its banking license in France, say
lawyers.
France is intensifying efforts to crack down on tax evasion as
the Socialist government of President François Hollande continues
to struggle to reduce its budget deficit in a stagnating economy.
French magistrates had already placed the Swiss unit of HSBC under
formal probe last November.
The French case is one of a number of legal snags hit by HSBC in
recent years, as its foreign clients have come under scrutiny for
evading taxes by keeping money in accounts potentially obscured by
Switzerland's bank secrecy laws. The bank's Swiss unit is currently
under U.S. Justice Department investigation, while last year a
Belgian judge filed formal charges against the bank alleging that
it helped wealthy citizens evade taxes by harboring their funds in
secret accounts.
In France, Swiss rival UBS AG is also under formal investigation
for tax fraud and money laundering. Prosecutors requested that UBS
pay a EUR1 billion bond in relation to the case.
While UBS filed an appeal saying the bail amount was
"unprecedented and unwarranted," France's highest appeals court
upheld the ruling last December. UBS has said it would take the
case to the European Court of Human Rights.
Judges are investigating whether UBS France facilitated a system
under which bankers from the parent company in Switzerland were
able to approach and sometimes encourage French clients to open
Swiss bank accounts that allowed them to evade taxes.
In June 2013, prosecutors had already pressed preliminary
charges against UBS's French unit, alleging that the bank helped
its parent company in Switzerland illegally recruit clients in
France.
Max Colchester and Rory Gallivan in London contributed to this
article.
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