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HSBC faces tax fraud probe in India, other countries

In a fresh disclosure, British bank HSBC said that it was being investigated by tax and law enforcement agencies around the world, including India, the US, France and Belgium, for alleged tax evasion, money laundering and unlawful cross-border banking solicitation.
The bank has set aside $773 million to deal with the financial impact of these investigations.
“Various tax administration, regulatory and law enforcement authorities around the world, including in the US, France, Belgium, Argentina and India, are conducting investigations and reviews of HSBC Private Bank (Suisse) SA (HSBC Swiss Private Bank) and other HSBC companies in connection with allegations of tax evasion or tax fraud, money laundering and unlawful cross-border banking solicitation,” the bank said in its annual report. “As at December 31, 2016, HSBC has recognised a provision for these various matters in the amount of $773 million. There are many factors that may affect the range of outcomes, and the resulting financial impact, of these investigations and reviews. Due to uncertainties and limitations of these estimates, the ultimate penalties could differ significantly from the amount provided,” it added.
India investigations
In February 2015, Indian tax authorities issued summons and a request for information to an HSBC company in India. In August 2015 and November 2015, HSBC companies received notices alleging that the Indian tax authority had sufficient evidence to initiate prosecution against HSBC Swiss Private Bank and an HSBC company in Dubai for allegedly abetting tax evasion of four different Indian individuals and/or families.
HSBC Swiss Private Bank and the HSBC company in Dubai have responded to the show-cause notices.
BusinessLine had earlier reported that a scrutiny report by the RBI on the processes followed by HSBC’s India unit had revealed a number of inconsistencies in banking operations, including allowing a decoy customer to open a dubious account.
The RBI had concluded that HSBC may have possibly encouraged Foreign Exchange Management Act (FEMA) breaches by allowing certain customers to bank with offshore private banking locations despite not qualifying for the same.