Israel Was on The Map For HSBC Bankers Offering Swiss Tax Shelters

The huge tax fraud scandal at the Geneva branch of the world’s second-largest bank, HSBC, is making waves around the world, and its juicy details continue to make headlines.

We have learned recently that bankers from the Geneva branch held hundreds of secret meetings with clients and potential clients in 25 different countries, including Israel, and that the meetings were part of efforts to convince the clients to open accounts at HSBC’s Swiss branch, apparently without reporting the accounts to the authorities.

These work methods are no longer in practice, a senior Swiss banker told Yedioth Ahronoth this past week. “These procedures of holding secret meetings and offering help with tax evasion have disappeared almost entirely,” he said.

“Things started changing between 2009 and 2011, and the banks in Switzerland began sending letters to all their clients in which they explicitly instructed them to report their intentions to open a Swiss bank account to their tax authorities. Without producing confirmation of such a report, it would be impossible to open accounts for them in Switzerland. To the best of my knowledge, this procedure was put into effect at HSBC too.

“When Israeli clients were informed of this change,” he continued, “many of them moved their accounts to Hong Kong. If the tax authorities wish to check where Israelis are hiding unreported accounts, they should look in Hong Kong.”

According to French newspaper Le Monde, the HSBC bank had a special department called MEDIS (Méditerranée-Israël) that handled Israeli clients. The department ceased to exist, however, in 2013.

Reports published in the Swiss press last week indicate that between 2004 and 2005, HSBC bankers held meetings with at least 1,645 clients and potential clients in 25 different countries. The meetings took place at various locations, including the lobbies of the luxury hotels in Paris and Tel Aviv, a piano bar in Antwerp, an airport in the Congo, and a vacation home in Copenhagen.

According to the reports, HSBC bankers conducted dozens of meetings with existing and potential Israeli clients at the Hilton Hotel in Tel Aviv under the radar of the Israeli tax authorities.

Are such meetings legal? If they were held merely for the purpose of getting acquainted and exchanging small talk, then there is nothing illegal about them; but if they were held for the purpose of setting up accounts without reporting to the tax authorities, their legality is questionable. Authorities in only five of the 25 countries in which the meetings took place – the United States, France, Argentina, Spain and Belgium – have initiated legal proceedings against HSBC and its employees.

According to the Swiss newspapers, the bankers also used these meetings to offer clients various creative ways to avoid paying a standard European tax on their accounts in Switzerland.

The European tax went into effect in 2005, but because it applies to individuals only, the bank advised clients to set up front companies abroad and deposit the funds through them. The clients would also sometimes go in person to Switzerland and meet with HSBC bankers at its branches in Zurich, Lugano and Geneva.

The customers were scattered across 150 countries and the HSBC bankers managed their travel plans in keeping with the clients’ locations.

“The bankers who worked beyond the Swiss borders operated like secret agents,” Swiss newspaper Tages-Anzeiger reported, quoting a former employee at the bank. According to the employee, the bankers were sent on their missions to the target countries equipped with untraceable cellphones with which they could place calls to the office in Switzerland.

Take for example the work procedures with respect to one of the bank’s clients, a share trader from Belgium, as laid out in a January 4, 2005, memo from an HSBC representative to his managers: “The client must not be called. He is the one who always calls us. He mentions the names of soccer players Zidane and Cruyff so they know it’s him, and he asks about the price of caviar. The question means that the client wants to know the balance of the capital in his account.”

In the case of the Belgian share trader, the price of “caviar” was at its peak in 2007, when his account showed a balance of $1.249 billion.