On August 6, the Belgian Public Prosecutor’s Office announced that it had reached a €294.4 million (US$329 million) settlement with HSBC Private Bank SA (Switzerland) (Bank) to resolve a criminal investigation into allegations of tax fraud and money laundering.
The Public Prosecutor’s Office stated that this investigation began in March 2013 and led to searches at the Bank in October 2013. Subsequently, in 2014 an investigating judge charged the Bank with serious and organized tax fraud, forgery of documents and the use of false documents, money laundering, and illegal exercise of the financial intermediary position. The authorities’ suspicions were directed at two types of alleged wrongdoing by the bank:
- What the Public Prosecutor’s Office deemed the bank’s “many years of illegal intervention in Belgium with a view to attracting and managing the assets of a very well-to-do clientele, especially from the Antwerp diamond industry”; and
- “[K]nowingly promoting and even encouraging tax evasion by making offshore companies available to a number of its privileged customers, particularly in Panama and on the Virgin Islands, which have no economic activity and whose sole purpose is to hide the assets of their customers.”
The Public Prosecutor’s Office pointed out that “[m]ore than a thousand Belgian taxpayers could be involved for amounts that would amount to several billions of dollars that were invested, managed and / or transferred between 2003 and today,” and that “[l]arge amounts of money may also have been laundered.”
In connection with the settlement, the Public Prosecutor’s Office took note of the fact that the bank “has taken important measures to fully revise its structures, controls and procedures to adjust its risk profile.” Those include (1) recruitment of new general directors, a new director for compliance, and a new director for the fight against financial crime; (2) discontinuance of certain services, such as those related to offshore companies; (2) the bank’s separation “from many markets and customers” and introduction of “a policy of fiscal transparency towards existing customers.”
The Public Prosecutor’s Office noted that under the Belgian Code of Criminal Procedure, the Brussels City Council Chamber must review and approve the agreement, and indicated that it would be possible to have the Council review it in September 2019.
Note: This settlement is significant in its own right, as it is reportedly the largest criminal penalty in Belgium’s history. It also constitutes the second time within the last several months that Belgian authorities have sanctioned leading financial institutions for money laundering-related misconduct. On April 24, according to De Standaard, the Sanctions Committee of the Belgian Central Bank fined ING Belgium €350,000 for money-laundering violations relating to a Russian customer of the bank between 2000 and 2013. The Central Bank reportedly found that ING Belgium had done banking with that customer without having properly identified that customer or identifying why he was opening an account in Belgium as a non-resident of Russian nationality.
Anti-money laundering (AML) compliance teams at financial institutions doing business in the European Union (EU) should share this information within their teams and, as appropriate, to senior executives ta their institutions. Financial firms that pay attention to AML requirements in the largest EU countries, but neglect AML compliance in other EU countries, increasingly do so at their peril.