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HSBC India mired in controversies after the Swiss Leaks
by Sushovan Dhar
24 March 2015

Following the Swiss Leaks implicating HSBC of actively promoting money-laundering and tax-heaven, the bank has hit the global headlines, but for wrong reasons. The trove of secret documents from HSBC Geneva reveals names of account holders and their balances covering over 200 countries for an amount totaling over $100 billion. But nowhere has the HSBC Swiss list kicked off a more intense political debate than in India.

The controversies and shady deals surrounding HSBC India operations dates four years back. In 2011, according to Sunday Times “HSBC India representatives are alleged to have advised New Jersey businessman Vaibhav Dahake to transfer money in batches of £6,500 to “stay below the radar”. The bank officials are alleged to have “advised and assisted” in tax evasion. Dahake admitted concealing undeclared bank accounts in 2011, but said bank representatives had solicited him to open accounts that paid high interest rates and would not be declared to tax officials. [1] Well, various others revelations seems to suggest that Dahake incident is not an isolated episode. Back in 2011 the US Justice Department sought an order from a federal court in San Francisco authorizing the Internal Revenue Service (IRS) to request information from HSBC Bank USA, NA about US residents who may be using accounts at HSBC India to evade federal income taxes. [2] In court filings the Justice Department said “HSBC bankers told prospective clients that, as a foreign bank, HSBC’s India operations wouldn’t disclose their accounts to the Internal Revenue Service. [3] In another case, Arvind Ahuja, was ordered to serve three years’ probation by the federal court in Milwaukee for filing a false tax return and failing to file a Report of Foreign Bank and Financial Accounts. Ahuja transferred millions of dollars from the US to undeclared accounts in India at HSBC, Europe’s largest bank. Ahuja earned $2.76 million in interest income on an HSBC India account that he didn’t report on his tax returns. [4]

The Indian newspaper, The Indian Express participated in a global project with the International Consortium of Investigative Journalists (ICIJ) based at Washington and the Paris-based Le Monde. The investigation disclosed the names of 1,195 HSBC Indian clients, approximately double the 628 names that the French authorities handed over to the Indian Government in 2011. The list contained the names of who’s who in Indian business or the “captains” of the Indian industry. The Ambani brothers - Mukesh and Anil, Anand Chand Burman, Rajan Nanda, Yashovardhan Birla, Chandru Lachhmandas Raheja, Dattaraj Salgaocar, Bhadrashyam Kothari and Shravan Gupta are among a few “dignitaries” who illuminate the list. The list also contains names of numerous top diamond traders of the country and a few other politicians. This new revelation has shocked the country with most of the the accused remaining tight-lipped about the charges. Later, the Ambani brothers and Jet Airways chairman Naresh Goyal, attempted to deny having illegal Swiss bank accounts. A number of Non-Resident Indians (NRI) and Persons of Indian Origin (PIO) like Swaraj Paul, members of Manu Chhabria’s family, Rajendra Ruia/Vimal Ruia and Naresh Kumar Goyal are also implicated.

Not being able to conceal this huge scandal, the government ordered the Income Tax department to conduct investigations on the bank. The Income-Tax (I-T) department has started what it calls an extensive survey of HSBC headquarters at Mumbai since February 20 and also, served a notice to the bank. Meanwhile, the Special Investigation Team (SIT) on black-money appointed by Supreme Court has also widened its probe into these cases after the recent revelations. SIT has as well, asked the Reserve Bank of India (RBI) to provide it with HSBC India’s financial transaction details for financial years 2011-12 and 2012-13 and also plans to ask the RBI for details of transactions over the last 15 years. The Income Tax department may file a complaint against HSBC Bank, Geneva, for abetting tax-evasion in India by operating unauthorized accounts of its citizens at its overseas branch. The department has already served summons on HSBC, London, on charges of unlawful cross-border banking and money-laundering.

Global Financial Integrity, a think-tank based at Washington, DC in its December 2014 report [5], finds that developing and emerging economies lost US$ 6.6 trillion in illicit financial flows from 2003-2012, with illicit outflows increasing at an staggering average rate of 9.4 % per year—roughly twice as fast as global GDP. The study “promoted” India to fourth place from the fifth place between 2013 and 2014 among the top ten developing economies with the maximum illicit fund leakages. India ranks only behind China, Russia and Mexico. During the decade ending 2012, GFI calculated that India alone had lost $439.59 billion. In 2014 alone, the loss totaled about $95 billion. [6] If $440 billion worth of illegal money is stashed abroad by Indians, an equivalent amount - if not greater - is circulating in India covertly. Put together, that’s just a little short of a trillion dollars. It is two-thirds of the size of the Indian economy, estimated to be around $1.5 trillion. The total size of India’s central budget for 2015/16 is 17.77 trillion rupees, or $287 billion.

It remains to be seen whether the Modi government summons up the courage to effectively deal with tax-evasion. It spoke a lot about it in its election manifesto assuring Indians that it would bring home back all black money stashed abroad in tax-havens. Several governments in past have also kicked a lot of furor - in the light of various scandals – about initiating stern measures to arrest black money, tax-evasion and money-laundering. However, none exhibited an iota of courage to take on the banks and the powerful industrialists. The Modi- government is keen to trumpet its success about forcing Swiss authorities. However, that is not true. Any credit for this revelation must go the ICJ and the French-Italian whistle blower Herve Falciani who leaked HSBC data as early as in 2008 and handed over information of 100,000 HSBC account-holders from more than 200 countries to the French authorities. The governments around the world has to only show a political will and act now!

Footnotes :

[1Second HSBC arm ’helped’ tax evaders stay below the radar, Jon Ungoed-Thomas and James Lyons, The Sunday Times, 15 February 2015,

[2Justice Department Asks Court to Allow IRS to Seek HSBC India Bank Account Records, April 7, 2011

[3Tax Crackdown Broadens : HSBC Pushed on Secret Bank Accounts in India Unit, Brent Kendall and Evan Perez, The Wall Street Journal, April 8, 2011

[4Doctor Spared Prison for Tax Violations Tied to HSBC Account, David Voreacos, Bloomberg, February 2, 2013

[5Illicit Financial Flows from the Developing World: 2003-2012, GFI, Washington DC, December 2014


Sushovan Dhar