The Most Criminal Bank In The World [Script preview]

Intro

Secrecy can be a very powerful tool.

It can obscure some of the most heinous acts from the public.

It can make the most criminal enterprise look like a legitimate business operation.

It can safely hide any amount of illegal wealth without repercussions.

But sometimes, secrecy is leaky. And when the filth spills all over the floor for everybody to see, that's when we can notice something strange. In the face of undeniable evidence and the most severe charges, the same pattern repeats itself over and over again.

In the world of dirty secrets, one nation does things better than perhaps any other around the globe. This nation has made it its mission to offer the absolute best of the best in financial privacy for a very special clientele. And it is from this nation that a leaker would spawn who would blow the loudest whistle in the country's history.

This is the story of the most corrupt bank in the world.

The Heist

In September of 2001, when nothing else of significance was going on, a British banker was arrested for skimming £12million from celebrity clients in the Monaco branch of HSBC. Half of the siphoned money, came from Michael Schumacher, a top Formula One driver. The rest came from the other 19 similarly rich and high-profile clients of the British bank.

This incident was an embarrassment for HSBC, a financial behemoth looking to serve the richest customers around the world. To quickly recover, the management hired a new systems engineer to secure the bank's internal networks against such incidents in the future. The man chosen for this job was Herve Falciani.

After securing the Monaco branch, HSBC was happy with the results so they transferred Falciani to a much larger branch in Geneva. At first, the satisfaction was mutual. Faliciani arrived to Geneva in 2006 and immediately undertook the new challenge.

But then one faithful day, things would go full 180.

As he was working on a new customer-relations management system, Faliciani stumbled upon a security vulnerability. And it was a severe one. The bug started dumping all of HSBC's sensitive information, bypassing any access controls put in place to prevent such a thing from occurring. Herve could see full customer names and account numbers, confidential notes from staff meetings with clients, everything that could lead to sensitive banking information of the most high-risk clients at HSBC. Soon Herve realized he didn't just have access to one system. He could see the whole kingdom. Which became evident when he was even able to find a file on himself.

This is where Falciani should have reported the vulnerability to his superiors so that an internal security team could patch it up. But instead, he began collecting the data for himself and his branch colleague and a mistress Georgina Mikhael. It is not exactly clear how this heist transpired in reality, but in the end, Herve and Georgina had their hands on a list of 127,311 clients at one of the most secretive banks in the world.  https://www.lexpress.fr/economie/georgina-mikhael-manipulee-ou-complice-dans-l-affaire-hsbc_856233.html

It is not certain what their true intentions were. According to Georgina Mikhael's testimony, Falciani initially wanted to sell the data to one of HSBC's competitors. Falciani, on the other hand, framed Georgina as a double agent and that he was blackmailed by Mossad to sell HSBC's data to their client.

But this is what transpired later.

Falciani and Mikhael took on a trip to Lebanon where they found a client interested in the data. They booked the tickets using Falciani's wife's credit card, and Herve took on a fake identity of Ruben al-Chidiak to sound more Lebanese.

Herve and Georgina told the client they ran a legitimate data brokering business and that they got the bank's data from legal open source intelligence. But the Lebanese client was suspicious of the true legality of the data. Instead of purchasing it, they quietly reported the incident to the interbank alert system. In the security bulletin, they described a man named Ruben al-Chidiak travelling with his associate Georgina Mikhael with what appeared to be private client information from a Swiss bank. Looking at Georgina's real name, it wasn't hard to figure out to which bank this security bulletin was of concern. HSBC was alerted.

When Falciani and Mikhael returned to work in Geneva, they were questioned by their superiors at HSBC. Falciani denied any involvement, but Georgina spilled the truth. At this point, Falciani was on the run and when the bank officials went back this time accompanied by police to arrest him, he was headed towards the French border.

Upon request from Swiss authorities, the French police arrested Falciani and were ready to hand him over to the Swiss. But when questioning him, Falciani decided to bargain. He offered the police all of the information he just stole from HSBC that he claimed contained enough evidence to collect billions of euros in back taxes by the French government. In exchange, the French police would offer Falciani protection. And so the deal was sealed.

The stolen data were decrypted and the Falciani list was sent to France's finance minister Christine Lagarde. -> holy cow

The schemes

The Falciani list uncovered incriminating evidence of a global scheme that enabled tax evasion of $180 billion in just a few months. People on the list were known arms traffickers and drug smugglers, blood diamond traders and dictators. Among them were somewhat less criminal members of the political and economic elite, celebrities and sports stars. All trying to hide their assets from the public and many even from their local tax authorities.

The schemes revealed that HSBC wasn't just an unwitting vector. They were proactively implicit in them. The bank developed several methods to help their clients hide their assets.

HSBC actively used strict Swiss secrecy laws to reassure their clients that their assets were safe from the jurisdiction of their local authorities. But this wouldn't be enough for clients with not so legitimate intentions.

So the bank came up with a scheme they called "hold mail" accounts. A hold mail account was a service offered to wealthy customers that would function without any correspondence of any kind going between clients and the bank.

If a client wanted to make a deposit, they would physically meet their account manager in a public place and hand over cash in an envelope. Account holders would then use burner phones to receive confirmation of their deposit. But the clients would have no documents of any kind that would attest their account ownership.

There would be virtually no paper trail left that could tie an account to its owner. As many as half of HSBC clients would select the "hold mail" account service.

Still, there was yet another arrangement that would enable similar level of secrecy. This scheme was more corroborated in the Panama Papers, in which HSBC was also implicated.

According to this scheme, rather than opening accounts in their names directly, clients would be advised to first set up anonymous offshore companies and then open accounts at HSBC in their name. The bank would then help transfer their funds to the anonymous accounts, to prevent them from being traceable to the real names of their owners. This is how a former HSBC CEO in the UK held his £8m Kensington townhouse. This method worked so well even HSBC's top executives took advantage of it to hide their wealth.

High-value clientele

HSBC was very successful at attracting the highest value clientele from around the world. The list didn't contain just some random millionaires and businessmen. The Swiss bank accommodated the very top of the world's ruling elites. From royalty, through oligarchs to dictators.

Among them were the King of Morocco, the Crown prince of Bahrain and dozens of members of the Saudi royal family.

There was a Turkish businessman sanctioned by the US for supplying goods to Qaddafi's regime. Listed was also a Russian billionaire associate to Vladimir Putin, sanctioned at the time in response to Kremlin's annexation of Crimea.

The documents describe British billionaire Richard Caring once withdrawing five million Swiss francs in cash.

They also uncover a number of multi-millionaire donors to the Clinton Foundation. Some of whom were reported to have won favors for their donations.

The leaks also confirm HSBC moved millions for an arms dealer who was named by the United Nations as financing the bloodshed of the Burundian civil war in the 90s.

There was almost 2,000 names of people involved in the diamond industry, including those convicted of dealing in blood diamonds. HSBC had known about an investigation into one of their blood diamond clients, and they opened offshore accounts to help him evade authorities.

HSBC also serviced at least three people from the so called Golden Chain list of 20 names linked directly Osama bin Laden from Al-Qaeda.

And as the greatest irony in human history,  HSBC banked with the Interpol's Most Wanted and also with the president of Interpol's Foundation for a Safer World.

Looking at this list, it became clear very quickly that no single jurisdiction could nor should deal with it. Christine Lagarde, France's head of finance, decided to inform her foreign counterparts of governments whose tax residents figured on the list. The list was then splintered accordingly and sent through diplomatic cables around the world.

Some of this was leaking to the press. Leaks that happened at the outskirts of the global economic recession. The public, the tax authorities, and the media were all outraged.

HSBC was grilled, questioned, and investigated. But did any of this actually lead to anything?

Investigations

Well, let's look at how governments dealt with these damning revelations.

Greece

Let's start with Greece, because how they dealt with was utterly hilarious. The original doc sent to Athens contained about 2,000 Greek residents. But the first finance minister who got the list didn't recommend any prosecution. During later reshuffling of the cabinet, a new minister claimed the list was lost. When Greek authorities requested a new copy from Paris, a USB flash drive with a copy of the list suddenly resurfaced from a drawer of the minister's secretary.

But when compared, names of the minister's relatives that figured on the original were missing from the copy. But nobody took it seriously. Out of the 2,000 names, only 10 were given to prosecutors.

In 2012, a Greek magazine Hot Doc somehow obtained all 2,000 names and the editor decided to publish the list in full. Outrage of the Greek public ensued. And finally prosecution did step in. But the only person they arrested was the editor who published the list for violating privacy laws. As for the tax evaders on the list, the Greek tax authorities concluded that no investigation will take place since the information on the list was obtained illegally.

The case was closed, and other than that, two people from the list were found dead by suicide within five days and a quarter of the globe from each other.

Europe

In Spain, the government collected 260 million euros from 650 tax evaders but no legal action was taken against the HSBC itself. In the UK, out of the $61 billion deposited in HSBC, only 135 million pounds was recovered, and only one person was prosecuted. France did charge the bank, but before things went to court, a law passed in 2016 that allowed the bank to settle without trial. So HSBC only needed to pay 300 million euros and never admit to any guilt. Switzerland also charged the bank, but the fine was only $43 million. Which was less than what some of HSBC clients held on their accounts.

Falciani himself was prosecuted by the Swiss authorities and was sentenced to five years in prison for aggravated industrial espionage. It was the harshest sentence ever in the history of Swiss bank secrecy laws.

The United States

In the United States, the fallout from the Falciani list surprisingly lead to the most severe consequences for HSBC. The revelations ignited a further probe into the bank's operations which found HSBC laundered at least $7 billion for drug cartels.

The government immediately issued a fine of $1.9 billion, which was more than any other government's action resulted in. But at the time, HSBC had about $2.6 trillion in total assets so...

Yet, even here not a single person was charged. Instead, the bank and the government signed a five-year deferred prosecution agreement, in which HSBC had to promise to do better in exchange for not facing any charges.

Since the five years have long passed, did the bank actually done do better?

Well, the bank did so badly that the independent monitor that was sent to oversee HSBC's doing better grew so frustrated he just gave up and blew the whistle on everything. These revelations became known as FinCen files and have been largely publicized by most reputable journalistic publications.

HSBC continued moving hundreds of millions of dollars for Latin American drug cartels. They helped a bunch of Brazilian kleptocrats move $31 million from stolen government funds. They continued doing business with clients in money laundering investigations. And they helped Russian oligarchs by moving their assets to the West wiping their slate clean. The bank was found to have processed billions in transactions while filing reports with incomplete information about them.

Despite these leaks, the US government decided to do nothing and concluded the whole saga by letting HSBC go free without prosecution.

End

So what's the moral of the story? There is actually a lot learn from this. The HSBC saga reaffirms that it will always be the whistleblowers who will get punished for exposing the wrongdoing, not the wrongdoers themselves. But we already knew that because we've seen this exact same playbook since the Vietnam war.

We all live in a fantasy world where we pretend we are all equal under the law. When in fact there are double standards in everything. There are multiple systems of criminal justice and there are multiple systems of taxation. The government seems to be way too eager to go after the tax returns of the working class but willingly turns blind eye to multi-billion-dollar international schemes. It seems incomprehensible to even suggest that enablers of tax evasion and money laundering clients should be punished. Or that the clientele above a certain wealth threshold should face any repercussions.

It's almost as if massive financial fraud was a feature, not a bug. Meanwhile, you are being told if you are a good boy or girl, are honest and work enough, you too will make it to the top. When nobody actually at the top plays by the same rules as everyone below them.

Banks, the super-rich, the international criminals... they all know they can get away with it because they know the proletariat is no mood to do anything about it. The justice system won't stop them, the law enforcement won't investigate them, the legal system won't regulate them. Now the question - will do working class do anything about them?

One thing you can do, is support independent investigations and explainer videos like this by donating to my Patreon. Making these video essays takes a tremendous amount of time and effort, which my YouTube ad revenue doesn't appreciate at all. At this point, I am virtually dependent on your support. So... pretty please?