WASHINGTON DC — An international banking giant, HSBC, made huge profits by allegedly engaging in shady deals of over $270 million with some Zimbabwean citizens seven years ago, in the process, disadvantaging the poor southern African nation of the much-needed foreign currency, documents in Studio 7’s possession have revealed.
BY Ray Choto
These secret documents, obtained from French newspaper, Le Monde, by the renowned International Consortium of Investigative Journalists (ICIJ), a Washington-based journalist organisation with members from more than 65 countries, including Zimbabwe, cover bank accounts up to 2007 said to have allegedly belonged to 198 clients connected to Zimbabwe by birth, or residence, amounting to $272 million.
The account records also show that HSBC in 2006/7 had accounts holding about $102 billion deposited by individuals and companies from 203 nations, Zimbabwe included.
The dealings between HSBC’s Swiss private banking arm show what some banking experts in Washington, who requested not to be identified, described as “illegal behavior by the bank, especially in hiding millions of dollars from tax authorities the world over”.
Topping the list of individuals from Zimbabwe are politicians, doctors, businesspeople, farmers, sportspeople and what the document refers to as “housewives”, though further investigations by Studio 7 reveal that some of these so-called “housewives” are directors of private companies and trusts.
The documents reveal that some of the political figures include former and serving Zanu PF ministers, prominent businesspeople and sports personalities.
According to documents in Studio 7’s possession, clients allegedly travelled to Geneva to withdraw huge sums of money, and in some cases, some of them were said to have been advised by HSBC on how to take a range of measures to avoid paying taxes in their home countries.
For example, on January 27, 2005 a Zimbabwean client (name supplied) met HSBC staff in Cape Town and was advised on how to take $500 000 in cash to support his son’s credit card request. The son had to emigrate to California to supervise property investments there by the client.
Reacting to reports of these alleged transactions, former Finance minister Tendai Biti told VOA Studio 7 the suspected offshore banking by Zimbabweans indicate that the money did not come from a legal source.
“One cannot send money outside Zimbabwe without the central bank knowing. At the time the transactions were made, the Zimbabwean laws were very strict when it comes to foreign exchange.”
Biti, who is a corporate lawyer, said the economy was on its knees when the transactions were made.
“Most foreign currency was bought on the parallel market and it was difficult to trace it. Although there is no law that stops Zimbabweans from opening bank accounts in other countries, the law requires all residents to declare interest earned when filing tax returns.”
In response to ICIJ inquiry, HSBC, with head office in London and offices in 74 countries and territories in six continents, admitted that its compliance culture and standard of due diligence in its Swiss private bank, as well as the industry in general, were significantly lower than they are today.
HSBC added that it had taken significant steps over the past several years to implement reforms and exit clients who did not meet strict new HSBC standards, including those where it had concerns in relation to tax compliance.
The bank further said: “As a result of this repositioning, HSBC’s Swiss private bank has reduced its client base by almost 70% since 2007.”
Asked for comment, a former senior government official who requested anonymity said: “Every truthful person knows that the hyper-inflation in Zimbabwe was not just the result of money printing pinned on former central bank governor Gideon Gono’s door, but was also caused by a lack of foreign currency in Zimbabwe to buy raw material inputs for improved capacity utilisation by the private sector.”
The official, who is a Zanu PF member, said any form of externalisation of foreign currency into any foreign bank worldwide was a direct attack on Zimbabwe’s economy.
The official said the amount revealed in the Swiss account of HSBC was a tiny fraction of the estimated $4,5 billion in Zimbabwean money allegedly stashed in other banks in Switzerland, and almost up to $3 billion stashed in South Africa, Virgin and Cayman Islands, in offshore tax havens like Guernsey, Mauritius, Seychelles, Singapore, Malaysia, Australia, China and Dubai.
“Zimbabwean people and business operators are some of the most unpatriotic and crafty people on this planet when it comes to economic patriotism and the monetary love for their country.
“Given the chance, they would sell the country and stash the money very very far away from Zimbabwe itself,” the official said. Finance minister Patrick Chinamasa, was not immediately available for comment. Gono’s number was not reachable.
HSBC was fined $1,9 billion in 2012 by the United States’s Senate Permanent Subcommittee on Investigations for allowing drug cartels to launder hundreds of millions of ill-gotten dollars through its US operations.
lRay Choto is a member of the International Consortium of Investigative Journalists working with other ICIJ members on the HSBC