WASHINGTON DC —
Further investigations into the inner workings at the scandal-ridden international banking giant, HSBC, have revealed what some banking experts in Zimbabwe have described as “unethical behavior by the financial institution in its dealings with some clients.”
The documents reviewed by Studio7, were obtained by the International Consortium of Investigative Journalists (ICIJ), from Le Monde, a leading newspaper in France.
They show how officials at the Swiss-based private banking arm of HSBC traveled to many countries, including Zimbabwe, to conduct business dealings with its clients, among them, politicians and other influential people.
The leaked records also show how clients across the globe made several trips to Switzerland and withdrew millions of dollars in cash that were then airlifted to other jurisdictions, dodging exchange control and tax compliance regulations in some countries.
The HSBC Swiss branch had over $100 billion in accounts belonging to individuals and firms from 203 nations, with Zimbabweans having deposited $272 million.
The accounts under investigation cover monies held in the global banking giant’s Swiss account belonging to more than 100,000 individuals and entities up to the year 2007. During this period, Zimbabwe’s economy was in tatters, with inflation pegged at 1,281 percent.
Banking executives in Harare told Studio7 that some of the accounts were set up from free funds (money earned outside a country’s normal trade activities), and were not subject to exchange control regulations.
But some banking industry experts are questioning the manner in which HSBC, which has headquarters in Britain and offices in 74 countries and territories in six continents, conducted some of its business with clients.
According to correspondence in the documents, one such meeting took place in Harare in 2005 to discuss an offshore account belonging to a Zimbabwean citizen, Frederick Mutanda.
Studio7 can confirm that at the time the meeting was held, HSBC was not licensed to do business in Zimbabwe. This is according to authoritative banking executives who spoke on the condition of anonymity because of the sensitive nature of the case.
During the meeting, Mutanda is said to have agreed to travel to Geneva in November 2005 “to define investment strategy after establishing a trust to protect his new family.”
Mutanda had two children from his first marriage, but according to the HSBC records, he remarried, and his wife, son and daughter lived in Barcelona at the time.
According to the records, the Harare meeting was a follow up to a telephone conversation between an unnamed HSBC official and Mutanda held on June 24, 2005.
The unnamed HSBC official, after going through voice recognition to confirm Mutanda’s identity, the conversation is alleged to have begun with Mutanda confirming that he would travel to Geneva to review investments, currency allocation and set up a trust for his new family.
During the Harare meeting, Mutanda is said to have indicated that he would keep his “VW dealership and pharma activities in Zimbabwe. The bank official wrote that “his currency exchange activity (Western Union representation) is down due to hyperinflation in Zimbabwe.”
Contacted by VOA, Mutanda, who, according to the documents, had $1,005,766 in his HSBC account covering the period up to 2007, said he did not have an account with HSBC, adding “actually they denied doing business with me.” Asked whether he met with an HSBC official in 2005, Mutanda said, “I don’t know, that’s a long time ago.”
In a follow up discussion last week, Mutanda said he was a private individual, and that the allegations against the bank were the bank’s problem, not his.
Asked again whether he met an HSBC official in Harare in 2005, Mutanda said HSBC was licensed to do business in Harare and that his private dealings with the bank were not of public interest. “This is an invasion of my privacy. I cannot allow somebody to infringe on my rights. I have rights and banks are also bound by client confidentiality agreements,” said Mutanda.
A senior banker in Harare, who declined to be named because of the sensitive nature of the matter, dismissed Mutanda’s claim that HSBC is licensed to deal business in Zimbabwe, saying the global bank was not registered in Zimbabwe.
“HSBC isn’t licensed to do business in Zimbabwe. But it can have clients from anywhere in the world at its branches anywhere in the world,” said the banker. He added that it wouldn’t be appropriate for HSBC to come to Zimbabwe to discuss offshore accounts as this would be tantamount to encouraging externalization unless the central bank was involved in moving the funds out of Zimbabwe.
Former finance minister and Harare East lawmaker, Tendai Biti, told Studio7 that one could not send money outside Zimbabwe without the central bank knowing.
Responding to a request for comment by ICIJ, HSBC said: “We acknowledge that the compliance culture and standards of due diligence in HSBC’s Swiss private bank, as well as industry in general, were significantly lower than they are today.”
The bank said 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.
HSBC Private Bank (Suisse) SA board chairman, Andreas von Planta, and the bank’s chief executive officer, Franco Morra, wrote last month to clients informing them that “certain media organizations, including the International Consortium of Investigative Journalists, have gained access to the stolen client information through an unknown third party. A number of clients have informed us that they have been contacted by the press in an attempt to obtain information concerning their private financial arrangements.”
The letter added that HSBC “has retained leading litigation lawyers who are advising us on if and how it is possible to restrict the publication of confidential client information. Despite these efforts and our engagement with the media, there is a risk that historic client data may appear in the public domain.”
The executives concluded their letter by assuring clients that “we will continue to take all reasonable steps to minimize the impact of the media’s potential intrusion into your privacy. We sincerely apologize for any inconvenience caused.”
The Swiss branch of HSBC was raided Wednesday by Geneva prosecutors who announced a criminal investigation into the accusations the bank was laundering money.
VOA reported Wednesday that the prosecutors were investigating criminal charges of “aggravated money laundering” against the bank, but stressed the probe could be broadened to include “physical persons suspected of committing or participating in acts of money laundering.”
On Sunday, HSBC published full-page adverts in British newspapers apologizing over the Swiss leaks.
The British treasury committee is reported as having shown interest in conducting an inquiry into tax dodging claims, while the country’s Financial Conduct Authority is already looking into the matter.
$1.9 MILLION FINE
The US, which fined the bank $1,9 billion in 2012 for allowing Latin American drug cartels to launder hundreds of ill-gotten dollars through its US operations, says new investigations will be carried out in the wake of the Swiss leaks.
Efforts to get comment from finance minister, Patrick Chinamasa, were fruitless as the minister was not picking up his mobile phone.
But Zimbabwe central bank governor, John Mangudya, said he was worried by the revelations. He said the country had put in place measures to recover the externalized funds. Mangudya told Studio7 that of the $108 million externalized funds the reserve bank had ruled out as irrecoverable last year, $68 million had been repatriated to the country.
According to Mangudya, the measures put in place included amnesty to individuals who violated exchange control regulations before 2010 and encouraging those who externalized funds to close their off shore accounts and bank their money in Zimbabwe.
WHO IS MUTANDA?
Mutanda, a former Zipra commander, served as a personal bodyguard of the late Joshua Nkomo, the leader of Zapu. Zipra fought alongside President Robert Mugabe's Zanla forces during the liberation war which ended in 1979.
When Zapu and Zanu PF united in 1987, Mutanda automatically became a Zanu PF member. The unity agreement ended atrocities in the Midlands and Matabeleland provinces that left more than 20,000 people dead, according to a report by the Catholic Commission for Justice and Peace.
Investigations by Studio7 have established that Mutanda, who is chairman of CAPS Holdings, is also a director of many companies in Zimbabwe.
Last year, one of the companies CAPS Holdings has shares in, QV Pharmacy, was placed under provisional judicial management by the High Court, citing abuse of funds by Mutanda. The final determination has been scheduled for April.
Another court order was made last year by the Constitutional Court to have the business executive’s trial on charges of breaching the exchange control regulations done by the regional magistrate.
EXCHANGE CONTROL CASE
Mutanda had applied for a permanent stay of prosecution in the exchange control case, but that application was dismissed by Chief Justice Godfrey Chidyausiku.
Mutanda, who is also the owner of FCA Motors and a Western Union representative in Zimbabwe, is facing charges of fraud and theft involving more than $25 million for allegedly conniving with a colleague and defrauding CAPS Holdings after taking 50 dossiers of critical drugs manufactured by CAPS Private Limited and registering them in Europe under CAPS International.
Two years ago Mutanda appealed to Zimbabwe President Robert Mugabe to intervene and save the country’s pharmaceutical giant from complete collapse.
In the exchange control case, Mutanda was arrested in 2011 by the Zimbabwe Anti-Corruption Commission and is out of jail after posting $1,000 bail, while his accomplice was released on $500 bail.