Britain's biggest bank is at the centre of a HMRC investigation after allegations that criminals opened offshore accounts for money laundering purposes in the bank's Jersey operation.
The tax affairs of more than 4,000 Britons with an HSBC bank account in Jersey were under scrutiny after their details were leaked to HM Revenue & Customs.
The list, which was passed to authorities this week by a whistleblower, reportedly includes the names of serious criminals, according to the Daily Telegraph.
It will raise further questions about HSBC's procedures at a time when the group is facing fines of about 1.5bn dollars (£938m) in the US for breaching money laundering rules.
Channel 4 News Business Correspondent Sarah Smith writes:
This is not the first time HSBC has been caught out providing banking services to criminals. Laundering the proceeds of crime. But are they any worse than other British banks?
HSBC has already been fined an astonishing $1.5bn in America for breaking money laundering rules. And $27.5m by authorities in Mexico for failing to comply with money laundering rules. And they were severely embarrassed when a list of Greek clients who bank with them in Switzerland was leaked.
No doubt, they will tell you that if you looked at the client list of any bank's Jersey branches you'd see quite a few unsavoury names there. And the names of others who are using the Channel Island to avoid paying tax. That may well be true but it's not really a good defence: "it's not just us breaking the law - everyone's at it."
HMRC found out about HSBC's Jersey clients when they were leaked. An insider passed over 4,000 names to the revenue and each one is now being investigated.
If details of any other bank's offshore account holders were leaked to the treasury they would be investigated too.
So it is very possible HSBC are not the only British bank providing services to people whose financial dealings aren't all entirely above board.
But they do seem to be the leakiest. And they will now have to clean up their act if they hope to restore their global reputation.
HSBC released a statement saying it was investigating "an alleged loss of certain client data in Jersey as a matter of urgency", but said it had not been contacted by HMRC.
Banks are required to report any suspicious activity that could suggest money laundering, although the responsibility for paying tax lies with the individual.
The list identifies the names, addresses and account balances of 4,388 Britons holding £699m in offshore bank accounts at HSBC Jersey, according to the Daily Telegraph. It includes a well-known drug dealer living in Venezuela, three bankers facing major fraud allegations and a convicted criminal, the paper says.
In total, there are 8,474 account holders, including 602 addresses from Israel and 527 in France.
HMRC confirmed it had received the data and is studying it. The list will now be used by HMRC to identify whether any of the Jersey accounts were used to avoid paying taxes.
HSBC said: "We have not been notified of any investigation in relation to this matter by HMRC or any other authority but, should we receive notification, we will co-operate fully with the authorities."