The threat of U.S. prosecution looms over HSBC Holdings PLC like the sword of Damocles after a groundbreaking report revealed that it helped clients hide cash from various tax authorities. These reports cast HSBC, HSBC’s Holding’s parent bank, in an unsavory light and is the latest round of negative publicity to besmirch the British bank’s reputation. As such, it sent shockwaves through the foundation of HSBC

The basis for these reports are documents provided by Herve Falciani, a former employee of HSBC.

These documents reveal how mid-level HSBC bankers assisted European clients do an end-run around a European Union tax on bank deposits. Specifically, the clients were instructed to transfer their accounts out of their own names and into that of a foreign entity, such as a corporation or trust. Because such entities are not liable for the tax, HSBC’s clients were able to evade the tax.

The documents also revealed how HSBC’s private bankers assisted miners, arms dealers, and governments hide their accounts from local tax authorities. These are some of the same individuals that are bankrolling Africa’s bloodiest conflicts, including those in the Democratic Republic of Congo, Burundi, and Liberia.

Immediately after the story broke, rumors began circulating about whether tax authorities in the affected countries – namely, the U.S. and U.K. – would bring criminal charges. Should the U.S. bring criminal charges, the consequences could be catastrophic. That’s because the British bank’s current status is analogous to being on probation.

Back in 2012, HSBC entered into a five-year deferred prosecution agreement (DPA) with the U.S., amid allegations that it laundered money for Mexican and Latin American drug cartels. As part of the agreement, HSBC agreed to pay a whopping $ 1.9 billion penalty to the United States and appoint a monitor.

While some thought that the existing deferred prosecution agreement between the United States and HSBC was an insurmountable obstacle for the United States to overcome in order to launch a new investigation into HSBC, the U.S. government wasted no time in disabusing skeptics of that notion.

At a press conference last Monday, U.S. Attorney Loretta Lynch, the federal prosecutor who brokered the deal, announced not only that a future tax investigation was possible, but that one might already be on the horizon.

“The DPA explicitly does not provide any protection against prosecution for conduct beyond what was described in the statement of facts,” Lynch said. “Furthermore, I should note the DPA explicitly mentions that the agreement does not bind the department’s Tax Division …”

Because the criminal information embodied in the 2012 deferred prosecution agreement was limited to allegations that HSBC violated the Bank Secrecy Act by failing to maintain an appropriate anti-money laundering program, the deferred prosecution agreement in no way hampers a future tax investigation.

If the U.S. decides to charge HSBC, it will mirror that of Credit Suisse, the bank that had the misfortune of being splashed across the front pages of the largest newspapers last May when it agreed to plead guilty to aiding U.S. citizens evade taxes. Along with its guilty plea, Credit Suisse entered into a settlement with the U.S. Department of Justice and state and federal financial regulators in which it agreed to pay a staggering $ 2.6 billion penalty.

According to Law360, “Credit Suisse was the largest bank to plead guilty in the U.S. in 20 years, and the amount of its fine was unprecedented.” Shortly after the agreement was memorialized, then Attorney General Eric Holder excoriated Credit Suisse for the lengths it went to in order to protect itself, its employees, and its clients from being ensnared within the coils of the criminal justice system. Among the nefarious acts on Mr. Holder’s “Top Ten” list were the following: “destroying bank records,” “deliberately subverting disclosure requirements,” and “using offshore debit and credit cards to repatriate money.”

HSBC strenuously denies engaging in any tax “hanky-panky.” Instead, it insists that its Swiss private bank has done an “about face” and has changed its corporate culture. Specifically, it claims that HSBC Holdings has undergone a “radical transformation” by terminating clients that it believed were breaking tax laws, “withdrawing from some markets and enacting management changes.”

Marty Steinberg, co-chairman of Bilzin Sumberg’s litigation department, told Ama Sarfo of Law360 that this was nothing more than a self-serving statement:

“It’s a common phrase used by most banks: ‘We changed our culture.’ … But the Justice Department isn’t really interested in the culture; they’re interested in empirical evidence that can be obtained.”

If prosecutors decide to launch a fresh investigation into HSBC for its tax-related shenanigans, author Ama Sarfo raises an interesting question. In her article, “HSBC Inquiry Would Likely Focus On Sincerity Of Tax Reforms,” Ms. Sarfo asks whether “they will seek a strong penalty that could cripple it … even though the government has said it doesn’t want to collapse major institutions.” This takes on a whole new meaning in light of HSBC’s “run-ins with U.S. authorities.”

Outside of the bank’s responsibility, Ms. Sarfo poses an even more vexing question: What if federal prosecutors decide to pursue the “top brass who were involved in the alleged tax evasion activity?” Will the recent acquittal of Raoul Weil, the third-highest-ranking executive at UBS, stop prosecutors dead in their tracks? Recall that Mr. Weil’s acquittal happened in record-breaking time, sending a strong message to government prosecutors.

As damaging as the Weil acquittal might have been to the government’s policy of rooting out offshore tax evasion by starting with the “higher-ups” and working its way down the chain, few defense attorneys believe that it will “… dissuade prosecutors from pursuing other similar cases.”

“I don’t think the government is slowing down,” Caplin & Drysdale Chtd. Member Scott Michel said. “Look, the government sometimes loses a case – that doesn’t mean they stop prosecuting the crime.”