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Analysis/Comment Last Updated: Feb 20, 2015 - 9:34 AM


HSBC & Tax Evasion: France/ Belgium issued criminal charges; UK/ Ireland nothing
By Michael Hennigan, Finfacts founder and editor
Feb 10, 2015 - 7:30 AM

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David Cameron, British prime minister, hosted a meeting of business ambassadors in Downing Street with Lord Green, trade and investment minister and former executive chairman of HSBC Bank, to discuss how the government could boost Britain’s export market, Jan 10, 2011.

HSBC & Tax Evasion: HSBC now Europe's biggest bank, was founded as the Hongkong and Shanghai Banking Corporation Limited in 1865 and to the local Chinese in Hong Kong it got the nickname Wayfoong or hui-feng in Cantonese meaning ‘abundance of remittances’ or ‘focus of wealth.’ However in recent years it has been associated with an abundance of criminality involving money laundering for Mexican drug gangsters, sanctions busting and tax evasion — the latter has been in the news since 2008 and in 2010 Christine Lagarde, then French finance minister and now IMF chief, distributed the names on a stolen list of 130,000 tax evader clients of  HSBC's private Swiss bank to relevant countries of origin of the evaders but in Europe only France and Belgium have charged HSBC with criminal activity while the authorities in the UK and Ireland did nothing.

HSBC and Falciani: How it happenedHervé Falciani spills the beans

HSBC moved its headquarters to London from Hong Kong in 1995 two years before the British returned the colony to China. In 1993 HSBC established a presence on the English high street with the full takeover of Midland Bank. It is now Europe's biggest bank by assets.

The International Consortium of Investigative Journalists, a global network of 185 investigative journalists in more than 65 countries who collaborate on in-depth investigative stories, on Monday through their publications, published the names of evaders.

The Guardian says that French tax authorities passed leaked Swiss data containing 6,000 British names to Her Majesty’s Revenue and Customs (HMRC) in May 2010 when Stephen Green was executive chairman of the HSBC bank group. Within months Green was appointed to the House of Lords and made a Conservative trade minister.

The newspaper says HMRC is also facing questions about its handling of the leaked Swiss data. "Its then head of tax, Dave Hartnett, went on to work for HSBC as a consultant after his retirement two years after the data was handed over. The UK has taken no legal action against the bank despite the evidence in the leaked files of wrongdoing, and only one individual has faced prosecution."

The Guardian also says: "France has recovered £188m in taxes and fines from a list of 3,000 clients and Spain has recovered £220m, also from 3,000 clients. The UK, by contrast, has recovered just £135m from a list of 6,000 clients in a series of secret deals that kept names out of the public domain. Many evaders were offered light penalties of only 10% of tax due, plus immunity from prosecution."

The Irish Times reports: "The Revenue Commissioners has recovered €4.55m from 20 settlements since it received the data in June 2010. Three prosecutions have been secured and a fourth case is currently under criminal investigation, the tax authority said in a statement to The Irish Times. As well as the €4.55m, a further €174,442 has been received as payments on account in two ongoing investigations."

The newspaper quotes the former head of the Revenue Commissioners as saying that securing the evidence required to support a criminal charge against HSBC of aiding and abetting was “very difficult, almost impossible.”

The bank faces criminal investigations in the US, France, Belgium and Argentina.

Richard Brooks, a former tax inspector and author of The Great Tax Robbery, said: "I think they were a tax avoidance and tax evasion service. I think that's what they were offering. They knew full well that people come to them to dodge their tax liabilities."

Last November a Belgian prosecuting judge formally accused the private bank of assisting rich clients, including diamond dealers, move money to the offshore tax havens of Panama and the British Virgin Islands.

Belgium has the equivalent of the Irish DIRT tax on interest income at a rate of 35% and the judge alleges that employees of HSBC’s private bank advised these customers to transfer their money out of Switzerland into offshore companies.

In 2013 Belgian police raided the homes of 20 people with HSBC Swiss private bank accounts as part of the investigation.

Belgian authorities also published emails and other correspondence between HSBC and Belgian clients, which appear to show the bank offering tax evasion services.

Whatever about the legal challenges that the Irish authorities would have in charging HSBC, which has a unit in Dublin's offshore financial services centre, it would have been an unprecedented Irish move against a big global company when for years a blind eye was turned to massive international corporate tax avoidance via Irish registered companies.

The Financial Times puts the main nationality of clients and funds as follows: Switzerland 11,235, $31.2bn; France 9,187, $12.5bn; UK 8,844, $21.7bn; Brazil 8,667; Italy 7,499; Venezuela $14.8bn and US $13.4bn.

US fines ex-British Empire banks HSBC and Standard Chartered $2.5bn for money laundering

In 2009, Stephen Green, the then chairman of HSBC outlined his whole philosophy of ethical business in his book 'Good Value':

If we are to restore trust and confidence in the markets, we must therefore address what is at its root a moral question. Trust and confidence cannot be restored overnight, and they cannot be restored by fiat: the process of renewal has to begin with a recognition of the moral dimension of what has happened. It is as if we have grown increasingly to accept the idea that the value of what we do is fully delineated by the market, by regulatory compliance and the law of contract. If the market will bear it, if the law allows it, if there is a contract, then no other test of rightness need apply. Yet we would not (or should not, at least) live our private lives this way. So why should it be acceptable in business…?

The truth is that the value of our business is dependent on the values with which we do our business. Capitalism needs to integrate values with value. We have to recognise – boards, management and owners alike – that values go beyond “what you can get away with”, and that values are in the end critical to value – to sustainable value, that is. Better risk management, enhanced regulation, codification of directors’ responsibilities in company law – all these things are necessary. But they are not, and cannot be, sufficient without a culture of values. As individuals, we do not govern our behaviour simply by what is allowed by law or regulation. We have our own codes of conduct and hold ourselves accountable. We take responsibility for our actions. The institutions of capitalism – businesses, banks and other institutions of the financial markets – have to do the same. This is the sine qua non for the restoration of public trust in the market, and is therefore essential for the overall health of society."

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