HSBC admits its Swiss private bank may have been involved in tax avoidance

HSBC is under fire, after a large cache of leaked bank files revealed that it helped clients evade taxes and conceal millions of dollars.

The files, which cover the period 2005-07, amount to the biggest banking leak in history, shedding light on some 30,000 accounts holding almost $120bn.

HSBC was led during this period by Stephen Green, now Lord Green, a former trade minister in David Cameron’s government who sits in the House of Lords. He has declined to comment.

The Labour opposition has said the government, and Britain’s tax-collection agency HMRC, has serious questions to answer.

The shadow secretary to the Treasury Cathy Jamieson said: HMRC were made fully aware of these practices back in 2010. There are serious questions for the chancellor to answer about why just one person out of over 1,000 have been prosecuted in five years; and why the government’s Swiss tax deal has been such an embarrassing flop, raising a fraction of the amounts initially boasted of by ministers. Tax avoidance and evasion harms every taxpayer in Britain, and undermines public services like the NHS.

HSBC has admitted that its Swiss-based private bank may have held accounts for tax-dodging clients, after secret files from Europe’s biggest bank were leaked to several news organisations exposing widespread tax-avoidance practices.

The revelations, including allegations that HSBC’s Swiss private bank provided large, untraceable bricks of cash in foreign currencies to clients and colluded with them to conceal “black” accounts from tax authorities, could be damaging for the bank.

HSBC paid almost $2bn in fines and signed a five-year deferred prosecution agreement with US authorities in December 2012 after admitting that it processed drug trafficking proceeds through Mexico and transmitted funds from sanctioned countries including Iran.

The agreement puts it at risk of a criminal conviction and potential loss of its crucial US banking licence if it commits another crime in that period. Since then, HSBC has promised to clean up its act by shedding many of the riskiest clients and businesses.

HSBC said its many private banks, including its own Swiss operation, had “a number of clients that may not have been fully compliant with their applicable tax obligations. We acknowledge and are accountable for past compliance and control failures.

“We have taken significant steps over the past several years to implement reforms and exit clients who do not meet strict new HSBC standards,” the bank said in a statement today. It added that its private bank client base had shrunk 70 per cent.

An international group of news outlets received leaked client bank account files that were stolen in 2007 by Hervé Falciani, an IT expert at HSBC’s Swiss operation, who later fled to France.

News reports claimed that the files showed the bank had opened Swiss bank accounts for clients who were subsequently convicted of crimes or who were thought to be in breach of their national tax obligations, and claimed that HSBC marketed tax avoidance strategies to its Swiss clients.

The BBC’s Panorama programme is due to broadcast a documentary based on the findings entitled “The Bank of Tax Cheats” at 8.30pm tonight.

The bank said in its statement that it had amended terms and conditions to allow the private bank to refuse cash withdrawal requests and placed “strict controls on withdrawals over $10,000”.

“In addition, we have withdrawn from markets where we are unable to conduct due diligence to a satisfactory standard on our clients. We review all Politically Exposed Persons annually at the highest levels within the group.”

In the UK, investigations by the HMRC have resulted in about £135m of unpaid tax, interest and penalties being handed over by the British citizens involved in the HSBC files.

Several national tax authorities have had access to the stolen files since 2010 and some – such as France and Belgium – have recently started taking legal action against HSBC as a result.

In November the bank was formally placed under investigation in France over whether its Swiss private bank had helped French citizens evade tax, a similar case to one that has already cost its rival UBS €1.1bn in bail. HSBC faces similar allegations in Belgium.

Clegg accuses Labour of letting banks runs riot
Britain’s deputy prime minister, Nick Clegg, has gone on the offensive over the HSBC leaks, accusing Labour of “letting the banks runs riot on their watch”. My colleague Josh Halliday has been listening to the Liberal Democrat leader on Sky News.

Clegg said the revelations showed “what a sophisticated industry it was to allow the wealthiest in society to avoid paying the tax which they should pay”.

Asked whether the shadow chancellor Ed Balls, who was city minister in the Labour government at the time, should explain what he knew about the Swiss accounts, Clegg said: I think it would be great if Ed Balls, or indeed Ed Miliband, for once were just to get up and admit that they let the banks run riot on their watch. We warned them, the Liberal Democrats. I remember Vince Cable, myself and others saying to Ed Balls, Ed Miliband and Gordon Brown at the time that this is going to end in a car crash because the banks aren’t been properly regulated.

Ed Balls went on a prawn cocktail charm offensive to suck up to the banks and they now have the brass neck to somehow constantly accuse this government of not doing enough when we’ve done considerably more to straighten out the banks than Labour ever did. I think it would be very helpful if he was honest enough for once to come clean and admit that the banks went awry on all sorts of fronts during Labour’s term in office.

HMRC failed to defend taxpayer’s interest – Hodge
Margaret Hodge, the influential Labour chair of the public accounts committee, has laid the blame at the door of HMRC, which is responsible for prosecuting tax evasion by British citizens and institutions.

Speaking on BBC Radio 4’s Today programme, she also said Lord Green, the Conservative peer who previously ran HSBC, faced serious questions.

The Press Association has a full account of her interview. “You are left wondering, as you see the enormity of what has been going on, what it actually takes to bring a tax cheat to court.

“If it had been a benefit cheat it would have been up for court years ago. Now we have had only one tax cheat taken before the British courts.”

Hodge said countries such as the US, France and Argentina were taking action against HSBC over its activities.

“We are never assertive enough, aggressive enough and I think just determined enough to actually protect the taxpayer,” she said.

“It makes me really frustrated that we have our tax authorities facing both ways. On the one hand, they are all part of the establishment, we want to look after them, on the other hand not defending really the taxpayer’s interest.”

Hodge accepted that many of the activities took place while Labour was in power.

“I think that times have changed and we have to move on. You have to remember in times past public finances were not under such tension, there weren’t so many demands on them, you didn’t have the deficit.”

She said former trade minister Lord Green, who previously ran HSBC, faced serious questions.

“Either he didn’t know and he was asleep at the wheel, or he did know and he was therefore involved in dodgy tax practices,” Hodge said. “Either way he was the man in charge and I think he has got really important questions to answer.”

Australia recoups more than A$30m after getting HSBC files
The Australian tax office has confirmed for the first time that it received the HSBC files in 2010, and that it has used them to recover tens of millions from tax avoiders. The Guardian’s Paul Farrell reports:

The Australian Tax Office has said it has uncovered “a number of discrepancies” among hundreds of Swiss HSBC accounts held by Australians and has recovered more than A$30m in tax liabilities over the past five years.
In a statement to the Guardian on Monday, the ATO confirmed for the first time it received a leaked cache of 261 Swiss HSBC bank files in 2010, which it believes to be the same data obtained by the Guardian and other news groups.

An ATO spokesman said In some cases, it was found that taxpayers had correctly reported these accounts to the ATO. However, there were a number where there were discrepancies and as a result we took further action. We initiated a number of reviews and audits, which to date have resulted in over A$30m in additional tax liabilities.

India may extend tax investigation following Swiss leaks
Indian authorities are expected to widen a tax investigation after the revelations in the HSBC leaks.

The Indian Express, one of the news outlets that collaborated with the International Consortium of Investigative Journalists, reports that almost 2,000 Indian HSBC clients are involved, including politicians, businesspeople, diamond traders and people involved in drugs cartels.

The Indian Express reports: The investigation revealed 1,195 Indian HSBC clients, roughly double the 628 names that French authorities gave to the government in 2011. The new revelation – published today as part of a global agreement – is expected to significantly widen the scale and scope of the ongoing probe by the Special Investigation Team (SIT) appointed by the supreme court.

A senior official at India’s tax authority, the Central Board for Direct Taxes, told the paper that everyone on the list would be contacted and would have to prove that they had acted within the law. We are putting the onus of proving NRI [non-resident Indian] status during the relevant period on the account-holder.