HSBC should have done more over ‘industrial’ tax avoidance at Swiss arm – Green

Lord Green has admitted more should have been done to uncover “industrial” tax avoidance practices at a Swiss arm of his former bank HSBC.

The peer – who served as David Cameron’s trade minister for three years after stepping down as HSBC chairman in 2010 – said he did not believe anyone at the banking giant knew what was happening in the subsidiary.

But he expressed regret that management had not “drilled into the detail much earlier”.

Lord Green was answering detailed questions from members of the Lords Economic Affairs Committee – the first time he has spoken in depth about the controversy.

Data leaked by a whistleblower suggested that in the mid 2000s around 30,000 wealthy account holders at the Swiss bank received help to hide assets from the tax authorities in their home countries.

Lord Green, who was chief executive and then chairman of HSBC between 2003 and 2010, admitted he expected “issues” when it acquired the subsidiary.

“I wasn’t involved in the acquisition of the private bank but I do know from conversations with my colleagues at the time that some quite detailed conversations took place,” he told peers. “They were very aware that in the case of that bank it was a distinctive business.

“It was actually a new business, at least the scale of it was a new business for us.

“It was a business with distinctive characteristics, in many ways a community institution. I know that a lot of conversation was had with the owner of the business.”

Lord Green added: “We were very conscious there were going to be issues in the private bank. That there would be considerable need for work on, for example, politically exposed persons.

“I am not sure to what extent the due diligence at the time revealed issues of non-compliance. I do not believe that anybody was aware of the – to use your phrase – industrial-scale systems of tax evasion.

“We became aware of this situation, the extent of it, only in around 2010.

“Indeed the kind of activity that was described in the media reports earlier this year I was certainly not aware of before we read about them in the media reports, and I don’t think any other member of the senior management group was either.”

He went on: “With the benefit of hindsight, it would have been better to have drilled into the detail much earlier. We didn’t get everything right.”

Lord Green argued there was a “good strategic case” for HSBC to buy the bank.

“It was a perfectly reasonable proposition for a bank like HSBC, with its global footprint, its development ambitions, to take the view that the way the world was going there would be more and more businesses and people around the world who would have need of private banking-type services, and in many cases that would mean Swiss-based private banking services,” he said.

Lord Green also conceded that HSBC’s management should have “focused on money laundering issues” in a Mexican subsidiary, where it was accused of handling millions of dollars for a drug cartel.

“We didn’t get this right,” he added.