HSBC Aided Tax Avoidance

The UKís largest bank, HSBC, helped affluent customers around the world evade millions of pounds worth of tax. The report that accuses the bank is based on a vast number of leaked files that were released by the former employee and whistleblower Herve Falciani in 2007.
 
The files were then obtained and analysed by an international partnership of media organisations including Le Monde, the Guardian, BBC Panorama and the International Consortium of Investigative Journalists. Furthermore, the files refer to a period between 2005 and 2007 and hold information on 30,000 accounts that amount to £78 billion in assets, making it the largest banking leak ever.

The report, released on Sunday, accused the Swiss private banking sector at HSBC of regularly permitting their clients to withdraw huge amounts of cash in Switzerland that were often in foreign currencies.

Furthermore, the bank was reproached for implementing ìaggressively marketed schemesî that empowered affluent customers to evade European tax policies whilst also aiding some of their clients to disguise ìundeclared ëblackí accounts from their domestic tax authorities.î Moreover, they were in business with a number of disreputable businessmen and criminals operating on an international level.

Herve Falciani, who worked in IT at HSBCís Swiss branch, first passed on the information to the French authorities who subsequently shared it with a number of other countries. HSBC are now facing criminal action in the United States, Argentina, France and Belgium but not in the UK where the bank is founded.

The HMRC received the information in 2010 and subsequently ascertained over 1,000 people who were guilty of tax evasion and as a result manage to recuperate £135 in tax repayments. However, there has been outrage that only one person has been prosecuted for a crime and because there has been no legal action against HSBC administered by the UK government.

The chair of the Public Accounts Committee, Margaret Hodge, commented: ìIf these tax cheats were so-called benefit ëscroungersí, they would be pursued with the full force of the law.î She went on to declare the committeeís intention to conduct an investigation into HSBCís tax procedures before the general election this summer.

Although having a secret bank account is legal, the law does not allow an individual to hold one in order to purposefully conceal assets and thus evade taxes. In 2005, a policy named the European Savings Directive was implemented in order to make Swiss banks appropriate any tax owed from these undeclared bank accounts and give it to the taxman. The report accuses HSBC of circumventing this procedure by writing to their clients and suggesting ways for them to evade it.

The author of ëThe Great Tax Robberyí, Richard Brooks, has reacted to the news and stated: ìI think they were a tax avoidance and tax evasion service. I think thatís what they were offering. They knew full well that people come to them to dodge their tax liabilities.î

HSBC have responded to maelstrom by arguing that since 2007 they have drastically changed their private banking system and they have reduced the number of Swiss bank accounts by nearly 70%.

In a statement they argued they had: ìImplemented numerous initiatives designed to prevent its banking services being used to evade taxes or launder moneyÖWe have taken significant steps over the past several years to implement reforms and exit clients who did not meet strict new HSBC standards, including those where we had concerns in relation to tax compliance. We are fully committed to the exchange of information with relevant authorities and are actively pursuing measures that ensure clients are tax transparent, even in advance of a regulatory or legal requirement to do so.î

They referred to the issue of private banking and the companyís past behaviour that was highlighted in the recent report. It stated: ìAlthough there are numerous legitimate reasons to have a Swiss bank account, in some cases individuals took advantage of bank secrecy to hold undeclared accounts. This resulted in private banks, including HSBCís Swiss private bank, having a number of clients that may not have fully met their applicable tax obligations.î
Much of the political backlash has centred on Stephen Green who was the man at the head of HSBC when this activity took place. Lord Green was subsequently made a minister only eight months after the HMRC had received the leaked files. He served as minister of trade and investment up to 2013 but has refused to comment on the issue.

However, Margaret Hodge has said: ìEither he didn't know and he was asleep at the wheel, or he did know and he was therefore involved in dodgy tax practices. Either way he was the man in charge and I think he has got really important questions to answer."