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Downing St dragged into HSBC row

Calls for tougher clampdown on bankers abusing tax rules

HSBCNew measures to clamp down on bankers helping their wealthy clients to avoid paying tax are expected to move up Downing Street’s agenda to prevent further embarrassment ahead of the General Election.

Prime Minister David Cameron claimed his government had made big strides to tackle those who abuse the tax system.

But Opposition MPs and taxpayers’ groups demanded more is done to bring wayward bankers into line, starting with a proper investigation by the authorities leading to prosecutions and banning orders on those found guilty.

There is growing concern that the regulators themselves are tainted or else not in a position to offer appropriate judgement. Financial analyst Richard Murphy tweeted:  “KPMG were auditors to HSBC 1991 – 2013. Ex-KPMG partners chair HMRC and direct Financial Conduct Authority. You couldn’t make it up.”

The calls for action to be taken came as more evidence emerged that the British tax office knew about wrongdoing at HSBC’s Swiss bank before Mr Cameron appointed the executive chairman of its parent bank, Stephen Green (pictured), a government minister.

Information published by The Guardian as part of a joint media investigation reveals that the French tax authorities passed leaked Swiss data containing at least 6,000 British names to HMRC in May 2010 just a few months before Lord Green was appointed trade minister in the House of Lords.

Green, who declined to answer questions about the newly-revealed allegations when confronted by a reporter from the BBC’s Panorama team, was executive chairman of HSBC from 2006 to 2010. The current management has now admitted that serious “compliance and control failures” took place at the Swiss private bank before January 2011 when chief executive, Stuart Gulliver, took over.

Thousands of documents from the private bank that HSBC acquired in Switzerland show how it routinely advised rich account holders how to circumvent their domestic tax authorities.

The documents have been exposed in a joint investigation involving the French newspaper Le Monde, the Guardian, BBC’s Panorama, the Washington-based International Consortium of Investigative Journalists and more than 50 other media organisations around the world.

Avoiding tax is is not illegal, but many have been used to conceal cash from tax authorities and evasion is illegal. The documents are said to have been stolen in 2007 by a computer expert working for HSBC in Geneva, contain details of more than 100,000 clients from around the world.

The French authorities are said to have assessed the stolen data and concluded in 2013 that 99.8% of their citizens on the list were probably evading tax. There are said to be between 6,000 and 7,000 British clients among those listed.

HM Revenue and Customs was handed the leaked data in 2010 and identified 1,100 people who had not paid their taxes. But only one tax evader has been prosecuted.

HSBC said it has now “fundamentally changed” and denies that all the account holders were evading tax. In 2007, HSBC, the Swiss private bank had 30,412 accounts. At the end of 2014 it had reduced that number to 10,343.

It said has implemented numerous initiatives designed to prevent its banking services being used to evade taxes or launder money. In a statement, it said:

“In the past the Swiss private banking industry operated very differently to the way it does today. Private banks, including HSBC’s Swiss private bank, assumed that responsibility for payment of taxes rested with individual clients rather than the institutions that banked them. Swiss private banks were typically used by wealthy individuals to manage their wealth in a discreet manner.

“Although 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 HSBC’s Swiss private bank, having 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 failure.

“We 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 have also refocused our Swiss private bank on clients from strategic markets of the group, such as owners and principals of the group’s commercial banking clients. As a result of this repositioning, HSBC’s Swiss private bank has reduced its client base by almost 70 per cent since 2007.

“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. We are also co-operating with relevant authorities investigating these matters.”

 

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