The Guardian reports that the US Department of Justice is considering bringing criminal charges against HSBC and its executives as part of its investigation into whether the bank’s Swiss subsidiary helped US clients evade taxes.
Democratic senator Elizabeth Warren called on prosecutors to “come down hard” on HSBC if the bank is found to have colluded with tax evaders on Tuesday.
Renewed focus has been placed on the long-running investigation into HSBC Switzerland by the department, after a huge leak of secret bank data – passed to the DOJ’s tax division almost five years ago.
It shows that HSBC Switzerland helped some clients conceal millions of undeclared assets, and has immediately raised questions on Capitol Hill about the response from prosecutors and tax authorities.
US government officials said the investigation is not merely looking at HSBC’s US clients, and could also result in criminal indictments against the bank itself. “That has not been ruled out,” one official said, when asked if HSBC or its executives could be criminally indicted. “It is certainly something that is under consideration.”
Any criminal US prosecution against HSBC or its executives would be a huge blow for Europe’s biggest bank. HSBC was made to pay a $1.9bn fine in 2012, in a deferred prosecution agreement over money-laundering with Mexican drug cartels and breaches of US sanctions.
Under that deal, HSBC controversially escaped criminal charges and kept the banking charter that enables it to operate in the US.
The most prominent political critic of that 2012 settlement was Warren, who is renowned for her campaign for accountability for big Wall Street institutions. In an interview she said;
“The government comes down hard on individuals who break the law time after time, and it should do the same for large financial institutions,” the Massachusetts senator said in a statement to the Guardian on Tuesday.
“The new allegations that HSBC colluded to help wealthy people and rich corporations hide money and avoid taxes are very serious, and, if true, the Department of Justice should reconsider the earlier deferred prosecution agreement it entered into with HSBC and prosecute the new violations to the full extent of the law.”
It has now become imperative that the US Government uses this opportunity to prosecute HSBC as a corporation, as well as the guiding minds on its Board and in its Executive suites for conspiring together with their clients for the purposes of committing tax fraud.
This really should not be a difficult case for the US Justice Department to bring because all the evidence is now in the public domain. This sort of evidence is normally very difficult if not downright impossible to obtain because it is the smoking gun proving the charges against the defendant, which is why such information is so jealously and closely guarded.
Why am I so adamant in my hope that criminal charges be brought against the senior officials of HSBC who were responsible for making these decisions at the time?
Because banking institutions like HSBC have now become major institutions of serial wrong-doing. They conduct their criminal affairs as if they are immune from the ordinary rules of social and commercial behaviour. They advise their clients on the best and most effective ways of removing their money from the UK and hiding it so that it is not available to be taxed in the same way that ordinary citizens are taxed.
Taxation is not pleasant but it is authorised by law. It is the only way in which free democracies can provide themselves with the means whereby they maintain their freedom under the law. When a banking institution conspires with its high-net worth clients to deliberately hide their assets from legitimate fiscal analysis, then they cross the line between what is ‘grubby’ but legitimate, and what is downright dishonest.
In so doing, they identify themselves as the mafia ‘families’ they have become, organised criminal enterprises who willingly commit crimes against the interests of the common weal, and if the societies within which they operate do not take the time and trouble to advise them of the serial criminality of their actions, they will continue to commit major crimes for profit.
They have literally become ‘enemies of the state’!
The UK government has already tried to wash its hand s of the affair and is not seeking to take matters further. A minister of the Crown, Matthew Hancock was interviewed on Newsnight last night where he strongly refuted that he had possessed any prior knowledge of the information now in the public domain, this despite the fact that the Head of Revenue and Customs, David Hartnett, had acknowledged receipt of the information, some years before.
(This was the same David Hartnett who whilst HMRC boss, negotiated a tax deal that granted HSBC’s bankers virtually guaranteed immunity from prosecution for any crimes they might have committed relating to tax fraud in Switzerland. Later in January 2013, he moved on to work at HSBC.)
Britain’s chief tax inspector told MPs in September 2011 that his department possessed a disc containing records from the Swiss subsidiary of a major UK bank – understood to be HSBC, contradicting Downing Street’s assertion on Tuesday that ministers only became aware of the scale of potential tax evasion through the bank at the weekend.
At the time, the former chairman of the HSBC, Stephen Green, was trade minister, having been appointed by David Cameron nine months earlier.
David Hartnett, told a Treasury select committee investigation into tax avoidance: “I think the whole nation probably knows that our department has a disc from the Swiss – from the Geneva branch of a major UK bank – with 6,000 names, all ripe for investigation.”
Hartnett continued: “We have hundreds [of people] under investigation, some of them under criminal investigation, and we are about to challenge another 800. Then we will industrialise the process, challenging 1,000 at a time, with a view to having all those who need challenging challenged pretty quickly.”
Although Hartnett made no reference to HSBC by name, the bank and the leak were clearly identified in newspaper reports at the time.
Hartnett told MPs that HMRC had received the disc in June 2010 – nearly five months before Green was made a Tory peer and asked to become trade minister.
The statements from Hartnett contrast with information provided at Tuesday morning’s Downing Street briefing. A spokeswoman for Cameron said ministers did not know about alleged tax evasion at HSBC’s Swiss arm until details emerged at the weekend when information on the evasion was published by the Guardian and other media organisations.
“No government minister had any knowledge that HSBC was involved in wrongdoing in regard to its Swiss banking arm,” the spokeswoman said.
In the afternoon, a spokeswoman sought to clarify the government position, saying: “We have no record of any government minister being made aware by HMRC of any alleged wrongdoing by HSBC employees.”
The spokeswoman refused to speculate on whether HMRC should have contacted the City regulator, the Financial Conduct Authority, over any alleged systemic wrongdoing at the bank, saying the focus of the HMRC was to recover lost tax.
It was also in the public domain in 2011 that HSBC had fought to block the French tax authorities from handing over the material on the disc to their British counterparts. The Financial Times reported in 2010 that legal efforts were made to block the transfer and protect the client’s confidentiality.
Lord Green, who was chief executive and then chairman of HSBC from May 2006 until December 2010, has so far refused to comment on about what occurred at the Swiss bank under his tenure.
“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,” said Margaret Hodge, the opposition Labour MP and chair of the UK parliament’s influential public accounts committee.
“Either way he was the man in charge and I think he has got really important questions to answer,” she said.
We will never probably know what efforts were made to place obstacles in the path of any HMRC investigation, nor how much time was subsequently taken up by tax advisers negotiating with HMRC on behalf of their hapless clients who had been caught with their taxes unpaid, as to how much the HMRC would settle for.
But all this is mere sophistry when the question of prosecuting HSBC comes to be considered.
Back in 2012, Warren and other senators – Republican and Democrat – complained that HSBC was let off the hook by the deferred prosecution agreement over drug money laundering for the Mexican cartels.
“How many billions of dollars do you have to launder for drug lords, and how many economic sanctions do you have to violate before someone will consider shutting down a financial institution like this?” Warren famously asked a Senate banking committee hearing.
Warren’s comments on Tuesday followed those of Sherrod Brown, the Ohio senator and ranking Democrat on the Senate banking committee, who also told the Guardian he will be seeking answers from US regulators and authorities, including the Internal Revenue Service.
“I will be very interested to hear the government’s full explanation of its actions – or lack thereof – upon learning of these allegations in 2010,” he said on Sunday.
British, French and Spanish tax authorities have publicly disclosed the number of HSBC Swiss clients investigated as a result of the leak and the total sums recovered. In total, the three countries have recovered more than $825m from taxpayers who had not declared their assets in Geneva.
However, in Washington, the IRS is refusing to disclose any information about investigations or recovered assets stemming from the leak of HSBC Switzerland data.
How much HSBC earned by way of fees for its services to the tax criminals is anyone’s guess, but If anyone should harbour any doubts about whether possessing off-shore facilities for harbouring funny money, could be something that any HSBC executive could be mistaken about as to its function, then consider the following statement.
It was made by John M Mathewson, former owner of Guardian Bank and Trust (Cayman). He said;
"...The one thing I learned very quickly, after having a bank in the islands, was that clients opening an offshore account were doing so for tax evasion; otherwise, they never would have paid the fees that were charged to them for offshore banking. There would be no point in it. Also, considering that all of these services that we provided offshore were free from U.S. banks in the United States, it didn't make sense..."
When the time comes to question ‘Lord Keep My Mouth Very Shut’ of Tax Fiddle Advisers, I hope the US authorities will ask this latter day enemy of the State these pertinent questions!