This week the revelations and twists and turns in the HSBC and tax evasion scandal have come apace. One day the Daily Telegraph leading political columnist Peter Oborne resigns, describing his former employers as perpetrating a “fraud” on its own readers by overlooking the importance of the HSBC tax tale in an openDemocracy exclusive; the next day former Labour Minister Michael Meacher publishes an article claiming the Conservatives don’t just turn a blind eye to tax evasion, they are actually in favour of tax evasion.
And before the ink had barely even dried on Meacher’s article - or indeed, it had started to flicker online - early on Wednesday morning Swiss police raided the offices of the HSBC private bank in Geneva as part of a major money laundering investigation.
How did it all come to such a pretty pass? And what have our own law makers been up to in scrutinising the misbehaviour of our banks?
One attempt came seven years ago, in run up to the collapse of the banking system – and near demise of two huge British banks, RBS and HBOS, and actual collapse of Northern rock - in late 2008.
The Treasury Select Committee launched an inquiry into Offshore Financial Centres on 30 April that year, shortly before the global banking scandal emerged with all its shocking austerity results for ordinary people in the early summer that year. On 1st July, the committee took oral evidence from two senior banking executives, Catherine Weir, of Citi Private Bank, and Chris Meares, of HSBC Private Bank.
The following exchange is extremely interesting in light of last week’s revelations of the activities of HSBC Private Bank in Geneva..
Committee member Liberal Democrat MP John Thurso asked Meares: “How much of your work as a private bank is about keeping your clients informed as to where the best place is? Or is that coming back to the start of the process?”
Meares replied “More the start of the process, rather than evaluating each jurisdiction as time goes on.”
Intervening, Thurso asked: “I presume that you have a duty from a regulatory standpoint to ensure that tax evasion is prevented when you are dealing with your clients and with offshore financial centres. Can you confirm that? How do you give it effect?
“Correct,” said Meares, adding “we prohibit our bankers from encouraging or being involved in tax evasion.”
Seeking clarification,Thurso asked “What do you do?”
Meares expanded confidently “If our bankers, say, sitting here in the UK, get any hint that there is tax evasion, then under the legal and regulatory system they have to file a suspicious transaction report. That is the main way. If they have a suspicion that it is happening, then we file a suspicion transaction report to the authorities.”
The Committee Chairman, Labour MP John (later Lord) McFall then enquired of Meares whether HSBC filed quite a number of suspicious transaction reports?
A relaxed Meares responded: “Not huge numbers, I am pleased to say, but there are a few and they all get dealt with... For the large global institutions, like ourselves, it has to be self-policing. Our reputation is the first thing. In running our business, I can assure you, the Chairman and the Chief Executive would not want us to have anything that would affect our reputation.”
Prior to this hearing - in May 2012 - Meares was hired by Bridgepoint to join Quilter Cheviot to become Chairman of the Board and the Audit & Risk Committee. He had enjoyed over 30 years experience in financial services working with the HSBC Group - both overseas and in the UK - and was Group General Manager and CEO of Global Private Banking for HSBC for the previous five years.
Another highly controversial former HSBC executive is Baron Green of Hurspierpoint, who over the weekend resigned as co-chair of business lobbyists TheCityUK’s advisory council with immediate effect, after a week of political turmoil over his role as a Tory Trade minister as appointed by David Cameron in 2012. He is a previous chairman of HSBC. Here is a selection of his bons mots on banking ethics when he was a minister: “(That) means ensuring that our tax regime is attractive, that we minimise unnecessary red tape…” (House of Lords Official Report, 5 July 2012: Column 837)
“More generally on business banking, there is a clear need to reinvest properly in business banking. In some ways I am better placed than many to say this.” (House of Lords Official Report, 9 October 2012: Column GC422)
“…the skill base of business banking in high street banks has been deteriorating. This has happened partly because average career bankers with a reasonable dose of ambition have wanted to head either for the excitements of corporate and investment banking or for the sexy end of the retail banking market and did not see themselves spending the rest of their career in a relationship management role in, let us say, Rotherham... it is that all the CEOs with whom I have regular dialogue and the heads of commercial banking are focused on this and are determined to address the problem. I hold regular round tables with the banks under the auspices of the British Bankers’ Association. The general problem, I have described. In international trade, in particular, there is even more of a problem with the skill base. They are focused on that. The challenge is that it will simply take time to turn the supertankers…I do not believe that those other financing sources can ever be an adequate alternative to, or substitute for, a properly run business banking presence on our high streets.” (House of Lords Official Report 26 June 2013: Column 830)
A third HSBC big cheese, Douglas Flint, current Group Chairman of HSBC Holdings plc, told a House Of Lords Economic affairs committee hearing on 21 October last year: “Importantly too, the banking system is heavily regulated, and therefore there is a massive line of sight through the supervisory mechanisms, which are much more intensive than they were historically, to see what is going on and what is happening in the economy.”
In another observation, he said: “It is entirely right that people talk about the culture of our industry; it is deeply depressing that people believe that the culture six years after the crisis is still flawed. There may be elements, but if the people running banks today are not the right people, that is a shameful reflection on the regulatory apparatus not to have replaced those who do not get it. I believe the people in the industry today do get it, because it is not much fun rebuilding from where we have come from.”
He also shared this insight into banking practice: “The analogy I use is that the financial system is a bit like a big jigsaw box and the regulatory reforms are effectively pieces thrown into the jigsaw box, but no one is given the lid with the picture on it. There are an awful lot of pieces that are really important and they all have a function, but until you know what you are trying to create it is very difficult to make the picture.” in asserting “I am a simple fellow.” (published in the Committee report, The post-crisis EU financial regulatory framework: do the pieces fit?, on 2 February 2015)
So it may be seen, these HSBC luminaries have given hostages to fortune in their many public utterances.
A whole problem is the mind-set created by Britain’s taxation culture: As openDemocracy’s review of former tax inspector Richard Brooks’ book The Great Tax Robbery in May 2013 reminded us, Brooks cites former HMRC tax inspector colleagues bemoaning to him: “We used to have a priority to collect tax, now we have a priority to have a good relationship [with companies and rich individuals]”.
In a House of Lords debate on overseas tax havens held in March 2009, Tory peer Baroness Noakes, a Director, Royal Bank of Scotland Group as well as a shareholder in amongst other companies, Barclays plc, JP Morgan American Investment Trust plc (United States), JP Morgan Chinese Investment Trust plc, JP Morgan Indian Investment Trust plc, Standard Chartered Bank plc, Aberdeen Japan Investment Trust, Legal & General plc, as well as HSBC, recalled a quotation from Lord Clyde said in the 1929 Ayrshire Pullman Motor Services case:
“No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores”. (Lords Official Report, 26 March 2009: Column 782). Her selection of a quotation dating from 86 years ago to justifying the minimising of the payment of tax sums up an all too prevalent attitude of the rich and politically powerful in Britain today.
As the now late multi-millionairess, Leonora Helmsley, owner of the Empire State Building - and dubbed ’Queen of the Mean’ - once notoriously asserted when being prosecuted for tax evasion in 1989 (for which she was jailed): “Only the little people pay taxes.”
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