|SocialismToday Socialist Party magazine|
Issue 186 March 2015
HSBC: the capitalists’ go-to bank
Recent revelations of tax-dodging scams by HSBC bank have laid bare the parasitic nature of the banking system. They raise questions of accountability and the cosy relationship between powerful capitalists in big business, the media and the political establishment.
Hervé Falciani, who worked at Geneva-based HSBC Private Bank Suisse for ten years as a computer analyst, handed over CDs on the workings of the bank from 2005-07 to French tax investigators back in 2008. The thousands of pages of data, shedding light on 30,000 accounts worth almost $120 billion (£78bn), were made widely available by the International Consortium of Investigative Journalists (ICIJ) in February this year.
The leaked files show that HSBC PBS engaged in a range of dodgy deals. It enabled clients to avoid taxes in EU states. It provided accounts to international criminals and corrupt businessmen, including Emmanuel Shallop, subsequently convicted of dealing in illegal ‘blood diamonds’. The bank was named in the US as a co-conspirator for handing over ‘bricks’ of $100,000 to American surgeon Andrew Silva. He would then illegally post them back to the US. An HSBC manager arranged the collection of bags full of cash from the sale of marijuana in Paris. The money was delivered to HSBC clients in the French capital while Swiss bank accounts were manipulated to pay the drug dealers. (Guardian, 8 February)
HSBC PBS enabled its clients to avoid a tax introduced under a 2003 treaty Switzerland signed with the EU. This allowed EU citizens to keep anonymous Swiss accounts on condition that their banks collected some tax from them. The very creative accountants at HSBC PBS, however, hit on the loophole that the rule applied only to individuals’ savings. The bank offered to transfer a client’s cash into a shell company set up in an offshore haven, such as Panama or the British Virgin Islands. For added security – and a further fee – the company could be registered as an offshore trust or foundation. The client would become a ‘beneficiary’ of the trust, not the owner of the company.
Rich clients got richer, EU states lost a huge amount of tax, begging some big questions: who knew what and when, and why was so little done about it? HSBC says it was in no position to know what its Swiss colleagues were doing because HSBC PBS had not been fully integrated into HSBC after its purchase in 1999. That meant that "significantly lower" standards of compliance and due diligence continued. (Guardian, 8 February)
It seem barely credible that HSBC – the world’s second largest bank, and Europe’s biggest – exercised so little control, or had no knowledge, of what its Swiss arm was doing for years. And it does not explain HSBC’s actions in other parts of the world. HSBC had been found to have manipulated interbank interest rate and foreign exchange markets, and engaged in payment protection insurance mis-selling, previous to the Swiss allegations. Then, in 2012, HSBC had to pay a $1.9 billion fine over money-laundering with Mexican drug cartels and breaches of US sanctions. Maybe that arm of HSBC’s operations had not been fully integrated into the parent bank’s ‘higher’ standards, either.
All those involved seem to be desperately trying to shift blame away from themselves. Take Lord Green. Before Tory prime minister David Cameron ennobled him and made him a trade minister in early 2011, he had been HSBC Group chief executive (June 2003 to May 2006), then HSBC Group chairman (May 2006 to December 2010). The Swiss bank events took place in the middle of his watch.
During that time, the CDs had been leaked and HSBC had tried unsuccessfully to use the French courts to stop the data getting into the hands of British tax authorities. Green remains tight-lipped, however, telling the Guardian: "As a matter of principle, I will not comment on the business of HSBC, past or present". (8 February) But what principle is that and whose interests does it serve? Green sits in the House of Lords, part of Britain’s government, influencing laws that affect the lives of millions of people. Yet he is completely unaccountable for activity that raises extremely serious issues and was, potentially, criminal. No wonder most people have lost all trust in the rotten political establishment.
Downing Street officials insisted at the Treasury select committee on 10 February this year that they were given no warning of any wrongdoing at HSBC PBS. The story of alleged tax evasion by the bank’s clients, however, had originally appeared in 2010, and resurfaced in the summer of 2011 and throughout 2012.
Moreover, the French authorities told Her Majesty’s Revenue and Customs (HMRC) about Falciani’s CDs in early February of 2010. In September 2011, David Hartnett, then head of HMRC, even told a Treasury select committee: "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... We have hundreds under investigation, some of them under criminal investigation, and we are about to challenge another 800". (Guardian, 11 February 2015)
He did not name HSBC but the bank had been identified in newspaper reports at the time. HSBC’s attempt to block French officials handing the disc to HMRC was also in the public domain. Why, if it was known that 6,000 names were being investigated, did the Treasury not challenge the bank over its activities, or ask Lord Green what he knew?
HMRC says it found more than 1,000 tax evaders among the UK clients of the Swiss bank. Only one has been prosecuted. Treasury minister, David Gauke, seems happy with that, saying it is normal practice to focus on recovering lost revenue instead of prosecuting those guilty – although tax evasion is a criminal offence. Even so, HMRC has collected a paltry £135 million in back taxes and penalties from the $20 billion the ICIJ estimates was banked by HSBC PBS customers with UK addresses – that’s 0.68%.
If you steal a loaf of bread from a supermarket you will be prosecuted. If you evade millions of pounds of tax you might be asked, if you are really unlucky, to give a fraction of it back. By the way, Hartnett retired as head of HMRC in 2012. He then took a job as a consultant – with HSBC!
The current boss of HSBC, Stuart Gulliver, has offered his "sincerest apologies" for the tax avoidance scams, saying it was a "source of shame". He was, however, shameless about picking up £7.6 million in pay and bonuses last year. Jill Treanor and Sean Farrell reported that he also defended his use of "a Swiss account to hide his bonuses from colleagues and then used a Panama structure to hide the details from Swiss colleagues". (Guardian, 23 February)
Another aspect of this saga involves the Telegraph, an important part of the right-wing media establishment. It came to light when Peter Oborne, the Telegraph’s chief political commentator, resigned from the newspaper on the grounds that it was avoiding the HSBC tax avoidance scandal. Oborne claimed it was a conscious decision so that the paper could maintain a lucrative advertising account with HSBC. The Telegraph’s editorial on 19 February was an attempt to rebut Oborne’s claims. Nonetheless, it summed up the situation: "We have covered this matter as we do all others, according to our editorial judgment and informed by our values. Foremost among those values is a belief in free enterprise and free markets".
That’s it! This story is all about the unregulated, out-of-control and unaccountable nature of the capitalist system – and all the hogs with their snouts in the trough. The finance industry is utterly corrupt and morally bankrupt. Its high-end services, like those offered by HSBC Private Bank Suisse, are aimed exclusively at the super-rich. They are the only people on the planet who are free: to move their wealth and lives wherever they please. Credit Suisse estimates that 128,000 ‘global citizens’ – forget the 1%, that’s the 0.0018% – hold assets of more than $50 million. (Financial Times, 11 February) At the very least, that’s $6.4 trillion. That could transform the lives of billions. Getting rid of these parasites is a top priority for the workers’ movement in the struggle for a socialist world.