The former head of HSBC, Stephen Green (pictured here in 2010), says he didn't know about alleged tax-dodging practices in the Swiss arm of HSBC
(AP Photo/Vincent Yu)
The former chairman of HSBC said it should have been more careful before buying its Swiss private banking arm, which is alleged to have helped clients evade taxes.
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Stephen Green appeared in front of a panel of lawmakers in the UK on Tuesday. The House of Lords economic affairs committee heard from Green that “with the benefit of hindsight, it would have been better to have drilled into the detail much earlier”.
The bank’s Swiss private bank was built up by its acquisition of the Republic National Bank of New York and Safra Republic Holdings in 1999.
Early this year a huge leak of private data covering around 30,000 accounts during the period 2005-2007, published by several major international newspapers and the International Consortium of Investigative Journalists, drew attention to practices at the bank, which are said to have allowed account holders to dodge taxes.
Between 2003 and 2006, Green was HSBC’s chief executive; he then went on to become chairman, a position he stayed in until 2010. He told the panel that he and senior management were unaware of the issues unfolding in the Swiss private banking section of the business.
In 2008, a former IT worker from HSBC in Geneva, Hervé Falciani, took private account data which is said to illustrate how taxes were avoided by some clients at the bank. The files led to the bank admitting that it had failed in some respects in its Swiss operations when it came to following proper compliance rules.
On Tuesday, Green also discussed issues arising from the acquisition of a Mexican business which allegedly assisted clients in laundering money.
In 2002, HSBC took over Grupo Financiero Bital, which US authorities suspected had facilitated money-laundering, including after the acquisition.
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Under mounting pressure from the so-called Swissleaks revelations, HSBC boss apologised on Sunday for the role played by its Swiss branch in helping clients evade taxes eight years ago. The bank also claimed to have turned over a new leaf.
In an open letter addressed to HSBC customers, shareholders and colleagues, chief executive Stuart Gulliver apologised for the bank’s past actions. He claimed that the whole episode was a “painful experience” for the group.
“We must show we understand that the societies we serve expect more from us. We therefore offer our sincerest apologies,” stated the letter.
Sorry but…
However, the bank’s attempt to address the so-called Swissleaks revelations was far from a simple letter of apology. The bank stated that the media coverage of the data stolen by ex-employee Hervé Falciani must be put into context.
“Many of the people mentioned have no allegation of wrongdoing against them whatsoever but been named simply because they are well-known individuals,” the bank stated.
It also disputed the 100,000 clients figure mentioned in the media, claiming that the Swiss private banking arm only had 30,000 clients at its peak. In addition, HSBC questioned the accuracy of the stolen data suggesting that it could have been manipulated.
“It is unclear if the integrity of the data has been preserved, or even if the original data itself was complete and accurate. Recent allegations by a French law enforcement official in Nice, suggest that the data has been manipulated and could therefore contain material inaccuracies,” said another statement released by the bank.
Lesson learned?
HSBC also claimed that it no longer the same bank it was eight years ago.
“We have absolutely no appetite to do business with clients who are evading their taxes or who fail to meet our financial crime,” stated the letter.
The bank also released another statement showing the progress that has been made in overhauling the bank’s practices since 2007. It claims the latest figures show that it has “put compliance and tax transparency above profitability”. Measures stated include withdrawal from markets where due diligence is difficult and annual review of politically exposed persons.
The Swiss private bank has reduced the number of clients by almost a third, from 30,412 accounts in 2007 to 10,343 in 2014. It also slashed the amount of assets under management from $118.4 billion to $68 billion within the same period.
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