New, from the people who brought you sub-prime lending, LIBOR rigging, Forex and Gold Spot fixing and many more innovative and, frankly, illegal schemes, banking giants are pleased to announce tax evasion for the rich. This latest scandal has been slow-cooking since well before 2007 when a whistle-blower, Herve Falciani, leaked thousands of pages of documents to French newspaper Le Monde relating to over a hundred thousand prominent, wealthy clients from over 200 countries who were clients of HSBC’s Swiss private bank, with over 300000 accounts between them. It is alleged that HSBC actively helped these people to dodge taxes that they owed in their home countries. The sums of tax avoided are said to run to hundreds of millions of Dollars.
HSBC is based in the UK and its head, Lord Green, left the bank to become a minister for trade and investment, serving until 2013. It is suggested that 7000 of the accounts are held by British nationals. French authorities claimed that 99.8% of their nations with accounts at HSBC in Switzerland were evading tax.
Criminal investigations are being made in the US, France, Belgium and Argentina over the affair. It is suggested that the bank wrote to clients in 2005 to advise them how an new EU withholding tax might be avoided, implying that they actively helped clients to evade taxes. It is unlikely that HSBC will be the only major bank to offer its clients such “services” – although HSBC now claims to have “fundamentally changed”.
Perhaps unsurprisingly, breaking news suggests that Swiss Banking giant UBS is under investigation in America for helping US citizens avoid taxes due in the US by purchasing investments banned in the US: so-called bearer bonds which can be transferred without the need to register ownership. The USA believes such bonds may allow people to hide their assets and so avoid taxes due on them.
Banking scandals will continue until the authorities prosecute the banks and their employees to the fullest extent of the law and make the fines imposed on “wrong doers” sufficiently large as to deter such activities in the future – my advice would be not to hold your breath on that one; particularly when one bears in mind the corporate tax avoidance apparently facilitated by the government in Luxembourg which was worth vastly larger sums anyway.