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HSBC tax failings came to light via whistleblowing

10 February 2015

HSBC tax failings came to light via whistleblowing - Read more

HSBC and its Swiss private bank’s tax failings have come to light via whistleblowing.

Hundreds of pages of client data stolen by ex-employee in the IT department, Herve Falciani, in 2007 have exposed the global bank’s widespread tax-avoidance practices. HSBC helped thousands of clients avoid paying millions of pounds in tax by allowing them to hold secret undeclared accounts in its Swiss private bank.

HSBC has admitted to ‘having a number of clients that may not have fully met their applicable tax obligations’ but added that the bank had ‘implemented numerous initiatives designed to prevent its banking services being used to evade taxes or launder money’ over the years.

According to BBC Panorama, HSBC had 7000 clients, of which more than 1100 had not paid their taxes in the UK. This leaked data was handed over to HMRC in 2010, yet after five years, only one tax evader has been prosecuted.

In its own statement, HMRC said that it had used the leaked data ‘to assess, collect, enforce and prosecute tax offences.’ The government agency stated that it had brought in more than £135 million as a result and added that the maximum penalty for hiding money in tax havens had been increased to 200% of the tax evaded.

The banking giant further stated that it is ‘fully committed to the exchange of information with relevant authorities and [is] actively pursuing measures that ensure clients are tax transparent, even in advance of a regulatory or legal requirement to do so. We are also cooperating with relevant authorities investigating these matters and we acknowledge and are accountable for past control failures.’

However, according to BBC Panorama, HSBC explicitly set out to help its clients to evade tax, and especially the tax levied by the EU on hidden accounts via the European Savings Directive (ESD) – the bank sent its clients a letter regarding the ESD and outlined different ways in which clients could avoid the tax.

In further damning evidence, a former employee of HSBC in Luxembourg, Sue Shelley, in her role as Head of Compliance, said that the bank’s claims to have put the house in order had not been put into practice. When she raised concerns regarding the bank’s approach to tax, she was fired, 18 months ago in 2013. Since then, she has won her unfair dismissal case at the Employment Tribunal.

Since the emergence of the evidence against HSBC, the US, French, Belgian and Argentinian authorities have begun proceedings against the bank – Britain has yet to do so, despite HSBC being a UK headquartered bank.

According to Public Accounts Committee Chair Margaret Hodge, the UK ‘tax authorities have not been tough enough in securing, for the British taxpayer, the monies that are due’.

‘How many whistleblowers still have their jobs?’ Governance + Compliance and Navex Global’s Ethical Intelligence initiative discusses the benefits of a speak up culture – visit our website

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