Another example of tax evasion, this time from “the world’s favourite bank”


 

Is the HSBC Channel Islands account list an isolated case of a mistake, or a systemic failure of a UK bank? That is the question we should be asking after HSBC is once again in the spotlight for the way it tried ever so hard to become “the world’s favourite bank”.

HSBCThe Daily Mail has a good report on the interesting account holders in HSBC’s Channel Islands Accounts. But a US Senate report, that has only had only superficial reporting in the UK, is relevant this morning because there was evidence of HSBC US giving haven to tax evaders in the US.

The Senate report was not undertaken by the banking committee, but rather by the Homeland Security committee, and its motive was the following:

“To examine the current money laundering and terrorist financing threats associated with correspondent banking, the Subcommittee selected HSBC as a case study.”

Of the can of worms revealed, the UK press has so far focused on the accusation of laundering Mexican drug money – but the report, extending to 339 pages, in fact covers the following:

• Servicing a high risk affiliate (The Mexican Problem);

• Circumventing Office of Foreign Asset Control prohibitions (“HSBC affiliates sent potentially prohibited transactions through HBUS involving Burma, Cuba, North Korea, Sudan, and other prohibited countries or persons”);

Disregarding links to terrorism;

• Clearing suspicious bulk traveller’s cheques (in Japan); and

• Offering bearer share accounts.

It is this final accusation that is relevant this morning.

To quote the report fully:

“Over the course of a decade, [HSBC US] opened over 2,000 accounts in the name of bearer share corporations, a notorious type of corporation that invites secrecy and wrongdoing by assigning ownership to whomever has physical possession of the shares …The Miami bearer share accounts alone held assets totaling an estimated $2.6 billion, and generated annual bank revenues of $26 million…

Two examples of the accounts illustrate the risks they posed. In the first, Miami Beach hotel developers, Mauricio Cohen Assor and Leon Cohen Levy, father and son, used bearer share accounts they opened for Blue Ocean Finance Ltd. and Whitebury Shipping Time-Sharing Ltd. to help hide $150 million in assets and $49 million in income. In 2010, both were convicted of criminal tax fraud and filing false tax returns, sentenced to ten years in prison, and ordered to pay back taxes, interest, and penalties totaling more than $17 million.

“A second example involves a wealthy and powerful Peruvian family which pressed [HSBC US] to grant a waiver from its AML requirements that bearer share corporations either register their shares or place those shares in bank custody. Bank documents showed how HBUS bankers pressed Compliance personnel to grant the waiver to please a wealthy client…

“Today, following an initiative that concluded in 2011, [HSBC US] has reduced its bearer share accounts to 26, most of which are frozen, while at the same time maintaining a policy that allows the bank to open new bearer share accounts in the future.

So while HSBC is not commenting on the HMRC list this morning, there is a broader question about the culture in HSBC and what the UK board of the overall group knew about, and signed off on.

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