Bank of England May Probe HSBC Tax Allegations

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Bank of England May Probe HSBC Tax Allegations
By HSBC Holdings plc (http://www.hsbc.com/1/2/) [Public domain], via Wikimedia Commons

The Bank of England has indicated it may look into allegations that Europe’s biggest bank HSBC helped clients evade taxes as the storm surrounding the allegations shows no sign of abating. Earlier Britain’s Serious Fraud Office said it was open to discussing the allegations with British tax authority HMRC.

BoE may probe HSBC

Sir Jon Cunliffe, deputy governor of the Bank of England and a board member of the bank’s Prudential Regulation Authority, stated Friday, “The allegations raised serious issues around HSBC’s conduct.” During his interview with BBC Radio 4, he added, “We’d expect the management, the leadership of a large group, to be able to ensure that there is the culture and the operations within that group to manage those sorts of risks. I wouldn’t comment on the [HSBC] case, because we’re not at that stage yet. But this is certainly something that could be of relevance to us [the PRA].”

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The PRA is part of the BoE that focuses on the overall stability of the markets, and sets British banks’ capital and liquidity requirements. The Financial Conduct Authority, a market watchdog group, and the PRA are trying to make senior managers of banks more accountable for failings on their watch. The BoE’s deputy governor further added that in terms of standards, a bank’s leadership should have systems in place to trim the risks of questionable activities in foreign subsidiaries.

As reported by ValueWalk, a cache of secret files obtained through an international collaboration of news outlets, including the Washington-based International Consortium of Investigative Journalists, allegedly revealed that HSBC helped tax dodgers stay ahead of the law, concealed millions of dollars worth of assets and doled out bundles of untraceable cash.

A plethora of agencies lined up

Interestingly, earlier this week, Downing Street denied that any government minister knew the full facts of the tax scandal before the media reports. Former trade minister Lord Green, who was also chief executive and chairman of HSBC, has declined to comment. He was chairman of HSBC from 2003 to 2010, including the period during which HSBC allegedly concealed “black” accounts from tax authorities.

HSBC’s current chairman, Douglas Flint, has been called to give evidence to the Treasury Select Committee later this month on the issue.

Europe’s biggest bank has admitted that some clients of its Swiss subsidiary were involved in tax-dodging activities with help from the bank. However, HSBC said it has since “implemented numerous initiatives designed to prevent its banking services being used to evade taxes or launder money.”

The Financial Conduct Authority is the regulator responsible for investigating banking conduct issues. Though it doesn’t investigate tax matters, it can fine banks for not having strict controls against wrongdoing and for management failures. The FCA’s chief executive, Martin Wheatley, surprised British lawmakers Tuesday when he said he only became aware of the specific allegations against HSBC when they emerged in the media last weekend.

HM Revenue & Customs is the regulator that deals with international tax investigations. It was given a leaked dossier of account holders at the Swiss private banking subsidiary in 2010. The regulator has an investigation open, and its head of enforcement signaled earlier this week that it could broaden its scope by saying HMRC wanted to collaborate with other agencies.

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