Last year, HSBC’s Swiss Private Bank was embroiled in a tax evasion scandal, after documents leaked by one of its IT workers were released to the French press. The year before, Public Accounts Committee chair and corporate grill-specialist Margaret Hodge accused the company of promoting a ‘mass-marketed tax avoidance scheme’ to its clients in Luxembourg. Now, the bank is one of several implicated in alleged offshore tax avoidance for wealthy clients in the Panama Papers.
Noticing a pattern? HSBC hasn’t been accused of anything illegal in Panama, but it hardly looks great. Regardless of their veracity, all these leaks have merely confirmed what most people long suspected, even assumed: banking for the rich involved creatively reducing tax bills in ways that weren’t possible for the average person on PAYE.
HSBC isn’t the only one to face allegations in the fall-out from the papers leaked from Panamanian law firm Mossack Fonseca – Credit Suisse and RBS-owned Coutts have also been forced to issue denials of wrongdoing. But because it’s already been publicly linked with avoidance in recent years, this will be more damaging for Britain’s biggest bank.
What are the allegations?
Out of the 11 million documents leaked from Mossack Fonseca, the International Consortium of Investigative Journalists (ICIJ) has identified some that among other things link HSBC in Switzerland to the billionaire Rami Makhlouf – cousin of Syrian president Bashar al-Assad and ‘regime insider’ sanctioned by the US since 2008. According to the BBC, HSBC provided financial services for one of Makhlouf’s front companies Drex Technologies after this point, with an internal email from Mossack Fonseca stating that HSBC was ‘very aware of the fact that Mr Makhlouf is the cousin of the President of Syria’.
How has HSBC responded?
The only way it could: denying illegal wrongdoing and focusing on what it’s doing to fix things. ‘We work closely with the authorities to fight financial crime and implement sanctions,’ the bank said. ‘Our policy is clear that offshore accounts can only remain open either where clients have been thoroughly vetted... where authorities ask us to maintain an account for the purposes of monitoring activity, or where an account has been frozen based on sanctions obligations.’
The real problem for HSBC is revealed in this statement, however, that a spokesman in Hong Kong gave to Reuters: ‘the allegations are historical, in some cases dating back 20 years, predating our significant, well-publicised reforms implemented over the last few years.’
Swiss banking has been forced out of the shadows since the crash, with tighter standards at HSBC’s private bank there resulting in it cropping its client base by nearly 70% between 2007 and 2015. But insisting it’s turned over a new leaf won’t stop these new leaks tarring the bank’s good name.
Much like the drip-feed of PPI fines that have been plaguing Lloyds and Co-Op Bank for years, this isn’t likely to go away any time soon. For HSBC, then, there’s little alternative but to don its sack-cloth and ashes, demonstrate its clear resolution to keep banking clean in the future and wait for its reputational penance to be over.