GRC Professional - February 2015 Edition | Page 22
WHAT WENT
WRONG?
HSBC LEAK
EXPOSES TAX RISK
The leak involving HSBC’s secret Swiss accounts is another
damaging blow to a banking industry still reeling from the fallout from the financial crisis. What impact will the incident
have? Is tax an emerging regulatory risk? Daniel Sheehan.
The bank
repeatedly
reassured clients
that it would not
disclose details
of accounts
to national
authorities,
even if evidence
suggested that
the accounts
were undeclared
to tax authorities
in the client’s
home country.
ONE THING THAT EMERGED CLEARLY
from the G20 held in Brisbane last year was that
governments were determined to do more to clamp
down on tax evasion. Increasingly, in a global
environment of slow growth, governments are concerned about their fiscal positions and are looking at
ways to close revenue shortfalls.
Following the G20 event in Brisbane, Chinese
authorities said they would tighten their monitoring of foreign companies, in order to prevent
them from avoiding tax. The official Xinhua news
agency, citing tax officials in the country, reported
that China would monitor profit levels of foreign
companies comprehensively to make sure that they
are not using tax avoidance techniques.
In Australia, Treasurer Joe Hockey has also
threatened to crack down – though actual progress
has been slow. While, as is often in the case in regulatory matters, the US has led the world in enforcement action. Credit Suisse pled guilty to a criminal
charge for its role in helping Americans evade taxes.
US Attorney General, Eric Holder, said Credit
Suisse will pay more than $2.5 billion as part of an
agreement with US authorities.
In this environment, the latest leak could not
have come at a worse time for HSBC, or the banking
industry more widely. Documents, obtained by
the International Consortium of Investigative
Journalists (ICIJ) via the French newspaper Le
Monde, lifted the lid on $100 billion worth of secret
Swiss bank accounts.
According to the ISCIJ, HSBC Private Bank
(Suisse) continued to offer services to clients
20 GRC Professional • February 2015
who had been named unfavourably by the United
Nations in court documents and in the media as
connected to arms trafficking, blood diamonds
and bribery.
HSBC served those close to discredited regimes,
such as former Egyptian President, Hosni Mubarak,
former Tunisian President, Ben Ali, and current
Syrian ruler Bashar al-Assad.
Clients who held HSBC bank accounts in
Switzerland include former and current politicians
from Britain, Russia, Ukraine, Georgia, Kenya,
Romania, India, Liechtenstein, Mexico, Lebanon,
Tunisia, the Democratic Republic of the Congo,
Zimbabwe, Rwanda, Paraguay, Djibouti, Senegal,
Philippines and Algeria.
The bank repeatedly reassured clients that it
would not disclose details of accounts to national
authorities, even if evidence suggested that the
accounts were undeclared to tax authorities in the
client’s home country. Bank employees also discussed with clients a range of measures that would
ultimately allow clients to avoid paying taxes in their
home countries. This included holding accounts
in the name of offshore companies to avoid the
European Savings Directive, a 2005 Europe-wide
rule aimed at tackling tax evasion through the
exchange of bank information.
It is not yet known if HSBC will face more
legal problems, as a result of the leak. In 2012,
HSBC agreed to pay more than $1.9 billion to settle
US criminal and civil investigations, and entered
into a five-year deferred-prosecution agreement for
sanctions and money-laundering violations.