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'Swiss managers most accountable' for issues: HSBC

HSBC's Douglas Flint and Stuart Gulliver

HSBC’s chief and chairman have conceded the Swiss Leaks scandal has caused “horrible reputational damage” to the bank and again apologized for the failings of the bank’s Swiss branch during the first British committee hearing on the issue.

Chief executive Stuart Gulliver and chairman Douglas Flint both apologized repeatedly during the 90-minute session of the UK Treasury select committee on Wednesday as they faced questions on allegations of tax evasion and scandalous clients linked with the bank, but both men refused to accept personal responsibility for the bank’s problems.

Questioning opened with MPs quizzing Gulliver on his own personal account arrangement, after it was revealed the chief executive had his own Swiss account tied to a Panamanian entity with a total of more than $7 million in it during the period covered by the Swiss Leaks files.

Gulliver told the committee he understood why it might look “rather strange” to members of the general public, but assured MPs the arrangement using the Panamanian entity had nothing to do with tax.

"It was purely about privacy from colleagues in Hong Kong and Switzerland. We had a computer system back in the day that allowed everybody to inquire into staff accounts ... I was amongst the highest paid people and I wished to preserve my privacy from colleagues. Nothing more than that," he said.

His status as a “non-dom” or non-domiciled resident of the UK also came under question – despite being born in Britain and being based in the UK since 2003, Gulliver is considered a resident of Hong Kong for tax purposes, and told the committee that he intended to remain a “non-dom” for the rest of his time in the UK. 

"The important point is I've paid UK tax on my HSBC earnings during that entire period [since being based in the UK], so the amount of tax I have paid is the fair and appropriate amount," he said.

Flint, the bank’s current chairman and former finance director, faced repeated questions about the bank’s reform program, and who should take responsibility for the scandals revealed by the Swiss Leaks investigation.

Under pressure to provide names, Flint conceded that the bank managers on the ground in Switzerland were ultimately the most accountable for the failings of the branch. He said since the mid 2000s (the time period covered by the Swiss Leaks files), about 70 percent of the managers had left the branch, and the remaining 30 percent had been vetted and managed as part of the bank’s push to reform.

“It’s very difficult for people outside Switzerland to get any access to the detailed account-level information in Switzerland. That’s something only the management on the ground can have access to for all the privacy and secrecy reasons,” Flint told the committee.

“The individuals that I think are most accountable both for the data theft and the weakness that allowed that to happen, and for the behaviour that was unacceptable in relation to our standards, were the management on the ground in Switzerland.”

Both Gulliver and Flint repeatedly referred to the bank’s failings as a product of “different times” and said they remained committed to continued reform.

Following a short break, the committee reconvened to question HM Revenue and Customs boss Lin Homer on the investigation into the HSBC data that the British authority received from the French in 2010.

Homer told the committee that as of this week the French authorities agreed to allow HMRC to share the data with other UK agencies, which could result in new prosecutions should they find more corroborating evidence.

Of the £135 million HMRC has collected from about 2000 non-compliant Swiss account holders identified in the data, Homer told the committee that about £120 million was from tax and interest, and £15 million was from fines and penalties. She also said there were about 100 outstanding cases where HMRC was still determining the amount of tax owed.

But she also downplayed expectations that much more tax would be reclaimed or that any prosecutions would go ahead.

“What we have is intelligence, not evidence,” she told the committee, and emphasized the problematic nature of the dataset, the limitations applied by the French authorities, and the high threshold of evidence required for prosecution against an offshore account holder.

Meanwhile in Ireland chairman of the Irish Revenue Commission Niall Cody told a parliamentary committee that Switzerland had refused to help bring prosecutions in Ireland based on the data. Cody said 13 individuals still faced investigations based on the data, which the Irish received from French authorities in 2010. 

In the United States, Loretta Lynch's nomination to be the next federal attorney general has been passed by the Senate judiciary committee, despite questions over her 2012 prosecution of HSBC for alleged money-laundering, and the subsequent agreement she made with the bank. She is expected to make it through a vote of the full Senate in the coming days to have her nomination confirmed.

In Venezuela officials announced they would ask HSBC for a list of state officials who hold Swiss accounts, following revelations that citizens of the country were among the bank’s leading clients.

And in Malta two former government ministers have had their secret Swiss accounts revealed, resulting in one forced and one voluntary suspension from their political party, according to The Malta Independent.

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