Swiss Leaks: Make it easier for bankers to pay for criminality

Opinion: ‘When the EU introduced the European Savings Directive in 2005, in an effort to clamp down on tax evasion by EU citizens, what did HSBC Private Bank in Geneva do?’

‘A number of countries (France, Belgium and Argentina) have decided to have a go at securing criminal prosecutions against HSBC Geneva on the back of the files stolen from the bank by a then employee in 2006 and 2007.’ Photograph:  Harold Cunningham/Getty Images

‘A number of countries (France, Belgium and Argentina) have decided to have a go at securing criminal prosecutions against HSBC Geneva on the back of the files stolen from the bank by a then employee in 2006 and 2007.’ Photograph: Harold Cunningham/Getty Images

 

Is it unfair to say that despite the awfulness of what was revealed over the past number of days in relation to HSBC Private Bank in Geneva, the revelations are really not that surprising?

Before returning to that question, and how something can perhaps be done about international banking, it is worth dwelling a bit on what has been revealed.

The people who ran this bank provided financial services to people who were involved in running arms to wars in Africa where child soldiers were involved. When the people who were profiting from this turned up at the doors of HSBC Private Bank, they felt assured of discretion in relation to their financial affairs.

Likewise with people making enormous sums from trading in so-called blood diamonds, or politically powerful people, or persons linked to them, who came from poor, corrupt, oppressive regimes but had multi-million euro balances in their HSBC accounts. Or people who asked for tens and hundreds of thousands of pounds and dollars and euros, to be prepared for them in cash. And even larger sums than that.

And the well-dressed bankers with polished shoes who dealt with their affairs were careful to be ultra polite and if, as the notes on the bank files often record, they were taken out afterwards for lunch in a top hotel or restaurant, they would also note this, and record the extent to which the client expressed himself, or herself, to be satisfied with the bank’s service.

And then, of course, there were the tax dodgers. From the well-off to the wealthy to the super-rich; from Ireland, the UK, France, Spain, Australia, sub-Saharan Africa, the Magreb, the Arabian Peninsula and North and South America.

While governments struggled to keep up with citizens’ demands for basic public services, and while the account holders themselves used those services, all the time the bank held deposits that had not been declared.

When the EU introduced the European Savings Directive in 2005, in an effort to clamp down on tax evasion by EU citizens, and Switzerland caved in to the pressure and agreed to impose a withholding tax on interest payments to EU citizens, but not to exchange information, what did HSBC Private Bank in Geneva do?

Parasitic jurisdictions

Meanwhile on the other side of the Atlantic HSBC was allowing itself to be used for money laundering by Mexican drugs dealers, and embargo busting operators dealing with, among other nations, Iran. This led to it having to pay a $1.9 billion fine in the US in early 2013 and being subjected to a “deferred prosecution” that may now be torn up. Some at the time discussed the withdrawal of HSBC’s licence to provide banking services in the US.

A number of countries (France, Belgium and Argentina) have decided to have a go at securing criminal prosecutions against HSBC Geneva on the back of the files stolen from the bank by a then employee in 2006 and 2007.

The Revenue Commissioners, who got the files in 2010 from the French, has since taken three successful prosecutions against former Irish account holders, but has decided the evidence does not exist to support prosecuting the bank for aiding tax evasion.

The British tax authorities offered a deal to those who settled, and have secured only one prosecution despite collecting £135 million in taxes. Politicians in the UK will now be probing this performance, and asking why the UK is not seeking to prosecute the bank.

So what can be done? Even a $1.9 billion fine is manageable when you produce four to five times that in profits every quarter. And hitting such banks with fines that really, really hurt them, raises the thorny too-big-to-fail argument.

In the wake of the HSBC revelations, the idea has surfaced again that it would be helpful if the authorities, in the light of such scandals, went after the personal assets, and the liberty, of the people who worked in banks and were personally involved with, or responsible for, their bank’s improper activities.

In the UK, Danny Alexander, Treasury chief secretary, said on Monday that the law might need to be changed to allow the authorities to prosecute senior bankers who “colluded” in tax evasion.

As matters stand, senior bank executives pursuing greater profits, can press that a bank cuts corners and indulges in sociopathic practices, and then walk away with their pay and bonuses only for the truth to emerge years’ later.

Revenue collection

While it may be expensive, and difficult, the deterrent effect of seeing more people go to jail, could make the practice more attractive not just in terms of justice, but in money terms too.

The world is full of illegal drugs networks, third world, and not so third world kleptocracies, corporate corruption, evil arms and women traffickers, mafia groups, and tax dodgers. What they share in common is the need for first world banking services. Cleaning up global banking is an enormous challenge, but it could make the world a much better place. Colm Keena is Public Affairs Correspondent. The Irish Times is a media partner with the International Consortium of Investigative Journalists which co-ordinated the Swiss leaks project

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