EUROSCOPE. Banking and scams go hand in hand

The start of 2015 has proved a tumultuous time for British bank HSBC. Two and a bit years after being accused of having a “pervasively polluted” culture and having to reach a $1.9-billion settlement with US authorities over breaches to anti-money laundering rules, it is yet again at the centre of a global banking controversy. This time, it’s over its role in enabling account holders across the world to evade tax via its Swiss private bank between 2005 and 2007.

Although details about the so-called Lagarde list are still emerging, information relating to 30,000 accounts were handed to French authorities by a former HSBC employee, Herve Facliani, in 2009 and subsequently shared with authorities across the world. This week their publication in media made them available to the public at large.

Several points are now clear. The first is the sheer scale of the scandal. The French authorities have shared details with governments across the world, from Greece to India (where the data includes details of more than 1,000 clients). Countries have begun to recover hundreds of millions of pounds in revenues.

Among the most proactive has been Spain, which has recovered £220 million, according to the International Consortium of Investigative Journalists.

In November last year, Belgian authorities charged HSBC’s Swiss arm with knowingly easing and promoting “fiscal fraud” by helping wealthy business people move money to offshore havens including in Panama and the Virgin Islands. Last weekend, the Sunday Times of London pointed to a number of cases involving HSBC India; it quoted US government filings dating back to 2011 alleging that US-based personnel of the Indian division promoted services to account holders on the understanding that details would not be disclosed to tax authorities.

Second, the Leviathan scale of this fiscal fraud has promoted tax avoidance to the status of a major global political issue. While foreign bank accounts have always been a contentious issue in India, legal routes for tax avoidance for individuals are fostering growing outrage in austerity-hit Europe.

In the past week, for example, donors to both major political parties in the UK — the Conservatives and Labour — have found themselves at the centre of a battle ground, following revelations that several top donors to both parties had legally held Swiss bank accounts with HSBC.

Politicians have also come under renewed scrutiny. London Mayor Boris Johnson, who made a point of publishing his tax returns during the mayoral contest in 2012, has stoked the fire by calling on politicians to publish their tax returns.

At a time when governments in Europe continue to be very fiscally conscious, commentators have been pointing to the lax treatment accorded those with millions in undeclared offshore accounts — especially when compared with those who have cheated the State of relatively minor amounts.

While the former have often simply been required to pay the amount owed, the latter — including those who have wrongly claimed welfare payments — have faced jail sentences.

Third, cooperation at an international level hasn’t been quite amicable. France, for example, has rejected claims by the head of Britain’s revenue service, HMRC, that it had placed restrictions on the way the data shared with it in 2010 could be used.

Prior to this, HMRC head Lin Homer had told a British parliamentary committee that France had only just lifted a French-imposed restriction on the use of the data, preventing it from being shared with other law enforcement agencies. France says British officials were fully entitled to proceed with prosecutions. With countries under pressure to show who among them has been the toughest on such cases, more finger-pointing is likely.

Fourth, the twin issues of responsibility and accountability — recurring themes in recent banking scandals — have emerged in yet more stark terms. Stephen Green, the CEO of HSBC during the period when the abuse was conducted and a former director of the Swiss division, was made minister just months after the leaked data was shared with HMRC. Green, a member of the House of Lords, is a particularly interesting case; he has made the compatibility of morality and finance a major theme of his career and has authored two books on the topic: Serving God, Serving Mammon? and Good Value: Reflections on money, morality and an uncertain world .

This week he stepped down from a high profile financial lobbying group.

And it’s not just HSBC’s personnel that are coming into the frame. In the past couple of weeks, the British tax authorities have come under unaccustomed scrutiny both over the amounts recouped and over the lack of prosecutions.

In Spain, by contrast, proceedings have been launched against two senior tax officials over an amnesty granted to people to own up to undeclared funds soon after the data was handed over to Spanish authorities.

A fifth point is that technological developments have not necessarily made the means of tax evasion more sophisticated, The Guardian , for example, has documented the daily visits to a Geneva branch of HSBC by account holders from all over Europe and the US to withdraw tens of thousands in currencies other than the Swiss franc.

In one case, the bank gave an American surgeon “bricks” of dollars (worth $100,000 each) to post back to himself in the US.

The audacious manner in which those involved in grand tax theft appear to carry out their own actions has been a persistent feature of recent banking scandals. This one is no exception: according to the Guardian , codenames given to clients included “Painter” “Captain Kirk” and “Captain Haddock.”

HSBC has sought to make expressions of regret for its behaviour, for example, taking out full-page ads in several British newspapers. While apologising for the past, it has insisted that since 2008 it has brought in tighter controls.

Many remain to be convinced. A senior British minister has written to the bank over the dismissal of a former head of compliance in Luxembourg. She told the BBC investigative television programme Panorama last week that she believed she had been dismissed 18 months ago after highlighting ongoing problems.

While HSBC continues to hog the headlines, other banks are unlikely to be experiencing schadenfreude . In recent interviews, including in the London Times , whistleblower Falciani hinted that more details would soon emerge, including some relating to other banks HSBC had dealt with.

Earlier this month, UBS confirmed a fresh tax evasion probe in the US over its marketing of bearer bonds to US clients, several years after it paid US authorities $780 million.

The one thing we’ve learnt from international banking’s recent ream of scandals, from the manipulation of interest rates to the facilitation of money laundering and tax avoidance, is that tougher regulations and steps to introduce greater accountability (including making top-level executives criminally liable) cannot come a moment too soon.