Financial regulators in
Jersey have launched an inquiry into
HSBC, one of the biggest banks on the island, following a
leak of the names of thousands of bank account holders said to include individuals with a history of links to drug and gun crime.
The
move follows confirmation that UK tax authorities had also begun
eagerly working through the list looking for possible evidence of
discrepancies in British offshore depositors' tax affairs.
The
leak is highly embarrassing for Jersey, which claims to have
comparatively tough regulations for its licensed banks, requiring them
to know who their customers are and where their funds come from.
"Jersey
has got some of the toughest anti-money laundering regulations in the
world, as assessed by the IMF [International Monetary Fund]," said
Jersey treasury minister Philip Ozouf. "There are many jurisdictions
with banking secrecy and much lower standards than we have. We are a
global leader in this area."
Geoff Cook, chief executive of the
island's powerful lobby group Jersey Finance, said: "This is a serious
matter and we note HSBC's immediate commitment to co-operating with any
investigations carried out by the relevant authorities and welcome the
clear position taken by the JFSC [Jersey Financial Services Commission,
the island's financial regulator] that any failure to adhere to Jersey's
clear standards will be robustly investigated and acted upon."
Before
joining the financial lobby group Cook was head of wealth management
for HSBC and before that worked as deputy chief executive of the bank's
operations in Jersey.
HSBC has come in for sharp criticism over
failures in its scrutiny of depositors, particularly in relation to
organised crime. This week the company said it was braced to receive a
fine which could be more than $1.5bn (£938m) from the US authorities.
This penalty follows a
finding by a Senate committee
that the bank had exposed the US financial system to "a wide array of
money laundering, drug trafficking and terrorist financing risks due to
poor anti-money laundering controls".
Friday's disclosures in the
The Telegraph added to the bank's woes as the newspaper named a handful
of individuals, with a history of criminal links, who it said were on
the leaked list of HSBC Jersey clients.
The paper reported that
the onetime owner of a farm near Lewes in East Sussex, where an
outbuilding had been used as a £600,000 cannabis farm four years ago,
held an account with HSBC Jersey in which more than £250,000 was held.
Daniel Bayes' account was said to have been registered to the same
address.
It was widely
reported in 2009
that Bayes have played a leading role in the cannabis farm – though it
was his father, Brian Bayes, who was convicted of managing the operation
and of laundering £66,000. Daniel was said to be in Venezuela during
the trial and could not attend court because his wife was ill. In
sentencing, the judge said: "It is a matter for your son's conscience,
not yours. To expose his parents like this is monstrous."
Jersey politicians and regulators point to high-profile convictions, such as that of
drugs baron Curtis Warren three years ago, as evidence of their uncompromising approach to organised crime.
HSBC
is one of the biggest banks on Jersey, its headquarters on the
esplanade dominating the seafront skyline. It routinely caters to many
British expats working overseas, notably in the far east, where the bank
also has strong ties and there is a substantial British workforce. Many
expats use offshore bank accounts at HSBC and elsewhere to legitimately
hold their overseas earnings without exposing them to UK tax.
The
leaked list of HSBC clients is reported to include names from the oil
and mining industries as well as doctors and some celebrities – all
groups which typically have significant overseas earnings. "Types and
rates of tax vary between countries, so you'll need to understand your
tax obligations (at home and abroad) and how to make the most of
potential tax efficiencies," the bank advises potential customers moving
overseas on its website.
The leaked list of clients has only very
recently been sent to Revenue & Customs, where investigators are
looking to check that leaked details correspond with the declared tax
affairs of the individuals concerned. It is not yet clear whether the
information will provide as much evidence of large-scale evasion as the
leaking of the so-called "Lagarde list" of HSBC's Swiss clients, some
2,000 of which were British.
That leak, in 2008, is said to have led to hundreds of private settlements with
HMRC,
but only one prosecution. Tax authorities have argued a pragmatic
approach to settling provides the best value for the taxpayer.
The
latest leak from Jersey is said to list the identities of 4,388 people
giving addresses in Britain who together hold £699m in offshore current
accounts. These people may also hold other offshore investments which
remain beyond the view of UK tax authorities; however, most are unlikely
to be super-rich clients of the kind known to have large fortunes
stored in offshore trusts.
Nevertheless, Phil Berwick, a director
at law firm Pinsent Masons said it was "inevitable" that HMRC would be
looking to use its criminal powers against some of people named on the
list. "If people with offshore accounts suspect that they might have a
problem, they need to be pro-active. They need to approach HMRC before
HMRC approaches them – possibly in the form of a raid of their home or
business. HMRC has taken a very interventionist approach in the past
year, more than doubling the number of raids they carry out."
A
statement from the JFSC suggested the regulator was most urgently
seeking to establish that HSBC had not breached rules on who can hold a
bank account and where funds can come from. John Harris, chief executive
of the regulator, said "The commission is unable to discuss individual
licence holder matters but any concerns regarding the use of the banking
system in Jersey involving money of criminal origin and failures to
follow Jersey's well-known and clearly documented reporting obligations
will be robustly investigated with any necessary follow-up action taken
in consequence."
HMRC said in a statement: "Clamping down on those
who try to cheat the system through evading taxes and over-claiming
benefits is a top priority for us, and we value the information we
receive from the public and business community."
The information is the latest in a string of illegal leaks of private offshore financial details from some of
Europe's
most controversial tax haven jurisdictions. HMRC is reported not to
have paid for the information on HSBC accounts, though that could not be
confirmed.
The bank insisted on Friday morning it had not been
notified of any HMRC investigation. "Should we receive notification, we
will co-operate fully with the authorities," HSBC said. "We are
investigating the reports of an alleged loss of certain client data in
Jersey as a matter of urgency."
The latest leaked information follows HMRC's receipt two years ago of
the so-called "Lagarde list".
Meanwhile, in 2007 the German authorities paid to get hold of stolen
trust company details from Liechtenstein relating to tens of thousands
of secret structures. US and UK counterparts also paid for the
information later. The offshore world reacted with outrage at these
payments, describing them as illegal.
