HSBC Chairman 'Knew Perfectly Well' About Tax Evasion, Says Whistleblower

Stephen Green
Stephen Green speaks at the Institute of Directors annual convention at the Albert Hall in London April 28, 2010. Luke MacGregor/Reuters

Stephen Green, the former boss of HSBC's Swiss private banking arm at the time of its alleged assistance of wealthy clients' tax avoidance, "knew perfectly well" what was occurring at the bank, according to the whistleblower at the heart of the scandal, Herve Falciani.

Revelations that Europe's biggest bank colluded with rich clients to help them hide undeclared accounts has sparked international condemnation with legal action being threatened in U.S., Belgium, France, Argentina and Switzerland. Lord Green, a peer sitting in Britain's House of Lords and a Church of England priest, was chairman of the bank between 2006 and 2010, but he has so far refused to comment on the revelations unearthed by the files.

Speaking to Newsweek, Falciani says that Green "came to Geneva to present the world strategy at the time [the allegations took place]" and therefore "knew perfectly well" of "every problem" at the Swiss private bank, a HSBC subsidiary.

When asked if he believed other members of HSBC management knew of the tax avoidance assistance being offered to the bank's clientele, the whistleblower said: "Of course, this is absolutely clear. Every problem was not a tiny one, the internal problems were huge. It was ongoing."

He said that his life since he leaked the files has been "a constant run" and that there are "more parts not used or revealed" so far in the leak that will emerge, but declined to comment further.

Lord Green acted as HSBC's chief executive before becoming the chairman of the bank from May 2006 to December 2010. He was then given a peerage and appointed trade minister in British prime minister David Cameron's coalition government following its election in 2010.

Richard Murphy, leading tax expert and director of Tax Research UK, says that Green should have known what was taking place on his watch and must take responsibility for what took place at the bank's Swiss operation because it was his "fundamental duty" as its director.

"He was chairman of the Swiss Private Bank. So he has no excuses whatsoever. He was not just involved in HSBC worldwide, he also happened to be chair of the Swiss private banking operation. He was a director of the bank where this happened," says Murphy. "For him, very clearly there is no buck which he can find to stop that. He has to take responsibility."

Murphy then turns his attention to the senior HSBC management, underneath Green, to call for an investigation into their conduct as they "should have known" that such assistance was being provided to rich clients.

"In the case of the senior management more generally, if they did not know, then they should have known. I think that obviously requires an investigation as to whether those people are fit and proper to be directors of any company, let alone a bank.

"Some of them will have undoubtedly retired, some of them should be retired and some of them certainly should not be advising the Church of England on how to train their ministers in the future as Stephen Green is."

In reaction to the leak, British MPs on the Public Accounts Committee have launched an "urgent" inquiry into the bank's conduct, while French prime minister Manuel Valls also announced an investigation.

"Today's shocking revelations about HSBC further expose a secretive global industry serving a wealthy elite," said Public Accounts Committee chair Margaret Hodge.

"The Public Accounts Committee will be launching an urgent inquiry to which we will require HSBC to give evidence - and we will order them if necessary".

HSBC has defended itself against the revelations that it helped its global clients evade tax as, even though it was "accountable for past control failures", it had now "fundamentally changed".

"We acknowledge that the compliance culture and standards of due diligence in HSBC's Swiss private bank, as well as the industry in general, were significantly lower than they are today," it added.

However, Murphy does not see the lower regulation standards during this period as an acceptable excuse.

"HSBC's position on this is untenable whichever way they move. They should have known what was happening in their bank," he argues. "You can't just say 'we wash our hands of what our subsidiary did because it is a subsidiary, we had a federal structure and we didn't know.'"

Markus Meinzer, senior analyst at the Tax Justice Network, says that there is a culture of "willful blindness" and a "systematic ignorance" present within banking institutions that is allowing such misconduct to go unnoticed.

"There is a general tendency of passing on the buck, of not wanting to see that it is being encapsulated into the very structure of the reporting systems of the bank.

"When the management has no knowledge about the individual cases of crooks depositing money in their banks, it is willful blindness that has led to this not knowing and this systematic ignorance of what is going on.

The accounts of over 100,000 of the bank's clients across the world were leaked by Falciani in 2007. Since being handed the data in 2010 HM Revenue and Customs have identified 1,100 people, out of 7,000 British client accounts, in the leaked files who had hidden their tax. However, British authorities have only prosecuted one person in connection with the data.

Stephen Green was not reachable for comment.

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