City Watchdog Probes HSBC Amid Tax Scandal

Written By Unknown on Senin, 16 Februari 2015 | 23.33

By Mark Kleinman, City Editor

The City watchdog has become the latest regulator to enter the fray over the tax evasion scandal at HSBC by examining whether it raises questions about the bank's current culture.

Sky News understands that the Financial Conduct Authority (FCA) has in the past week accelerated its programme of 'close and continuous' supervision of the bank by reaching out to other agencies and HSBC executives about the affair.

News of the FCA's intervention, which does not amount to a formal inquiry, comes just days after its chief executive told MPs it had been unaware of the tax-dodging allegations despite a long-running investigation by Her Majesty's Revenue & Customs (HMRC).

In a statement issued to Sky News, an FCA spokesman said: "This [tax scandal] has served to reinforce the importance of firms operating with the right culture across all of their operations.

"The FCA is working closely with the firm and other agencies which have an interest in this matter to ensure that any questions this may raise in relation to any current practices and culture of HSBC are addressed."

It was unclear on Monday exactly how wide-ranging the FCA's examination of HSBC's "current practices and culture" would be, although one senior City figure suggested it was important for the regulator's reputation that it was seen "not to be sitting on the sidelines of such an important story".

Insiders said the FSA was talking to both HMRC and the Treasury about what steps it could take to examine the conduct issues at HSBC.

Since the misconduct at HSBC's Swiss private bank initially came to light more than five years ago, its parent has changed its senior management team and employed thousands more staff to work in its compliance functions.

Stuart Gulliver, HSBC's group chief executive, took over in 2011, and last week told the bank's 250,000 staff of his frustration that the re-emergence of the issue was obscuring his overhaul of the organisation.

"You have been working tirelessly and with great dedication to build a stronger HSBC with fully global businesses and functions, rigorous controls and the highest global standards, all underpinned by a clear strategy to serve our millions of loyal customers," Mr Gulliver wrote.

"I share your frustration that the media focus on historical events makes it harder for people to see the efforts we have made to put things right.

"But we must acknowledge we sometimes failed to live up to the standards the societies we serve rightly expected from us."

In his first remarks to the bank's workforce about the scandal, Mr Gulliver said that HSBC's Swiss private bank had been "completely overhauled" since 2008, when a whistleblower, Herve Falciani, stole data relating to tens of thousands of accounts and passed it to French authorities.

While many of the accounts were held legally, the details of tax-evading assistance given to wealthy customers by HSBC's Swiss private bank has raised the prospect of new investigations by regulators in the UK, US and elsewhere.

HSBC ran advertisements in national newspapers at the weekend apologising for the historical lack of oversight.

The tax authorities are also facing scrutiny over the dearth of successful prosecutions of HSBC customers found to have evaded taxes, while David Cameron has been urged to disclose whether he knew about the scale of the issue when he appointed Lord Green, the bank's chairman, as his trade minister in 2010.

The FCA's predecessor body, the Financial Services Authority did not conduct a formal investigation into the HSBC Swiss tax issues because it did not have the jurisdiction to do so, according to one source.

HMRC is understood to have discussed the issue with the Serious Fraud Office (SFO), although observers have pointed out that the SFO has no additional powers to prosecute tax evasion offences.

An official at the Bank of England's regulatory arm has also signalled that it could launch an examination of the affair.

Martin Wheatley, the FCA chief executive, told the Treasury Select Committee last week that he was "not aware" of the scale of the issue, which Andrew Tyrie, the Committee chairman, said was "extraordinary".

Since 2012, HSBC has been subject to an independent monitor following a $1.9bn fine for breaching money-laundering and sanctions laws.

The bank is bound by a deferred prosecution agreement running until 2017, although the Swiss tax-dodging scandal pre-dates the signing of that deal with US lawmakers.

HSBC declined to comment on its discussions with the FCA.


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