Sunday, November 11, 2012

The FSA must now focus its regulatory attention on HSBC, and bring relevant prosecutions, and if necessary, wind this rogue bank up in the public interest!


The Fantastically Supine Apologists have one last chance to assert their regulatory authority on the British financial sector by putting HSBC on notice that they are about to be subjected to the most intrusive root and branch review of their culture and their compliance practices, prior to the most stringent disciplinary action ever brought against a British bank, which will include criminal proceedings.

How much longer must the ordinary people of Britain be expected to put up with this shameless parade of organised criminality in their High Streets going completely unpunished, while decent and honest men and women are suffering so badly under the rigors of this recession. Does the FSA truly believe that the businesses which are being denied ordinary commercial loans, the savers watching their life savings being whittled away and earning nothing in interest, and the ordinary bank customers who are being gouged at every turn by fraudulent malpractice, do not notice that they, the primary regulators, are turning a deliberate blind eye to this level of blatant criminality, and doing nothing about it?

Only today, Sunday 11th, the Sunday Times, in article entitled 'The banks that still give customers a hard sell' reports that High Street Banks are even now, after all the recent scandals and fines, engaging in unlawful and criminal sales practices and forcing customers into the purchase of unsuitable financial products they don't need or want. And who are the biggest criminals of all, yes, you guessed right, HSBC, RBS and Santander. Don't these bastards ever learn, are they incapable of getting the message, that the days when they can just ritually gouge their customers with impunity, are over. Except, the FSA hasn't got that message across because they have never prosecuted anyone for this criminal activity, so they let down the investing public yet again.

The man and woman in the street knows that there is one law for the banksters and one for the rest of us, and as each scandal, each new criminal allegation and each new investigation is announced, while the FSA sits back and does nothing, means that the FSA is now held, generally, in deeper and deeper contempt. They could be doing something about this latest story of abuse. If their much vaunted intelligence facility was doing its job properly, they should be passing this information to its financial crime investigators on Monday and they should be undertaking an urgent review of product selling in these banks. They could be demanding access to the sales records of these banks, asking for the details of their objection training and interrogating their sales directors. Instead, they will do nothing, while we all wait for the next outcry of high street fraud.

The FSA has warned about these accounts before in 2010, but merely sending out an elevated news briefing is simply not enough because it does not get heard by the public. Now the FSA knows that the banks are wilfully ignoring their warnings, they must step in and do something positive, and prove that they have the will, the courage and the knowledge needed to take on these crooks. It's no good having a Financial Crime and Intelligence Division if they don't get out and start doing something positive. Just playing musical chairs with job titles is pointless

This week alone, two more major scandals involving HSBC have been publicly announced.

With HSBC already preparing to pay fines of around $1.5 billion in America for breaking money laundering rules, for deliberately laundering drug money for the Mexican cartels, the UK tax authorities have received details of every British client of HSBC in Jersey after a whistleblower secretly provided a detailed list of names, addresses and account balances earlier this week.
The list includes a British drug dealer, now on the run in Venezuela; an illicit arms dealer who was convicted of possessing more than 300 weapons at his house in Devon; three bankers facing major fraud allegations and a man once dubbed London’s “number two computer crook”, while a series of other accounts containing six-figure deposits are also registered to modest addresses in relatively poor parts of the country. These disclosures raise very serious questions about HSBC’s compliance procedures in Jersey, a jurisdiction with a less than savory reputation for handling other people's funny money. 

I am not going to listen to protestations from the Jersey authorities about the effectiveness of their much vaunted anti-money laundering regime. They have been whingeing about people like me pointing the finger at them for many years, but it's funny how, periodically, stories like this emerge. British residents put money offshore with the overriding aim of disguising the proceeds of their crimes or cheating on their taxes, and no-one with any experience or knowledge of this practice thinks or believes otherwise. I mean, It's not as if HSBC hasn't heard of due diligence IT products like WorldCheck which would have immediately thrown up the identities of these undesirable clients. But what the hell, why bother, a criminal bank likes to provide its criminal clients with the best services possible!

This does not even begin to address the question of the institutionalised level of tax evasion by British citizens which has been uncovered, and HM Revenue and Customs is now understood to be trawling through a list of the names and addresses of more than 4,000 people based in Britain who have had bank accounts at HSBC in Jersey. This work is expected to lead to the identification of many hundreds, if not thousands of people who are evading tax if the accounts have not been previously disclosed. A spokesman for HMRC said: “We can confirm we have received the data and we are studying it. We receive information from a very wide range of sources which we use to ensure the tax rules are being respected.

It is no longer acceptable for British banks to continue to adopt the insouciant approach that they cannot be expected to be responsible for UK citizens actions in cheating the British Revenue. In these straightened times, when ordinary people are being required to carry the financial can for years of banking irresponsibility and greed, and when they are being focused on by the Revenue authorities to pay every penny of tax that the authorities can levy against them, it is completely unacceptable that wealthy British citizens can open offshore bank accounts in British Banks, deposit significant sums of money, and the banks can just wash their hands and say '...it's nothing to do with us....'

If these complacent banks were fined the financial equivalent of every penny of tax evasion HMRC could calculate the UK Treasury had lost, as a result of these secret accounts, and they are, after all, providing safe refuge for this criminal financial activity (tax fraud is a crime let us not forget), then the bank should only be able to recover these fines from their clients, if the clients could not prove that they had disclosed their accounts to the Revenue. Why should HMRC, and by default, the tax-payer, have to foot the bill for this recovery process, let the banksters and their dirty clients pay for it!

The days of this offshore scam for wealthy British tax fiddlers should have ended long ago. A huge number of these so-called off-shore accounts are nothing more than electronic book entries, while the UK bank treasury function is still controlling the global book. It is nothing short of scandalous that H.M Government continues to allow these offshore boltholes to continue defrauding the British Treasury.

The HSBC Jersey client list is believed to include senior figures in the City. Dozens of bankers are understood to have deposited six-figure sums offshore, while some institutions are described as having “clusters” of employees taking advantage of the accounts. Doctors, mining and oil executives and oil workers are also heavily represented in the list. More unexpectedly, a greengrocer in the East End is understood to have more than £80,000 in his HSBC current account in Jersey. HMRC is comparing the new documents with existing tax records to identify anomalies. One investment manager has more than £6 million in his account, while the average amount held is £337,000. Of the greatest seriousness for HSBC, dozens of people with no obvious legal source of substantial income are identified to be holding large sums in Jersey.

Apart from anything else, there would appear to be a complete absence of any proper anti-money laundering controls being applied to the maintenance of these accounts. This should not come as any surprise to us, or the FSA for that matter. Around the world, HSBC has faced repeated accusations that it was not maintaining sufficient controls over the source of money deposited in its accounts. Money laundering rules which demand that banks monitor the source of money and report any suspicions to the relevant authorities.are being routinely flouted.  

In July, the US Senate investigation found that money-laundering controls were largely absent in HSBC’s operations in Mexico, and that the bank was actively laundering money for the Mexican drug cartels. The bank has also faced serious criticism for hiding Iranian transactions.
One analyst has described HSBC’s compliance practices in this regard as “a wink/nod business model” that showed “a profound lack of controls”. Such a business model can only be allowed to work when the lead regulator repeatedly fails to take concerted action to enforce its rules on its regulated members. 

Other countries are now pointing out how HSBC is facilitating criminal activity in their countries.. 'India Against Corruption' on Friday released a list of 10 names, including a politician and heads of corporate houses, and charged HSBC Bank with running ‘hawala’ (money laundering) transactions.

In a daring expose, IAC members alleged that these persons, among others, had crores of rupees sitting in Swiss banks. This information, they said, was based on a list of 10 account-holders in HSBC banks in Switzerland that was passed on to them by a senior Congress leader and cross-checked by them independently. Those named were part of the list of 700 people who had accounts with HSBC banks in Switzerland. The list was shared by the French government with India.

In its most serious allegation yet, IAC charged HSBC Bank in India with involvement in ‘hawala’ transactions, as revealed by the depositions of three account-holders whose premises were raided last year.

“You don’t even have to go to Dubai or Geneva [Switzerland] to open a Swiss bank to deposit your unaccounted money. HSBC Bank is openly and brazenly running a hawala racket in India, making the country vulnerable to terrorist money, drug money and ransom money. Someone comes and collects rupees from your house, and its equivalent in euros or dollars is deposited in a Swiss account opened for you. It can work in the reverse order, too, if someone wants to spread terror in the country,” IAC members Arvind Kejriwal and Prashant Bhushan said at a press conference. Demanding action against the bank and its top officials, they urged the 30,000-odd employees of HSBC to quit the bank “in the national interest.” They also demanded the “immediate arrest” of those who indulged in money- laundering transactions.

It now looks extremely likely that the Indian Government is likely to conduct yet another thorough 
inquiry into allegations that HSBC was involved in money laundering which may have helped terror groups operating in India. The probe is likely to be conducted by investigators of various intelligence wings of home and finance ministries as the allegations, if proved true, would have serious security implications, senior sources in India have reported. The multinational bank had, however, on Friday denied the charges and said it takes compliance with the law very seriously. The probe agencies will look into reports that funds were being routed from Pakistan and a few Gulf countries to terror groups operating in India using banking networks.

All these multi-faceted allegations against HSBC, are a clear and loud message to the FSA that something is deeply rotten in the HSBC structure. Lord Turner goes to great lengths to point out that HSBC is structured on a Holding Company basis, but that he does not have authority over some of its overseas entities. In his typical Mandarin-like way, the head of the FSA tries to explain why he does not have authority over parts of the HSBC empire.

That, with the greatest of respect to his noble lordship, is complete and utter bollocks.

He is the boss of the lead financial regulator in the UK and HSBC is one of his entities. He has the power to drag HSBC and Stuart Gulliver its CEO into Canary Wharf and tell him that the days when HSBC can go round the world behaving like a mafia organised crime family are over, and he can put HSBC management on notice that they are being required to clean up their shoddy act, or face the ultimate consequence of a petition for their nationalisation being presented to Government.

It is often said that the fish rots from the head and in the case of HSBC, the failure to promote a willing acceptance of routine financial compliance in all its areas, is something that has emanated from the Head Office in London. Its culture is determined by the way the main Group Board dictates and if the message they send is that compliance is all too difficult and too costly and is frankly a waste of time, then that is the message the offices on the ground get!

I once attended an IMLPO quarterly workshop when a senior compliance man from HSBC Group made a presentation about compliance with the new laws on Bribery and Corruption. The message he was sending was as stated above, it was all too costly, too complicated, too difficult to achieve, and that it was frankly, a waste of time. He referred to a minor cultural practice in China of the giving of red envelopes containing a few small low denomination coins to business contacts at New Year. He explained how this age-old gesture, akin to our giving our friends Christmas cards, had needed to form a major legal investigation by HSBC, costing many thousands of pounds in legal fees to ascertain if they might be breaching the Bribery and Corruption laws by continuing with the practice.

What he was really doing was reinforcing the HSBC worldwide message, 'compliance is a waste of our time and money so don't get too involved with it'! Such a message is routinely reinforced when City apologists and fellow parallel universe dwellers such as the Centre for Economics and Business Research publish rubbish such as that reported in the Sunday Times Business Section today,where they reported that according to CEBR, London was losing its dominance as a financial centre and 'short-sighted over-regulation, penal taxation and banker-bashing' was accelerating the trend.

It's not over-regulation that causes financial crime, you dimwits, it's a failure to enforce the regulations that exist already. Its not penal taxation that is causing banks and obscenely wealthy people to defraud the Revenue, because all too few of them pay any realistic levels of tax, because they routinely cheat; and its not banker-bashing that is forcing London into a subordinate position in world terms, but the fact that the world is slowly getting the message that London is the leading financial cess pit of the world and if you don't want to be screwed over by the insiders, then don't bring your business here.

These are the problems that Lord Turner and his new Centurions face. Routine acceptance of the phenomenon of financial crime has meant that London has become a sink. He must now focus on exerting his authority over HSBC and make them understand that they are required to obey the law, that it applies to them as much as anyone else, and that a failure to comply, by permitting money laundering, facilitating tax evasion, engaging in Hawala banking thus facilitating terrorist financing, are all criminal offences, and a failure to implement a policy of 'best practice' of compliance with the Money Laundering Regulations is also a criminal matter, for which HSBC executives will and must be held to account.

Only in this way will the ordinary man and woman in the UK High Street start to begin the believe that the FSA really stands for anything, and is worth the money it costs and that it means what it says,  because right now, I am not sure they have any reason so to do!






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