Friday, March 20, 2015

Integrity in Financial Services – A question of real leadership

An important story in today’s newspapers deals with former trader Paul Robson who has been banned for life from the UK financial services industry by the FCA following a conviction for fraud in America, the regulator's first public action against a trader for manipulating Libor submissions.

In 2014 Robson, who worked at Rabobank, pleaded guilty in a New York court in August 2015 to his part in a conspiracy to manipulate Rabobank’s Yen Libor submissions to benefit trading positions.

As a result, he has been banned for lacking ‘honesty and integrity'. 

This ban comes ahead of Robson's 2017 sentencing in the US and the FCA's proceedings were stayed due to ongoing criminal proceedings since they issued Robson with a warning notice in 2013.

FCA acting director of enforcement and market oversight Georgina Philippou said: 'No excuse can be made for Mr Robson’s behaviour, which was particularly serious. He was the primary submitter of Yen Libor at Rabobank for a number of years and experienced in the market. 

'He knew what he was doing was wrong. This ban reinforces our expectation that individuals and firms take responsibility for ensuring market integrity and reminds them of the consequences if they fall short of our standards.'

This story is important for a number of issues.

Firstly, it raises the vexed question of the lack of dynamic action by the FCA and the SFO against a UK-registered individual for a particularly dishonest and grubby criminal offence involving the criminal manipulation of the LIBOR benchmark. Why was the criminal case left to the Americans?

Now, it may be that the SFO had decided to let the case lie while they observed what their US counterparts wanted to do about it. It would not be too far from reality to observe that if there were US defendants involved in the conspiracy, and the US prosecutors had taken the lead in the investigation, then the trial might more properly be allowed to take place in New York.

It seems this is probably what has happened, and Robson will later be sentenced by the New York Courts in 2017, no doubt when other similar cases arising out of the same circumstances have been finalised.

This case does raise more issues however, issues which have to do with integrity and moral transparency, and which underpin an argument for the need for a greater degree of strategic leadership.

This issue of strategic leadership was also amplified by the actions of former HSBC boss, Lord Green, the former chief executive and chairman of HSBC, who has just revealed his “dismay” and “deep regret” over the tax evasion row that has engulfed the bank. 

The HSBC veteran admitted that management had made mistakes during his time at the lender, which coincided with alleged moves by its Swiss private bank to help wealthy clients hide billions of pounds in order to escape taxes in the mid-2000s. 

What sheer bloody hypocrisy!

This man, who refuses to answer any questions over what he knew and how he knew it about the tax evasion scandal was a career banker. I have every expectation that he knew all about Swiss banking methods and tax evasion issues. If he didn’t, which I don’t for one second believe, then he was remarkably ill-informed, but his career tells a different story.

In January 2005, Green became Chairman of HSBC Bank plc, the group's UK clearing bank subsidiary, and Group Executive Chairman in June 2006. In its July 2005 issue, Bloomberg Markets magazine reported that HSBC was allowing money laundering by drug dealers and state sponsors of terrorism; the magazine alleged that this had included a transfer of $100,000 in April 2000 to the Taliban in Afghanistan which had subsequently resulted in a fine levied by the US Treasury Department. 

Green denied the allegations, calling them “a singular and wholly irresponsible attack on the bank’s international compliance procedures”. Subsequent investigations however, confirmed that money laundering had taken place at the bank for several years throughout Green's tenure as Chief Executive and Chairman, chiefly for the Sinaloa Cartel.  It is widely reported that Stephen Green earned well over 25 million pounds per year at the time, although it is hard to quantify the exact amount. 

Green's successor as the top of HSBC, Stuart Gulliver, said “between 2004 and 2010, our anti-money laundering controls should have been stronger and more effective and we failed to spot and deal with unacceptable behaviour”.

So what did ‘Lord Green of See No Evil’ think his Swiss Bank was doing for UK clients, selling cuckoo clocks?

For this man to talk about setting high standards, is a travesty and an abuse of the ordinary meaning of words. This was not leadership, it was a deliberate and willing avoidance of the truth, and he needs to go and ponder the parable about camels, rich men and the eyes of needles before he spouts any more hypocritical tosh!

Edwin Sutherland, the US criminologist tried to enunciate an explanation for such behaviour among white collar workers, in his book ‘White Collar Crime’, in 1939. Sutherland defined it as;

“...A crime committed by a person of respectability and high social status in the course of his occupation...“

In other words, a crime committed by someone who would otherwise not be thought of as a typical criminal type or a person likely to commit crimes.

In his theory of “Differential Association”, Sutherland posited that criminal behaviour is a result of a process of socialization, during which criminal “definitions” (ideas) are not only transmitted culturally,  but are actually learned through social interactions with trusted intimate groups.

Learned behaviour is neither invented, nor inherited. The skills and techniques required for criminal activity are not innovations, and they are not automatically obtained from birth.
Criminal behaviour is learned. Just as one learns to prepare a meal, so too one learns to cheat a client or manipulate a benchmark.

They are acquired through a process of learning from others in the same milieu.
Sutherland states that one learns criminal behaviour through social interaction and communication with others in the same ‘trusted’ group. 

This communication-based discovery occurs during the learning process about criminal activities. One may come to learn about bank crime through discussion with others, but also by witnessing the responses of the others towards the activity, such as maintaining a group silence about the practice, if questioned by supervisors.

Most learning of crime and deviance takes place in interaction with members of intimate, personal groups, such as fellow employees in a department or on a trading desk. 

The greater implication of this proposition is that it locates trust at the root of those social interactions which encourage deviance. 

New employees would be likely to first learn how to mis-sell products or manipulate a benchmark from their close associates within the close group or team, rather than from mere general acquaintances.

Sutherland’s concept of learning identifies what is acquired through communication with intimates that facilitates criminal activity. 

Through this learning process an individual gains not only the skills and techniques required to commit the crime, but also what Sutherland called the “motives, drives, rationalizations, and attitudes” that accompany the behaviour. 

Not every employee who learns, commits offences. Instead, Sutherland calls attention to a subjective component which individuals also have to learn, or adopt, the social, cultural and psychological attitudes that drive a violation of the law.

Such rationalizations and attitudes also explain the common excuse for criminal behaviour which is that it is warranted or deserved. 

“There are no laws against it”.

“Everyone is doing it – it must be ok” What David Matza would later call ‘Techniques of Neutralization”.

If what they do is not perceived by themselves, their sub-cultural peers or professional colleagues to be criminal because they have jointly accepted that the law does not apply to them in these circumstances, then regardless of Parliamentary intention or definition, any attempt by legislators to provide systems of regulatory control, particularly those which depend upon self-regulation for their authoritative administration become futile.
This is why there is such a need for strong moral leadership within the banking milieu!
If employees learn that their colleagues are rewarded for cheating, stealing, manipulating benchmarks or otherwise indulging in thinly disguised criminal behaviour, the more likely they will be to indulge in the same dishonest conduct themselves.

If earning objectives are set so high that it means that employees will need to cheat and steal to achieve those targets, then there should be no surprise if that is what happens.

Once management has instilled the idea that criminality is rewarded, while turning a blind eye to the provenance of the revenues being driven, employees will adopt these methods as a matter of course.

Remember, criminal conduct is what Sutherland defined as a ‘learned process’, and being rewarded for doing wrong is the fastest way to create an unstable and dysfunctional workforce.

So, when Paul Robson was engaging in his dishonest conduct, he was merely demonstrating his teaching and demonstrating that he had learned well.

What on earth would have possibly otherwise encouraged a man with a senior (and presumably well-paid job) to engage in such blatant criminal conduct. He must have known that what he was doing was dishonest, so why did he do it?

Clearly he had observed too many examples of others getting away with similar behaviour until such a time when it became unremarkable to him. However, he must also have known that management would remain untroubled by his actions, as long as he was making a profit!

Where management fail to provide the necessary degree of example of good business models and fair conduct, then their staff and direct reports will quickly learn how to manipulate the working environment to their own benefit.

This is why I suggest that senior directors of banks who conduct themselves like Lord Green of ‘Hear no Evil’, fail to provide the necessary degree of leadership and good example to their staff which will overcome the tendency to resort to criminal conduct.

Banking crime is not necessarily a foregone conclusion, nor does it need to be, but until such time as bank Boards start demonstrating a far greater degree of leadership and ethical suasion, and stop making pious excuses when it can be amply demonstrated that they were failing to lead the enterprise in an effective manner, cases such as that demonstrated by Paukl Robson will continue to proliferate.

Monday, March 16, 2015

The scourge of Swiss banking.

The way Swiss banking works means we all are forced to live in a parallel tax universe. It becomes a scourge for countries trying to organise fair taxation policies.

I have been following the interviews conducted by Parliamentary Select Committees with senior officials from HSBC.

These events are great fun and they enable us to watch MPs giving Stuart Gulliver a hard time, along with sundry other grey men and women whom you would frankly have difficulty trusting to feed your cat while you were away on holiday.

The difficulty with this process is that the Committees never seem to resolve anything, and they leave the problem still wide open.

The witnesses are incredibly well briefed on what to say and how to say it, while the Select Committee members, tend to bumble along, asking wide open questions, each with their own agenda (apparently) and making assumptions they probably have no right to make.

Much as I have enjoyed watching Margaret Hodge losing it with Rona Fairhead, the HSBC non-executive director who earns in excess of half a million pounds a year for presiding over, well I’m not sure what she does, at the bank, Ms Hodge’s very righteous anger doesn’t do much more than allow the rest of us a brief period of schadenfreude, while we watched this grossly overpaid member of the Liberal Chatterati Establishment (she is also the Chair of the BBC Trust) squirm in her well-tailored suit while Margaret Hodge denounced her as untrustworthy, said she had lost any confidence in her, called upon her to resign her role from the BBC, to avoid being sacked, and generally trashed her reputation. Frankly, she would have a difficulty getting a job running a whelk stall after this public dressing down.

Sadly, this is about all the Select Committee seem to have been able to achieve, Chris Mears, another former HSBC Director came in for the Hodge softening up process, learning that he too had lost any confidence Ms Hodge might formerly have had in him!

The real problem with all this invective and reputation destruction is that while it makes for great television, as a forensic process of deep, insightful, investigative interviewing, it does nothing to help us pin the blame on the right people, who were responsible for allowing HSBC to add the words ‘Institutionalised Tax Evaders to the very rich and powerful’ to their tarnished commercial escutcheon.

You see, the way the world’s tax evasion systems were designed to work, anyone with a Swiss bank account could effectively hide his money from the oversight of his homeland Revenue collectors, and there was little the tax men could do about it.

The vast majority of countries used to work on the principle that no country would assist to enforce the tax laws of another, and the generalised fiction used to be that if X had abused his home tax laws, we would not pursue him here to help recover money for his home country’s exchequers.

Switzerland went a step further, and actively and knowingly accepted the proceeds of foreign tax evasion. Ironically, this did not apply to Swiss citizens and they were encouraged to pay all their taxes to their relevant tax authorities, but foreign tax evasion would always be certain of a warm welcome in Switzerland.

So a vast number of foreign banks have branches in Switzerland. These are largely Swiss-registered entities, operating under the home name, and would be subject to all the severe Swiss banking laws with regard to secrecy, and confidentiality, as well as the strict requirement for preventing any unauthorised person from having sight of the identities of the beneficial clients of the bank. 

If questioned, the foreign bank would say that they assumed that any clients from their home country who had a Swiss bank account would be fully aware of their responsibilities of reporting its existence to their home revenue authorities, and they would claim they felt entitled to assume that their clients were operating their accounts lawfully and within the terms of the home revenue’s requirements.

So when HSBC operated HSBC Suisse, the company was incorporated in 2001 and is headquartered in Geneva, Switzerland. HSBC Private Bank (Suisse) SA operated as a subsidiary of HSBC Private Banking Holdings (Suisse) SA.

It should be said right here that it was not a criminal offence for any non-Swiss person to possess a bank account or savings account in Switzerland, subject always to the proviso that its existence and contents were disclosed to the tax authorities of the home country in which the individual paid tax.

Simple really, but what on earth would be the point of having such an account, with its high operating fees if you then go and disclose it to your tax man. You might as well not have it in the first place.

However, and this needs to be emphasized, as far as the Swiss authorities were concerned, the Swiss bank was doing nothing wrong in allowing a non-Swiss individual to operate an account whose sole intention was to defraud his home nation of tax, relying on Swiss bank secrecy to enable him to get away with it.

What makes life even more difficult is that the senior managers of the Swiss bank, particularly if they were non-Swiss citizens would almost certainly not have been aware of the identities of the clients of the bank. Under the strict confidentiality laws, it is not certain that the CEO, particularly if he was a foreigner, would have known the identity of any client, and he would have made very sure not to ask.

Where things began to get a tad murky was when the European Savings Directive was introduced.

The original aim of the EUSD was that all countries would freely disclose interest earned by a resident of an EU country in order to ensure that the interest was fully declared in his country of residence. The plan was that non-EU countries would also agree to disclose information about the interest earned by EU residents. Many non-EU states and countries agreed to introduce similar measures. These countries included most tax havens and dependent territories of the EU countries. Countries such as the Isle of Man, Jersey, Guernsey, Cayman Islands, Andorra, Turks & Caicos, British Virgin Islands, Monaco, Switzerland, and many others thus agreed to implement similar or transitional arrangements.

Some countries agreed to fully comply with the EU Savings Directive by disclosing the names of their account holders and the interest that they earned. However, several other EU and non-EU countries, such as Switzerland, objected to the disclosure of account holders' names on the grounds that such a disclosure would be contrary to their bank secrecy laws, which prevent the disclosure of information about account holders, their assets, and their interest or other income.

Accordingly, in order to guarantee privacy and bank secrecy for EU residents who have accounts within certain territories such as Switzerland, a withholding tax of 35% was to be levied on the interest earned by those EU residents.

Then, to avoid the implications of such personal investments being subject to the witholding tax. HSBC marketed a scheme which offered clients the opportunity to switch their funds into a corporate account maintained in a tax secrecy jurisdiction, such as Panama. The EUSD did not extend to corporate funds, so if a client were to form such an additional layer of secrecy, then he would avoid becoming subject to the implications of the EUSD.

This begins to identify a very aggressive form of tax avoidance or evasion as in this example.

Indeed, Stuart Gulliver was the beneficial owner of one such scheme, although he insists that it was not done for tax-avoidance or even evasion purposes, but simply to guarantee him complete confidentiality of his financial affairs.

And I for one naturally believe him!

Nevertheless, the Swiss bank encouraged a large number of clients to adopt this tax evasive measure.

But all the time, it is extremely unlikely that the senior directors of the bank would have known the identities of the clients. They would have relied on the discretion of the respective account managers, as well as maintaining the full operational effectiveness of their own anti-money laundering provisions. The Swiss, ironically, have some of the most effective AML laws in the world, and they work and the Swiss enforce them. The only problem is that the information they possess can not be shared with other agencies, except under very specific criminal investigations, but specifically not when it comes to tax matters.

So when Stuart Gulliver and his colleagues were saying that they did not know who was banking with HSBC Suisse, they were in all probability telling the entire unvarnished truth, because they would not have known.

Indeed, Ms Fairhead not unreasonably made the point that when the directors of the bank wanted to satisfy themselves that all was in order, they had to rely on the word of the staff and the outcome of investigations by an external technical consultancy firm. All they would have been able to do was to confirm that the Swiss Bank had good ant-money laundering practices and procedures and that they were working effectively.

This would not have alleviated the concern of client identity, and to make matters more difficult, the directors would almost certainly have assumed or surmised that one of the purposes of running such an account was for tax evasion purposes. So it suited their purposes not to know the identity of the clients, or indeed anything about them at all, because they might otherwise have been required to start making disclosures under the Money Laundering provisions.

So we find ourselves caught in a Catch 22 situation. Had they been aware of the identity of any UK citizens, and possibly any other citizen of any country who was using these evasive schemes; and the information came to them through their office or employment; they could do very little other than suspect that the schemes were being used for tax evasion purposes, and they should have made disclosures to the relevant law enforcement aiuthority in the UK.

So, while It is illegal for a UK domiciled tax payer to defraud HMRC by possessing an undisclosed Swiss bank account, and using that account to disguise sums which would ordinarily become subject to tax.

The same situation is not illegal in Switzerland.

So, until a situation such as we now observe arises, whereby the identities of foreign nationals who possess Swiss bank accounts, and who have not made relevant disclosures comes to light, there is very little the UK authorities can do, because they cannot identify who is defrauding the Revenue, and the Swiss will not tell him.

Now, with the knowledge of the identities of the tax evaders, HMRC can begin oroceedings against all those persons who made use of the facilities to defraud the UK Revenue.

Further, they can now bring proceedings against relevant persons inside HSBC, if it can be shown that British employees of the Swiss entity came to the UK and solicited UK clients to make use of the new tax evasive facilities, and they can be prosecuted for various offences of incitement, or conspiracy to commit the relevant offences.

Then there are the offences under the Money Laundering Regulations of money laundering. Albeit the information is now possessed through these disclosures, it can now be clearly shown that HSBC were helping UK citizens to evade tax, and they are thus likely to be charged with Money Laundering.

These issues are all a matter for the Criminal Justice Authorities.

It is of course massively hypocritical of HSBC to now apologise for such actions, calling them ‘unacceptable’. They must have known or at the least suspected that any UK citizen who had a Swiss bank account, would be tempted to use it to evade UK taxes, albeit they could not prove at the time, the identity of their own clients, because their Swiss colleagues would have been prevented from telling them.

Of course, half an ounce of common sense, and a flair for investigation would have demonstrated that the profits the Swiss bank was making far outstripped profits in other bank sectors, which might at least have caused them to wonder ‘why’?

However, without the actions of the French insider who downloaded the relevant records and published them to law enforcement authorities, we would still be in the dark as to the dubious activities of HSBC Suisse.

However, this will always remain the conundrum when Swiss registered banks offer banking services to persons from outside their domicile, and no amount of well-intentioned shouting and insults from Select Committees, will alter that fact.

Tuesday, March 10, 2015

The new bonfire of the vanities.

In a blog-piece I wrote not so long ago, I challenged Britain’s Banks to demonstrate that they could continue to return the levels of profitability they had hitherto made, but to do it by acting ethically and honestly and not through a series of criminal offences! My challenge to them was that I did not believe they could do it!

Some years ago, a good friend of mine rang me up to tell me he was going to work as a senior MLRO for a bank in the Middle East.

‘Nice jpackage’. I said, ‘but I thought you had a good job with Barclays?’

‘I had to leave them’ he said. ‘I was wondering all the time when I might be arrested, and I wanted to be able to sleep at nights’!

As a senior and experienced compliance officer at Barclays Capital, he was caught in the middle of the heady days of the Diamond regime, but he was still trying his best to make sure that the Money Laundering Regulations were being respected and applied. He wanted to make sure that the KYC provisions were respected, and if or when he was not satisfied that the necessary due diligence about the identity of the beneficial owner had been properly achieved, he would require more investigation, or further documentation before allowing the funds to be traded.

He was particularly specific about PEPs and insisted that the relevant enquiries were satisfactorily completed.

If he was not happy about the provenance of the funds he would discuss the client with the account managers to see if they could acquire more clarification of the source of the deposits, but if this could not be achieved, he would advise the account manager of his intention to make a Suspicious Activity Disclosure to the relevant law enforcement agency.

He was a tough, experienced compliance professional, and his insistence on ensuring that the laws dealing with Money Laundering were obeyed, led to his having to endure screaming arguments, torrents of abuse from traders and account managers, ostracism from the relevant senior managers who accused him of not being part of the team, and a working life which was one long series of battles.

Another man (or woman) with less moral courage, would have long since sought the line of least resistance and would have stopped fighting the other members of the team, and just signed off whenever required.

He worked closely with the police when they investigated STRs that were made and he sought to make sure that the relationship between the bank and the law enforcement agencies was respected, and most importantly, that as far as he could, he sought to protect the reputation of his employing institution. He should have saved his breath, because no-one else around him cared and instead, confronted him at every turn.

All this did was to make his life a very unhappy one, and in the end, sooner than continue to face the daily grind of having to explain why money of deeply suspicious criminal origin was not welcome, he chose to leave and go elsewhere.

I have long suspected that the UK Investment Banking arm was very closely linked with the fortunes in dirty money that daily found its way into the City of London. Indeed, I believe that the only thing that helped to provide liquidity to some UK banks in the really dark days of the credit crisis, was the amount of drug money from dubious foreign sources sloshing around the City banking sector. Not for nothing could it be said that the UK banking sector was truly drug dependent!

Consider the implications.

The City of London is the most effective and connected financial market in the world, bar none. It connects effortlessly with the global offshore sector, many of whose practitioners are former British protectorates or in some way connected with GB.

Investment banking has a varying number of technical names to describe its professional function, but the one I like best is ‘gambling’!

I know there are a large number of people out there who will accuse me of ignoring vast swathes of banking activity which are undertaken for legitimate reasons, but I will try and show why those functions are more properly the function of more traditional ‘merchant banking’, financial advisory work, as opposed to ‘investment banking’.

For example, when a big corporation asks for the bank's help if it wants to borrow money in the bond markets, or float itself on the stock market, or buy up another company. In this capacity, the investment bank acts as an impartial adviser - like a solicitor or an accountant - using its expertise to help its client in return for a fee.

This group of activities was undertaken by traditional British Merchant Banks for many years and with a great degree of success. But it never generated the level of fees and revenues that were generated by the investment banks.

This is what happens when investment banks also do something else quite different – dealing directly in financial markets for their own account. Then an investment bank's "markets" division makes money by buying financial assets from one client, and then selling them to another - often with a hefty mark-up.

But it was the capital markets whizz-kids who were behind the last decade's boom in "derivatives" – the complex contracts that allowed clients to speculate on financial markets, by reversing the polarity of the traditional use of the risk-hedging function of derivatives and using them to amplify risk so as to earn inflated profits, which gave the ‘investment’ arm of these institutions the belief that significant levels of profitability were a foregone conclusion.

Once the taste for dealing on their own behalf, or proprietary trading became a profit centre in its own right, then the investment banks started to trespass into areas where the ordinary rules of business were quickly jettisoned.

Whether it was in straight-forward derivative trading for the bank’s own book, or dealing in options strategies, trading baskets of stocks against put options designed to be unwound at a strategic moment to enhance profitability; market making in shares, manipulating benchmark products, dealing in Foreign Exchange, you name it, once that stage had been reached, then the potential for down-right criminality became the operating norm!

In a blog-piece I published entitled ‘Behind every great fortune there is a great crime’, I wrote;

   You only have to look at the activities of all the major banks in the perpetration of the institutionalised level of PPI fraud which has lasted for many years, to understand the truth of this allegation. The monies made in the pursuit of profits and the ‘grabbing of the biggest share of the customer’s wallet’ which so identified the PPI fraud era, has enriched many bankers a hundredfold.

“...Add into this the other levels of criminal fraud perpetrated against clients, the deliberate lying about the valuations of debt-secured securities followed by the fraudulent foreclosure on loans, the false enrichment of bankers at the expense of client’s criminally forced out of their contractual obligations, and you begin to see a positive policy of criminal activity being widely perpetrated.

“...Then you start to look at the level of foreign money laundering, sanctions busting and other breaches of anti-terror controls being imposed by Governments, many if not most of which were routinely ignored by the banks. HSBC led the way with their billions of dollars recovered from their money washing activities on behalf of the Mexican Drug Cartels.

“...Libor, and Forex manipulations are among the more recent exposees, and we have absolutely no way of knowing how much criminal money has been recovered from these dishonest adventures.

“...For these, and for other reasons, I assert that the level of organised criminality is so widespread in the banking galere that it is impossible to calculate the amount of money they have created for themselves, and which has been paid to them in the form of bonuses. 

While their basic salaries may remained relatively modest, they have more than made up for the wealth they have absorbed through other payment mal-practices, as well as tax avoidance methods.

“...I lived through the era of change as a detective at the New Scotland Yard Fraud Squad, and I watched with mounting irritation and bemusement while perfectly proper cases we should have been investigating were undermined by Government lawyers, and later, as a regulator, I observed the spineless kow-towing of the regulatory regime towards those who were facilitating the movement of the growing levels of criminal money being slushed through the UK financial sector.

“...I believe that it is now too late to put the genie back into the bottle, we must live with the fact that the City of London (has been) and is run by a gang of organised criminals who make Al Capone look positively benign!

“...Without their intervention, as an integral component in the onward transmission of the billions (if not trillions) of foreign dirty money which comes to London, I seriously wonder how UK plc would survive if we had to run our affairs lawfully and properly, I am not sure we could do it...”

Well, imagine my great surprise when I read the Sunday Times this week-end and saw the story “...Who did you think you were kidding Mr Banker...”

The piece was sub-titled “...Barclays and RBS have reined in their ambitions to be global players in investment banking. Will the City regret it..?”

Quoting from the article;

“...Now, Barclays is in retreat. Anthony Jenkins, Barclays boss, has already slashed the size of the Investment Bank, and last week, professed he had limited patience with the rest.

At Royal bank of Scotland...the flight is full blown. Its giant investment bank will shrink by two thirds over the next three years. By the end of it, tens of thousands of pin-striped warriors will have been scythed down.

“...Due to the damage done by the credit crisis, however, when over-ambitious and greedy bankers cost tax-payers billions, the Industry is without friends. Britain is saying goodbye to the commanding heights of investment banking and  - rightly or not – good riddance...”

The authors are not like me. They do not go the full 9 yards and identify the reasons for the wholesale retreat from what was a highpoint of British Banking, but their message is still clear.

Well, I have no such reservations. It is, as I challenged the bankers before, show us, prove to us that you can continue to make the scale of inflated profits and pay the obscene level of bonuses you have traditionally paid, but by doing so honestly and without committing criminal offences.

Demonstrate to us that you were making all this money because of the so-called highly qualified skills you boasted about so assiduously and for which you had to pay such high salaries.

Remind us of the rocket-science brains your dealers and traders are said to possess to enable to to make all this money, so that we can justify to ourselves the fact that the rest of us are unworthy to deserve similar salaries and bonuses.

And the simple fact is, they can’t. I never thought they could and now, they have admitted it!

Barclays and RBS, two of the most aggressive and highest risk-taking institutions in the business are now openly admitting that they cannot make these returns using the new, conventional, hopefully ethical, integrity-driven banking regime that their new CEO’s are seeking to incorporate.

Banks don’t give up highly profitable business centres for no reason. These banks have discovered what most of us outside the industry have known for a long time, and that is the business model they used hitherto was one more akin to the business methods of Mafiosi, or organised criminals.

Now, using the newly adopted methods which, we are told, incorporate greater honesty, accountability and integrity, the banks are discovering that the traditional profits are not available any more.

We should be pleased that such a series of reforms is taking place, but not too quickly! Let us remind ourselves that London is and remains still, the leading magnet for the world’s funny money. As the Sunday Times article points out;

“...Whether they are UK-owned investment banks or not, is not the issue. The question is whether investment banking is taking place in terms of London being attractive as a location, it remains strong..!”

London will continue to be attractive to the world’s crooks, oligarchs, dictators and other corrupting influences for a long time to come!