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Sat 14 Feb 2015 09:21 AM

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Nobody can trust HSBC any more

After last week’s tax revelations, the 'world’s local bank' is globally damaged goods, says Anil Bhoyrul

Nobody can trust HSBC any more

As surprises go, finding out that the King of Jordan and the King of Morocco have a fair bit of cash stashed away in secret Swiss bank accounts isn’t much of a surprise. So what? Why shouldn’t they? And there’s nothing illegal about it.

But HSBC’s problems, which erupted last week after the leaking of 60,000 confidential documents, are not about the finances of super-rich royals and celebrities being made public.

It is the “other stuff” that makes uncomfortable reading, and deserves to put many of the bank’s executives in the dock. For we now know that the company that claims to be the “world’s local bank” has been equally busy sorting out tax-free finances for drug dealers, gangsters and dictators. For the right price, just about anyone has been able to open an HSBC Swiss bank account, no questions asked. And further been allowed to carry bundles of cash — totalling several millions of dollars — out of their accounts.  Hundreds, possibly billions of dollars’ worth of tax has been evaded and black money given a silver home. It has been a monumental scam and a monumental sham that even the “Wolf of Wall Street” Jordan Belfort would be hard pressed to top.

So what should happen now? The biggest problem for the banking and legal community is the smell of double standards. Across the world, thousands of people have been prosecuted for evading minute amounts of tax. Try and hide a few thousand dollars and get caught, chances are you will face the full force of the law. In some countries like the UK, claim extra benefits that you are not really entitled to, and the police will be round your house pretty fast. Jail time, if you get caught, is almost certain.

But if you happen to be a billionaire who made his fortune from drug dealing, welcome to the HSBC VIP suite — and don’t worry about the cops, we won’t tell if you don’t.  So far in the UK (where the authorities have had this information for four years), there has been just one prosecution.

Now is the time for the authorities to ask big questions. The leaked documents show that HSBC set up 1,702 accounts for 1,126 UAE-based clients. They show that 91 percent of these clients were expats, with just 9 percent holding Emirati passports (it is reasonable to assume that Emiratis generally don’t need to avoid paying tax). The maximum amount held by a single UAE client was $800m. Who are these people? Where has their money come from, and is it taxable? If they have broken the law, they MUST be prosecuted.

As for HSBC itself, what does it have to say?  Franco Morra, CEO, HSBC Private Bank (Suisse) SA, told Arabian Business in a statement: “We have no appetite for business with clients or potential clients who do not meet our financial crime compliance standards. These disclosures about historical business practices are a reminder that the old business model of Swiss private banking is no longer acceptable.”

The problem is, HSBC is the problem, not the solution. Nobody can trust it any more, until at the very least the senior executives involved during the time period the leaks refer to are brought to justice. Until then, the world’s local bank is globally damaged goods.

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chalky6766 4 years ago

Since when have double standards bothered any bank, banks by their very nature are, hypocritical and greedy. Swiss bank accounts/The Swiss banking system have long been known to look the other way concerning black money its not just HSBC. For the masses there are ethical practices gloatingly handed out by banks such as HSBC however for the select few cash rich the world is their oyster. Jordan Belfort as I remember laundered his scam proceeds in Switzerland.

twistedtory 4 years ago

I haven't trusted HSBC in years, not since they "lost" deposits made through their ATMs for which I had receipts (took 11 months to resolve), refused to reverse a transaction wherein the vendor had posted a charge of AED3,000, not the correct amount of AED300 (didn't matter that the receipt clearly read 300), and took over six months to reverse fraudulent charges on my two credit cards - even after it was proven that it was HSBC's own systems that were hacked!
This latest misconduct comes as no surprise, I only hope they are held to account for it and for the variety of other misdeeds and incompetence for which they are notorious.

MT3 4 years ago

If HSBC had been satisfied to stay the hugely liquid, highly prudent, tediously ethical beast it has been for most of its history it would today stand foremost among global banks in this new era of Basel 3 etc... Instead it listened to the analysts and shareholder activists, who hate boring, and splashed the cash on Household, Republic and Bital in an attempt to drive up shareholder returns and from which the majority of its regulatory woes have emerged, ironically in large part due to those organisations total and utter un-HSBCness. Now it has to sell off and cut away so much to balance the books that it can barely be considered truly global anymore and its reputation is in the gutter. A case study in throwing it all away in one generation.

Non-Muslim 4 years ago

Dear Anil,
Did YOU ever trust ANY bank?
I never did, and I never will.

savio 4 years ago

Who can trust a banker as even between themselves they don't trust each other. I am working in a industry who daily transact between banks and I can confirm it. In the case of HSBC if we speak globally I don't think they are to blame more the anyone else. You just need to go to Geneva once and you will see next to each Watch luxury brand logo the logo of all the international banks like Citibank, UBS, BNP, Calyon, JP Morgan. What do they do there? just providing asset management for Swiss resident and cash facilities ATM??? Come on open your eyes they all are guilty. Now HSBC Dubai is a different case to study...Lack of customer service not to say inexistent, arrogant approach, poor business understanding, risk averse... But when they will have no more clients then they might change their approach.. I always laugh when I arrive in any airport and I see advert from HSBC 'We know every big business started small' .. we should maybe sue them for misreading customers

Vicky 4 years ago

I heard they closed thousands of consumer accounts in Middle East sometime back with barely any advance notice. When the bank executives have millions from tycoons and rich cats, why bother with consumer and retail banking which entail painful customer service obligations?

David 4 years ago

The headline is wrong, totally!
It should read "Nobody can trust ANY bank anymore!"
They are all morally bankrupt!