An FCA spokesman said the regulator faced difficulty in pursuing action against HSBC because the behaviour publicised so far involved its Swiss unit, HSBC Private Banking (Suisse) SA, which the spokesman said was beyond the FCA's jurisdiction.
Britain's financial watchdog said it was investigating HSBC following reports it helped clients evade taxes but said it was focusing on the bank's current behaviour rather than alleged past abuses. In its first statement on the matter, the Financial Conduct Authority (FCA) said it wanted to verify that the "failings" the bank admitted to were in the past. "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 said.
Gary Greenwood, analyst at Shore Capital Stockbrokers, said the focus on current behaviour was positive for HSBC if, as the bank said, it had cleaned up the problems at its Swiss private bank. But Nick Smith, who sits on parliament's Public Accounts Committee which last week criticised the UK tax authority for failing to take action against HSBC, said he was disappointed the FCA had settled for a narrow focus. Smith noted the FCA's US counterpart, the Securities and Exchange Commission (SEC), had taken legal action against Swiss banks for assisting clients to evade US taxes. "We need a belt and braces effort here. The SEC have shown the way, the FCA need to grip this properly," he told Reuters in a telephone interview.
Last year, the SEC forced Swiss bank Credit Suisse to admit wrongdoing and pay $196 million in relation to tax evasion involving US clients. An FCA spokesman said the regulator faced difficulty in pursuing action against HSBC because the behaviour publicised so far involved its Swiss unit, HSBC Private Banking (Suisse) SA, which the spokesman said was beyond the FCA's jurisdiction. However, lawyers have told Reuters that if, as alleged in news reports, HSBC Private Banking (Suisse) SA sent staff to Britain to advise clients on how to dodge UK taxes, the Swiss unit could come under the FCA's jurisdiction. The SEC case hinged on the fact Credit Suisse bankers travelled to the United States to push products and advice they were not licensed to offer. The FCA spokesman declined to say if the agency would investigate the allegations that staff from HSBC Private Banking (Suisse) operated in Britain.
HSBC said last week it was cooperating with relevant authorities but declined further comment on Monday. Jon Cunliffe, deputy governor at the Bank of England, HSBC's other main regulator in Britain, said on Friday the BoE may look into the tax allegations. Britain's Serious Fraud Office said on Thursday it was open to discussing the allegations with British tax authority HMRC. Parliament's Treasury Select Committee are also taking an interest and will grill HSBC Chairman Douglas Flint and CEO Stuart Gulliver on February 25.
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