The Telegraph reports this morning that:
The tax authorities have obtained 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 Telegraph understands that among those identified on the list are Daniel Bayes, a drug dealer who is now in Venezuela; Michael Lee, 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”. A series of other accounts containing six-figure deposits are also registered to modest addresses in relatively poor parts of the country.
The disclosures raise serious questions about HSBC's procedures in Jersey, with the bank already preparing to pay fines of around $1.5 billion in America for breaking money laundering rules.
The bank is legally obliged to report to the authorities any suspicions about the source of money deposited in its accounts.
Read the rest of the account to get the true flavour of this: the accusation is a simple one, which is that HSBC has turned a blind eye to money laundering and tax evasion in its Jersey operation. Given that when assess by value of fines paid HSBC is now the uncontested lead money launderer to the world there's no surprise about that allegation, although I will comment on it in another blog.
So let's turn to the issue of Jersey. For years politicians from Jersey have crowed that they don't want money laundered funds, and Jersey Finance has crowed that they are one of the best regulated locations in the world.
But as I've always said, that's only on paper. It is, for example, easy for Jersey to comply with its regulation on offshore companies filing tax returns: it doesn't ask them to make a return and as a result has a 100% success rate. And passing laws is one thing, applying them another. To date this has been almost ignored by inspections.
I hope no more, because as this new suggestion reveals, behind the facade Jersey looks to have been what I have always and persistently, and much to Jersey's annoyance, suggested. It is a tax evasion and money laundering centre. That is not by chance; it is by design. As I wrote this year (but have been doing in similar view on this blog since it began):
Earlier this year I sat in the boardroom of one our leading banks, opposite the Chairman and told him and his co-directors that their bank wilfully ignored tax evasion in Jersey and failed to report reasonable suspicion as required by Jersey law that their customers are money laundering.
I knew I was right. The bank in question has a major operation in Jersey. It handles the accounts of many people from the UK who bank in that island. And Jersey deliberately and wilfully refuses to cooperate in full with the European Savings Tax Directive so that banks working there — including the bank in question can operate two systems with regard to disclosure of interest paid to their UK based customers. Under one system the customer can opt for the interest earned to be declared to HMRC in the UK as would happen if the account were maintained by the bank in the UK mainland. They then get paid their nterest gross. Under the other system tax is deducted at 35% — less than all the UK higher rates of tax — and the UK HMRC are not told anything about the account — they just get part of the 35% that has been deducted.
Jersey still operates this second system for just one reason — that it meets the needs of those using the island for tax evasion. I know that is true. The only purpose of the European Savings Tax Directive is to tackle tax evasion so the only reason not to fully comply with it as Jersey does not is to help tax evasion.
I do not know how many customers of the bank in question opt not to tell HMRC of the income they earn, but they have confirmed some. On average the split seems to be about 50/50 now.
Now suppose you are bank money laundering officer in Jersey. Your job is to report any transaction where you have suspicion that tax evasion and money laundering is taking place. A customer declines to have information on their earnings sent to HMRC even though you know they are resident in the UK. Must you in that case at least suspect they may be tax evading? Of course you must at least suspect it — it would be impossible not to do so without categoric proof that the customer is declaring the income — which the bank does not ask for you could not apid that suspicion except by lying. And since suspecting tax evasion in the UK is specifically a reason for reporting suspected money laundering in Jersey then every bank in Jersey that has a UK customer who declines to have the details of the interest they earn sent to HMRC must primarily facie send, without exception, details of the customer in question to the Jersey authorities as a suspected money laundering case. I follows like night does day.
Except that never happens. The banks deny that this is required. And the Jersey authorities turn a blind eye to it.
There is wilful neglect by UK banks based in Jersey to report money laundering based on very obvious simple cases of tax evasion through their banks. It must be so much easier to get away with blatant money laundering as a result.
The bank I sat in was not HSBC. But you all know its name. And they did, by the way completely deny the allegation in writing, as no doubt HSBC would have done if I had said it to them.
I don't believe the bank I spoke to.
But most of all I don't believe Jersey. You cannot deliberately set up a system that is solely designed to help money laundering and tax evasion and then say you are shocked it is happening.
Jersey's offshore industry is based on crime. I've always said so. I still do. The evidence is undeniable. And HSBC is not just a "bad apple".
And that's why Jersey, along with the Isle of Man, Guernsey, Cayman, BVI, Gibraltar and other locations under direct British control, has to be stopped from pursuing its criminal activities.
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[…] I’ve already written about Jersey today. […]
Richard, it is not illegal to have accounts offshore. Please stop branding those who do as criminals. Many British people who work overseas hold accounts offshore because it is difficult to maintain accounts onshore!
I am not defending criminals, but the requirement to know source of funds along with KYC is quite a recent thing. Monies that have been in accounts for a decade or more will have been accepted regardless, quite legally.
You are defending criminals
And HSBC has a duty to enquire on all new funds
All new funds – yes, but that is a relatively recent requirement.
The days of the early ’80 when people used to turn up with black plastic carrier bags full of cash are long gone. But the requirement of checking source of income is recent.
David,
I agree to a certain extent. At the moment the whole story is very much open to interpretation, perhaps all the uk clients are res non-doms, perhaps the criminals listed are already subject to SARs and reported, perhaps it is a fictitious list made up by a disgruntled ex-employee (I believe HSBC PB Jersey recently made a lot of employees redundant).
Where I disagree is with regard ‘old funds’ being an excuse. I work for a Guernsey bank and as far as i am aware, checking names against the likes of OFAC or Wordlcheck are not a one off requirement at the point a client is taken on. We check all names (not just account holders but their direct relations, trustees, settlors, company secretaries, directors etc etc) in our systems every 2 weeks against all available national and international sanctions lists.
If (a very big IF), these lists are proved true and HSBC have failed to perform name checking against the various watch lists and IF those check lists contained these criminals names then HSBC should loose the banking licence in Jersey IMO !!!
Shall we stop making silly excuses, like they’re all non-doms?
No one believes you
Hi Richard
I’ve come across the following scenario a number of times. UK expat employed by an overseas company, no longer UK resident so would be denied a UK bank account by many UK banks. Gives the bank a relatives address in the UK so he can maintain a UK current account. At the same time opens an account in a tax haven to receive interest gross as he is no longer a UK taxpayer and gives the bank the same UK address. He does not give his actual address because of the nature of the regime of the country in which he works.
This isn’t UK tax evasion. This person could give the tax haven bank instructions not to pass his details to the UK and if the bank was aware of the arrangement it would have no reason to suspect money laundering. It is of course possible that this person is evading tax in the country he is working in, but not certain as there are so many different possibilities.
So the waters are muddy and its not always straight forward but the banks still without doubt fail to report money laundering where they will have suspicions of tax evasion.
“A number of times”
Sure some who use HSBC are innocent, of course
I’ve been making a systemic point throughout
Sure Richard I agree with your point and I have to say that the number of cases I’ve seen involving tax evasion involving offshore accounts far exceeds the number of legitimate cases. My own personal sample and most other people’s is probably not representative thats why we should be calling on HMRC to publish exactly what percentage of accounts on Lagarde’s list with UK addresses involving HSBC Switzerland turn out to involve tax evasion, the tax evaded, penalties paid and the number of prosecutions. The same should be done for the new HSBC Jersey information though that will no doubt take time.
Richard
I agree with your entire article except for the last paragraph.
Please don’t assume that Guernsey and the Isle of Man operate to Jersey’s low standards. Isn’t is now obvious why Guernsey and the Isle of Man signed up to automatic exchange while Jersey refuses to do so? Unlike Guernsey and the Isle of Man, the big UK banks employ huge numbers of staff in Jersey. The Jersey economy cannot afford the huge job losses which would inevitably result if automatic exchange of information came in. That factor alone is why automatic exchange has not happened in Jersey. That is why the rest of your article is correct.
But please, please, do not make the massive mistake in claiming that Guernsey and the Isle of Man operate in the same way – they certainly do not.
If the story is true, and at this moment it is premature to include that somebody not yet found guilty of fraud has acted in a criminal manner, or thetefore that the bank is handling the proceeds of crime, then the bank and its officers must face criminal charges. Allowing them to get away with a fine would be a scandal when “the little guy” with a rogue trust company in Jersey gets a jail sentence.
Jersey and the Isle of Man do not operate quite to Jersey’s depths
But Jersey is so low you’re still utterly unacceptable
Richard
I think you meant “Guernsey”, not Jersey. And we don’t operate to anywhere remotely near to Jersey’s depths, not merely “not quite to Jersey’s depths”. The mega-banks in Jersey are so big that they are able to control the situation. Nothing remotely like that in the other CDs. That’s why automatic exchange is rejected by Jersey. There can be other explanation.
The odd thing about this story is that the British-owned banks offshore are already required to provide details of interest paid to UK residents, so what additional information would have been contained on that disk anyway?
HSBC is a cesspool. Their Mexican issue in Cayman earlier this year would surely have alerted the regulator in every offshore jurisdiction to the need for an urgent and extensive compliance visit. Did this happen in Jersey? If not, why not?
They do not have to supply offshore data as you imply
Please get facts right
Hi,
Richard you are dead-right I only can confirm what you are stating because in my career I set up an outsourcing center in Mauritius for a major bank in Jersey, Isle of Man and Cayman. Most of the PEPs had a criminal record ! That`s why they are in Jersey or in an other secrecy jurisdiction.
As well as covering up tax evasion, Jersey is also covering up paedophilia – there may well be a high-level Establishment connection.
American journalist Leah McGrath Goodman was trying to investigate but was arrested at Heathrow, held without access to a lawyer for 12 hours, then deported.
Here’s an article about the cover-up:
http://leahmcgrathgoodman.com/2012/09/11/freejersey-a-small-island-fights-for-its-democracy/
PLEASE SIGN THIS PETITION – better still, you could also copy and paste this and send it on to your friends:
http://www.change.org/petitions/ukhomeoffice-restore-the-visa-of-banned-journalist-leah-mcgrath-goodman-freejersey
Thanks very much!
Richard
I notice the post on the criminlaity of the HSBC &, therefore, Rev Stephen Green, has been “pulled”. Has the Rev Green been instructing some lawyers !
No – I was having HTML problems with it which were blowing the whole blog format apart
Back now
[…] then we get to Jersey – already having a problem or two with HMRC right now – and they’re torn between the devil and the deep blue sea in deciding how to react. Do […]