Wednesday, December 26, 2012

HSBC, the rogue bank

On Christmas Day, Himpunan Hijau activists held a demonstration in Kuantan against a major international bank over its involvement with Australia's Lynas Corporation. Their target was the HSBC branch at Jalan Mahkota. Protestors claim that the bank was financing Lynas and was thus contributing to environmental degredation.

About 50 protestors took part in the event, dubbed the Black Christmas gathering complete with a black Christmas tree. They gathered at about 2.30 PM for the 25-minute protest in the rain. Protestors carried placards venting their anger towards Lynas and HSBC, with one reading "Our Christmas has been darkened".

After they were done, the black Christmas tree was left at the bank's doorsteps.

Police personnel were at the scene, but did not take any action.

Himpunan Hijau chairperson Wong Tack said banks must not have a neutral stand on environmental issues and must show a sense of corporate social responsibility. More so, HSBC because it has been in the news for a lot of wrong reasons!

US prosecutors announced on December 11, 2012 a record $1.92 billion (RM5.87 billion) settlement with HSBC.

A 335-page report compiled for the committee detailed how HSBC’s subsidiaries transported billions of dollars of cash in armored vehicles, cleared suspicious travelers’ cheques worth billions, and allowed Mexican drug lords to fly whole planes loaded with money laundered through Cayman Islands accounts. The bank even managed to label Mexico, ravaged by corruption and drug wars, as “low risk”.

So rampant was the practice, prosecutors said, that on some days drug traffickers deposited hundreds of thousands of dollars at HSBC Mexico accounts. To speed things along, the criminals even designed “specially shaped boxes” that fit the size of teller windows at HSBC branches, according to the documents.

As far back as February 2008, Mexican authorities had told the CEO of HSBC Holdings Plc’s Mexico unit that a local drug lord referred to the bank as the “place to launder money”! Prosecutors said a multi-year, multi-agency probe into such transactions revealed how HSBC had degenerated into the “preferred financial institution” for drug traffickers and money launderers.

David Bagley, the head of compliance at HSBC, resigned from his position on July 17 in front of a US Senate subcommittee after being accused of operating a money-laundering conduit for “drug kingpins and rogue nations” as well as terrorist financing. And according to the Senate committee, HSBC accepted more than $15 billion in bulk cash transactions from subsidiaries in Mexico, Russia, and other countries at high risk of money laundering between mid-2006 and mid-2009, but failed to conduct proper checks. Other subsidiaries moved money from Iran, Syria, and other countries on US sanction lists, and even helped a Saudi bank linked to Al-Qaeda shift money to the United States.

UK’s The Telegraph has already disclosed that Britain’s biggest bank is at the center of a major HM Revenue and Customs investigation after it opened offshore accounts in Jersey for serious criminals living in this country. [Jersey is a British dependency but has a separate tax system and is considered a “tax haven”].

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 in the week beginning November 12, 2012. 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 total value of the accounts under investigation is said to be about $1.1 billion.

The bank is legally obliged to report to the authorities any suspicions about the source of money deposited in its accounts. HM Revenue and Customs is understood to be trawling through a list that has identified 4,388 people based in Britain who had bank accounts at HSBC in Jerseyholding £699 million in offshore current accounts in addition to having billions of pounds more in investment schemes. This work is expected to lead to the identification of hundreds of people who are evading tax as the accounts have not been previously disclosed.

The whistleblower who has obtained the information also has further lists of offshore HSBC clients with addresses outside Britain, including 602 in Israel, 527 in France, 333 in Spain and 117 in the US. In total, the leaked HSBC Jersey client list is thought to contain the names and addresses of 8,474 people, including more than half that are based in the UK.

The use of tax havens by British residents and citizens to minimise tax is legal but subject to a range of complex rules and regulations. British taxpayers have a duty to report to HMRC details of money held offshore that is liable to tax.

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 demand that banks monitor the source of money and report any suspicions to the relevant authorities. Most banks take an active approach to this duty but HSBC is showing itself to be a rogue bank. Shame on you, HSBC!

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