UK watchdog to tackle HSBC on standards

UK watchdog to tackle HSBC on standards
Published: 17 February 2015
HSBC is facing searching questions from regulators over the quality of its internal checks and culture after the Financial Conduct Authority said it was looking into recent revelations that its Swiss private bank helped clients to evade taxes.

The FCA was likely to examine the case of Sue Shelley, the former head of compliance in Luxembourg at HSBC's private bank, who was dismissed 18 months ago for raising concerns about tax-dodging, said one person familiar with the situation.
The FCA said no meeting with Ms Shelley had been scheduled. But the regulator added that it took the issue of whistleblowers "very seriously" and was making it a regulatory requirement that financial institutions have procedures to deal with internal complaints. Ms Shelley, who won an unfair dismissal case in an industrial tribunal, told the BBC's Panorama programme last week that she was fired for pointing out compliance failures as recently as 2013.

"I think the verbal messages were great but they weren't put into practice and that disturbed me greatly," she said.
Vince Cable, the business secretary, wrote to HSBC last week to express his concern at Ms Shelley's dismissal and to ask whether the bank had really cleaned up its act. The FCA said it had not launched a formal investigation into HSBC and was not looking into the historical details that were published by dozens of news organisations last week allegedly showing the bank colluding with clients to dodge taxes.

Instead the FCA is focused on the question of whether the bank has tightened up its internal controls and culture sufficiently to prevent such activities from happening again - something it claimed in a statement last week.  The bank said that its Swiss private bank had "undergone a radical transformation in recent years" and that it had "implemented numerous initiatives designed to prevent its banking services being used to evade taxes or launder money".
A handful of UK regulators have expressed an interest in the HSBC case, which has become a political football three months before the general election. HM Revenue & Customs was given a leaked dossier of account holders at the Swiss private banking subsidiary in 2010.

It has an investigation open and its head of enforcement signalled it could broaden its scope by saying the Revenue wanted to collaborate with other agencies. The Serious Fraud Office has said it is open to discussions with the Revenue.

Martin Wheatley, the FCA's chief executive, told the Treasury select committee last week that it had not been told of the Revenue's probe into HSBC. He said it would be for the monitor, appointed by US authorities and the FCA in the wake of a $1.9bn money-laundering fine in 2012, to question the bank on the tax allegations.

The Bank of England has also signalled that it may look into the affair. French magistrates, who put HSBC Private Bank under formal investigation in November, have ended their probe and prosecutors now have three months to request that the bank be sent to trial to answer charges.

Shares in HSBC rose slightly on Monday, but they have still underperformed the FTSE 100 by about 3 per cent since the tax evasion revelations were published - equivalent to £3.5bn of market value for the bank.

- FT
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