Downing Street insists it had no warning of HSBC wrongdoing, despite revelation MPs had known about ‘disc from the Swiss’ with names of potential tax dodgers (Read the three-part narrative which follows)
David Hartnett, the then head of HMRC, told MPs in 2011: ‘Our department has a disc from the Swiss – from the Geneva branch of a major UK bank – with 6,000 names, all ripe for investigation.’ Photograph: Alamy
Downing Street and the Financial Conduct Authority insisted on Tuesday they had been given no warning of any wrongdoing at HSBC’s Swiss bank before the weekend – even though executives at HMRC were raising concerns in public in 2011.
No 10 said it first knew of an admission of wrongdoing by HSBC at the weekend, even though stories of alleged tax evasion by the bank’s clients had appeared in the summer of 2011 and through 2012.
At a morning press briefing, a Downing Street government spokeswoman said HMRC had not briefed any minister on the allegations surrounding HSBC’s Swiss subsidiary. “No government minister had any knowledge that HSBC was involved in wrongdoing in regard to its Swiss banking arm,” said the spokesperson.
However, in September 2011 David Hartnett, the then head of HMRC, told MPs on the Treasury select committee: “I think the whole nation probably knows that our department has a disc from the Swiss – from the Geneva branch of a major UK bank – with 6,000 names, all ripe for investigation.”
Hartnett went on: “We have hundreds under investigation, some of them under criminal investigation, and we are about to challenge another 800. Then we will industrialise the process, challenging 1,000 at a time, with a view to having all those who need challenging challenged pretty quickly.”
It was also in the public domain that HSBC had tried in the French courts to block French officials handing the disc to the UK tax authorities, pleading client confidentiality. But it was handed over, with HMRC telling MPs that it had been received in June 2010, before former chairman HSBC Stephen Green was made a Tory peer and became a trade minister.
Faced with the statements made by HMRC in 2011, Downing Street sought to clarify the government position, saying: “We have no record of any government minister being made aware by HMRC of any alleged wrongdoing by HSBC employees”.
The spokesman’s remarks are a more narrow denial of what Treasury ministers knew about the scale of tax evasion at the bank. They also leave open the question why if it was known that 6,000 UK names were being investigated in one UK bank, the Treasury did not challenge the bank over its activities, or ask the former chairman Lord Green what he knew.
Ed Balls, the shadow chancellor, said it “beggared belief” that HMRC did not inform the Treasury of the scale of tax evasion found amongst UK clients at the bank.
Labour plans to go on the offensive over the issue at prime minister’s questions on Wednesday, and in a special Commons debate in which Labour will promise to put forward a tax evasion clampdown in its first finance bill.
Labour believes the public are angry that HMRC has only one prosecuted one person from the HSBC list and instead focused on recovering the lost sums.
Meanwhile, Martin Wheatley the chairman of Financial Conduct Authority told a Treasury select committee hearing on Tuesday that the financial regulator had not been offered any details of wrong doing by HSBC.
Labour committee member John Mann questioned how the FCA could do an effective job overseeing the banking industry if it was not informed about potential wrongdoing.
Mann said: “Something very seriously is going wrong when one arm of government is investigating what appears to be a very, very major transgression and another arm, the conduct authority, isn’t able to do so, because no one has told you.”
Wheatley told MPs that the FCA was “closely monitoring the banks overall … We do have a deep programme of reform in a number of the banks regarding anti-money laundering and HSBC is one of the banks we’re working closely with”.
HMRC had said under the terms of the transfer of the disc from the French banks in 2010, it was prevented from transferring the information to other UK authorities.
Downing Street refused to speculate on whether HMRC should have contacted the Financial Conduct Authority over any alleged systemic wrongdoing at the bank saying the focus of HMRC was to recover lost tax.
Wheatley, who took charge of the FCA in 2013 with the aim of making the regulator tougher on poor behaviour in the financial sector, said the files referred to historical claims and the bank had since cleaned up its act.
“The allegations are about a Swiss unit of the bank, based on events of predominantly 2005-2007,” he told MPs on the Treasury select committee. “We are very closely monitoring the ability of the bank overall … and we think significant improvements have been made.”
However, asked whether he was confident that the recent run of banking scandals was over, Wheatley said: “No, I am not, because frankly the CEOs don’t know about these skeletons in their organisations.”
