September 19, 2020

HSBC files raise questions about oversight of senior bankers past and present

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7a671e2c-b0c9-4a34-9f3d-6c68a1e86c3c-1020x612 90507d0a-dd86-4d8b-a119-113dfdba7f20-2060x1236David Leigh, James Ball, Juliette Garside and David Pegg From The Guardian UK

The five were involved in either acquiring, overseeing or managing the Swiss operation, which helped clients conceal assets from the taxman

Part 2 The cash machine

Apart from Stephen Green there are five other former senior bankers caught up in the scandal that has engulfed HSBC, one of the world’s biggest banks, following the leak of its Swiss operation’s secret customer list.

Sir John Bond, Stuart Gulliver, Clive Bannister, Chris Meares and Peter Braunwalder were involved in either acquiring, overseeing or managing HSBC’s Swiss bank, which helped clients conceal assets from taxman.

HSBC’s present leaders now describe the Swiss bank as an operation with “compliance and control failures”, where individuals “took advantage of bank secrecy to hold undeclared accounts”, and which took on “high-risk” customers.

Four of them have since left HSBC, and none want to talk about it. Confronted with the evidence of misconduct at the Swiss subsidiary, each has remained silent.

Sir John Bond
It was Sir John Bond who took the decision to purchase the Swiss bank in 1999. These were the banking boom years, and Bond was on a spending spree, snapping up Edmond Safra’s Republic National Bank of New York together with its Swiss arm. Safra, who built up the business, had died in a Monaco fire. Bond’s newly acquired Swiss operation now sought fresh customers from South Africa, Ireland, the UK, the Middle East, France, Italy and Germany, while retaining many existing customers from Israeli families, Safra’s early client base.

When the news originally surfaced early in 2010 that there had been a leak at HSBC’s Swiss bank, it caused consternation. As the wall of secrecy cracked, depositors fled. In Belgium, scores of diamond dealers were raided by the authorities. In Spain, the Botín family, who head Santander bank, were forced to pay back taxes. French examining magistrates and the US Department of Justice both began to swing into action.

Bond left in 2006 at the age of 65. He went on to chair Vodafone and Xstrata.

Stuart Gulliver
Stuart Gulliver, handed the job of chief executive in 2010, was faced with the problem. Gulliver, who had become one of the world’s best rewarded investment bankers with a salary in excess of £10m, had himself been on the board of the bank’s private banking division, HSBC Private Banking Holdings (Suisse) SA from 2007 on. But he and the bank maintain that the Swiss arm, although part of the private banking division, was an independent, even maverick, operation. Swiss bank secrecy laws reigned supreme, they say.

As alarm grew at HSBC’s London HQ, plans were made for the toxic parts of the Geneva bank to be quietly dumped. A unit that had specifically targeted diamond dealers was shut down. The Chinese business was shifted to HSBC’S Asia-Pacific division in Singapore and Hong Kong, and many of the remaining European clients in Switzerland were sold off for an undisclosed price in 2014 to LGT bank in Liechtenstein.

Clive Bannister & Chris Meares
Two other British executives, Clive Bannister (top), succeeded in 2006 by Chris Meares, ran the worldwide private banking operation day by day. HSBC insists its group operated under a federal structure, with local subsidiaries enjoying varying degrees of autonomy. But executives were proud of the Swiss operation. Meares publicly applauded at the time its “very strong performances”, with “record profits”.

Chris Meares.
He also assured the UK parliament’s Treasury committee in 2008: “We prohibit our bankers from encouraging or being involved in tax evasion. If our bankers, sitting in London say, get any hint that there is tax evasion … If they have a suspicion that it is happening, then we file a suspicion transaction report to the authorities.” Bannister left in 2010 and is now CEO of Phoenix Group, a life insurance company. Meares left in 2011 and now chairs the London investment managers Quilter Cheviot.

Peter Braunwalder
The first manager of the actual Geneva bank was Sem Almaleh, who dated from Safra’s time. He was succeeded in 2002 by Braunwalder, a Swiss who also holds a British passport. In the period 2005-7 covered by the leaks, Braunwalder was directly in charge. By December 2007, he boasted he had doubled deposits to £78bn. Profits were running at £550m a year. Braunwalder left HSBC in 2008. He is now president of the Swiss dental implant company Thommen Medical.

But the bank’s IT specialist, Hervé Falciani, had already hacked the files by then and made off to France, and eventually Spain, where he lived under a witness protection scheme before eventually returning to France.

HSBC was already in the firing line. Following a withering US Senate committee report, the bank paid a massive $1.9bn in penalties in the US in 2012 for effectively helping launder Mexican drug cash. It says this was an inadvertent failure of controls.

The US explicitly declined to pursue a criminal prosecution against HSBC over its Mexican misconduct, on the grounds the bank was too big to lose its licence and employed too many people. But now, as the bank admits, its Swiss unit is under criminal investigation in Europe for “organised money-laundering”.

Not much remains behind now of HSBC Private Banking Holdings (Suisse) SA in Geneva and Zurich. It has lost 70% of its clients, either because they fled or because the bank got rid of them.

HSBC piously told the public by 2013: “All over the world, we follow the letter, and also the spirit, of local laws and regulations.” It did not mention the Swiss scandal.

While others picked up the pieces, however, some had already stepped away from the bank.

• Braunwalder left HSBC in 2008. He is now president of the Swiss dental implant company Thommen Medical.

• Bannister left in 2010 and is now CEO of the Phoenix Group, a life insurance company.

• Meares left in 2011 and now chairs the London investment managers Quilter Cheviot.

• Bond left in 2006 at the age of 65. He went on to chair Vodafone and Xstrata

IMAGES:
Sir John Bond, HSBC group chairman at the time, purchased the Swiss bank in 1999. Photograph: The Guardian
Hervé Falciani hacked the HSBC files when he was the Swiss bank’s IT expert. Photograph: Philippe Wojazer/Reuters
For more on this story and images go to: http://www.theguardian.com/business/2015/feb/09/hsbc-files-questions-oversight-senior-bankers-swiss

See related story also from The Guardian Part1 The leak “HSBC files show how Swiss bank helped clients dodge taxes and hide millions” at: http://www.theguardian.com/business/2015/feb/08/hsbc-files-expose-swiss-bank-clients-dodge-taxes-hide-millions?CMP=share_btn_tw

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