Dodgy bankers, dodgy clients

Under both the Tories and New Labour, Britain became one vast tax haven - a playground for the super-rich. Eddie Ford looks at the HSBC scandal

Over the last few weeks we have had a fascinating insight into how the other half lives - or, perhaps a bit more accurately, how the other 1,000 conduct their dubious financial arrangements. Thanks to the leaked and voluminous ‘HSBC files’ published in The Guardian and elsewhere, we now know in great detail about how the Swiss arm of the world’s second largest bank, HSBC, effectively aided and abetted wealthy clients in evading taxes.

Thus we read in the leaked files that HSBC Private Bank (Suisse) SA operated like a “cash machine” for the super-wealthy. They would travel in person to Switzerland, as opposed to wiring or digitally transferring the money, so as to take out vast amounts of cash in sterling or whatever denomination they fancied - sometimes requiring suitcases just to carry the stuff around, which, of course, the bank would conveniently supply. In other words, they wanted to hide from the UK tax authorities that they had a Swiss bank account. Now why would you want to do that? Particularly notorious, or typical, was the example of the US surgeon, Andrew Silva, who admitted in 2010 that Suisse gave him “bricks” of notes amounting to $100,000 to secretly post home in a series of envelopes. According to court papers, the bank told its client not to wire money because that would “create a trail for US authorities” - undoubtedly true. Similarly, in 2013, Vaibhav Dahake, a New Jersey businessman, admitted HSBC bankers advised him not to bring in more than $10,000 in illegal funds on any one occasion, but rather to “stay below the radar”.

Anyhow, the entire story was kicked off by the Monaco-born Hervé Falciani, an IT expert and Suisse employee between 2001 and 2008. If we are to believe his own account, in 2006 he realised that the way data was managed at the bank “fostered” tax evasion and proposed an alternative system - which was flatly rejected by the Suisse bosses. He then copied some 60,000 files pertaining to 130,000 clients possibly involved in tax avoidance and money laundering - including 3,600 British-based individuals. Naturally, many of these people were prominent figures in business, film, music, sport, various royals and so on.

According to the Financial Times (whose version of events has to be treated with a slight pinch of salt, given its ordinate fondness for the super-wealthy - like oligarchs that have fallen out with Vladimir Putin), Falciani subsequently flew to Lebanon in early 2008 and tried to flog this data to numerous third parties (a former Suisse colleague of his, Georgina Mikhael, even claims that he “confessed” to her that the only reason he joined HSBC was to obtain ‘sensitive’ client information). Adding to the drama, Falciani also alleges he was “kidnapped” by Mossad agents in Geneva that were seeking information about Lebanese clients and banks with ties to Hezbollah.

Returning from Lebanon to France, he passed on the HSBC files to Christine Lagarde, then French minister of finance and now the managing director of the International Monetary Fund - forming the basis for the now near legendary ‘Lagarde list’ of Greek oligarchs, business persons and politicians stashing their millions in Switzerland to avoid paying taxes (which the Athens government somehow failed to investigate). In turn, Lagarde sent the information to selected governments, whose citizens were on the list - including the British in May 2010. Falciani also says that at this point he fled to Spain on the “advice” of the US government, because “it would be easy for someone to pay” to have him killed whilst he was living in France.

Currently, there is an arrest warrant against him in Switzerland for “industrial espionage” and “stealing” information from Suisse’s Geneva offices - that is, violating the country’s notorious bank secrecy laws. Falciani now lives in France under a government witness protection scheme. Interestingly enough, he headed the electoral list for the Spanish Citizen Network X Party in last year’s European elections and in February announced he will collaborate with Podemos to draft measures against tax evasion for the party’s political programme. Maybe we will hear more of him in the future.


We all know the gist from here. The British government did next to nothing with the information provided by the French authorities - prosecuting only one person and doing out-of-court deals with others on the grounds that this was the “most efficient” way of handling the affair - apparently criminal prosecutions could not be undertaken on the back of the leaked Swiss files alone. In the end, a fairly pitiful £135 million was collected by Her Majesty’s Revenue and Customs. Trying to save some face, financial secretary David Gauke told parliament that HMRC was now “reaping” nearly a third more from Britain’s wealthiest than happened under Labour and had brought in £2 billion in previously unpaid taxes from Switzerland and Liechtenstein. To show the Tories’ determination to combat such practices he added that the “maximum penalty” for secreting money in tax havens is now 200% of the total evaded.

Far more damaging for the Tories and the establishment in general, of course, was the fact that Lord Stephen Green - also an ordained prebendary minister1 - was chief executive/chairman of HSBC on £25 million a year for the period in question. Yet he knew nothing, it seems, about the mass, systematic tax avoidance going on under his watch. Very strange, especially when you consider that he was actually chairman of Suisse for a certain time - was he asleep? Even more curiously perhaps, David Cameron made him a life peer and minister for trade between 2011 and 2013 despite having Falciani’s HSBC files since 2010 (he was an “excellent” minister, we are told). Unsurprisingly, given the stink, Lord Green resigned from his position as chairman of the banking lobby group, City UK - he obviously jumped before he was pushed, and “god’s banker” is now a virtual pariah.

However, it is worth noting that the Church of England is standing by their man - even though it is trying to position itself as a natural friend of the poor, calling for a “fresh moral vision” in politics in the run-up to the general election. One insider said the church felt the need to counter the “sex appeal” of ‘anti-politicians’ such as Russell Brand, but predictably some Tories have denounced the church’s latest “leftwing” turn.2 Nevertheless, the C of E insists that Green himself is entirely upstanding and honest.

Maybe he is, in his own strange way. After all, it appears that he has given most of his bonuses away to the church in order to train vicars - which must amount to a not so small fortune. Then again, some have complained bitterly about his training programme, saying it had almost no spiritual content - was he importing banking practices and values into the church rather than the other way round? Green was the author in 1996 of Serving God? Serving mammon?, which one unkind reviewer on Amazon described as an attempt by a “tax evader extraordinaire” to “salve his conscience” by “waffling on about Christianity and capitalism”, while people are “killing themselves or visiting food banks due to austerity”.3

A church colleague recounts a rather unsettling occasion when Green held an event on top of Canary Wharf - with all of London spread gloriously before those present. Naturally enough, he was immediately reminded of how Jesus was taken to a very high mountain by the devil and shown all the cities, and riches, of the world - all this could be yours if you follow me. Jesus resisted temptation, but the jury is out on Green.


The FT carried an informative article on February 13 explaining how two-thirds of the British people on Falciani’s list are ‘non-doms’ (non-domiciles) - hence fully compliant with the UK’s tax laws. Here we have an extraordinary financial arrangement, purpose-built to suit the interests of the extremely wealthy, the main benefit being the ability to keep offshore income and capital gains out of the British tax net. Therefore, assuming you have been a resident for at least 17 years, for a one-off fee of £90,000 a year (absolutely bugger all to these people, of course) you are exempt from paying any tax on foreign earnings so long as they are not brought into the UK - and before 2008 you did not have to fork out a single penny (new rules introduced that year meant that non-domiciles who had lived in the country for seven or more years had to pay £30,000).

We now have a crazy situation where most non-doms today inherit their status from their parents. As a result, it is perfectly possible for people who have been born, raised and educated in Britain to have non-dom status, even if they hold British passports. No wonder London has become a playground for the rich. Lawyers say they sometimes go back as far as the 1930s when they are establishing a non-dom claim. If that is not tax evasion, then what the hell is?

Yes, naturally, both Tories and New Labour said the non-doms rules benefited the country - incentivising them to spend extremely large amounts of hard-earned cash on houses, servants, cleaners, Rolls Royces, millionaire meals, etc. Watch the wealth trickle down. OK, sure, Ed Miliband has talked fairly passionately about cracking down on tax havens abroad (Cayman Islands, Bermuda, British Virgin Islands, etc). There is no particular reason to doubt his sincerity, especially given that he is more reliant on union funds than either Tony Blair or Gordon Brown. But the main point is that Britain itself has become one vast tax haven, where the wealthy, rich and well-connected get to enjoy an obscenely privileged existence. One law for the rich, another law for us. Even more crucially, both the Tories and New Labour shamelessly sold their souls - assuming they ever possessed such a thing in the first place - to multi-millionaires and newspaper proprietors.

Having said that, the HSBC revelations are a blow to the Tories in the heated lead-up to the general election. Miliband and Margaret Hodge, influential Labour chair of the Commons public accounts committee, have made significant political capital out of the accumulating tax scandals: bank cleaners pay more tax than the bankers themselves, and so forth. On February 11 Hodge cuttingly told HMRC chief executive Lin Homer that “you are left wondering” as to “what it actually takes to bring a tax cheat to court”. Then on the same day in parliament, Miliband robustly attacked Cameron as a “dodgy prime minister surrounded by dodgy donors”. Cameron instantly responded by asking about the number of Labour donors who also have Swiss bank accounts - no doubt there will be some, albeit very few compared to the Tories. Doubtlessly the rightwing press will be doing a lot of research over the coming weeks to dig up embarrassing secrets about Labour.

However, rubbing it in - what treachery - even the Daily Mail thought a recent £1,500-a-head Tory fundraising dinner (with auction prizes going for hundreds of thousands) was dodgy. Thus the rather enjoyable headline: “Porn barons. Shady financiers. Hedge fund kings. Welcome to the secret Tory ball” (February 11). The same article could not help but observe that eight City individuals alone have donated a combined £12.2 million in this parliament to the Tories, and that the number of big City backers has doubled since David Cameron became prime minister.

Then we had the idiotic former Tory treasurer, Lord Fink, who threatened to sue Ed Miliband for claiming in the Commons (under parliamentary immunity) that he had been involved in “tax avoidance activities”. When Miliband refused to back down, Lord Fink capitulated instead - admitting he had taken “vanilla, bland” steps to “reduce” his tax bill and claimed that “everyone” was involved in tax avoidance: do you ask for a receipt from your window cleaner?4 Fink by name, fink by nature, some have suggested. One thing you can totally guarantee though is that Lord Fink’s phone would have been red-hot with Tory fixers screaming down the line at him to retract his threat - which would have been a spectacular own goal and a marvellous gift to Miliband and the Labour Party.

Now we find out that on February 18 the Swiss police raided HSBC’s Geneva office as part of an investigation into “persons unknown for suspected aggravated money-laundering” - at last the net might be closing in.5 Can Lord Green now also expect a knock on the door in the middle of the night?

Meanwhile, Cameron has sunk to dog-whistle politics of the worst sort - saying he will withdraw benefits from the morbidly obese and alcohol/drugs addicts unless they go for treatment. Go to the gym or lose your money. An utterly inhumane attack on some of the most vulnerable members of society, in marked contrast to the kid-glove treatment - if not respect - handed out to the tax avoiders and money-launderers on the HSBC list. Tells you everything about the warped values of class society.



1. A prebendary is a senior member of the clergy, normally supported by the revenues from an estate or parish: http://en.wikipedia.org/wiki/Prebendary.

2. The Guardian February 17.

3. www.amazon.co.uk/Serving-God-Mammon-Stephen-Green/dp/055102982X.

4. The Guardian February 17.

5. www.bbc.co.uk/news/business-31516416.