APRIL 22, 2016
The chairman of HSBC has told investors that the uproar over offshore tax structures caused by the so-called Panama Papers leak highlights the need for banks to keep tightening up their checks and controls.
Douglas Flint responded to questions from investors about HSBC’s role in arranging thousands of offshore structures in Panama by pointing out that many of them predated the bank’s drive to improve its compliance procedures.
“The so-called Panama Papers have highlighted once again how perfectly legal corporate structures can be abused to facilitate money laundering and tax evasion or to obscure ill-gotten gains,” he said.
“While there are lessons to be learned from the revelations, the circumstances alleged in the Panama Papers with regard to HSBC are largely historical, in some cases dating back 20 years, and so predate the tough financial crime, regulatory compliance and tax transparency standards which HSBC has put in place in recent years.” But Mr Flint said that out of the 2,000 structures that HSBC was revealed to have helped clients to establish in Panama, only 5 per cent of them were still active. “Today it would be impossible to open such an account without full tax transparency.”
HSBC must convince the US Department of Justice that it has cleaned up its act on fighting financial crime by next year, or it could face a range of punishments including even criminal conviction and potential loss of its licence.
These onerous conditions stem from the deferred prosecution agreement that the bank signed in 2012 to avoid US criminal charges when it paid a $1.9bn fine for breaching sanctions and anti-money laundering rules.