HSBC, crime and high finance

15 March 2015 (Jeremy Seabrook)

A recent US Department of Justice report on HSBC, the British-owned bank, has observed that its 'historical cultural deficiencies continue to pervade its operations today'. Delving into the bank's history to show up the consistently criminal nature of these 'cultural deficiencies', Jeremy Seabrook comments that, given the hegemony of finance in our times, the bank's latest scandals are unlikely to attract any serious sanctions.

IT might have been thought that the international banking scandals of the past eight years had plumbed the depths of irregularity and impropriety by institutions which are supposed to be 'pillars of the financial architecture' of globalisation. From promiscuous 'sub-prime' lending, to shadowy dealing in complicated 'financial instruments', the rigging of exchange rates, fixing of the Libor rate, the absorption of billions in 'quantitative easing' intended to help business, and, of course, money laundering which allows drug traffickers through the alchemy of financial morality to transmute filthy lucre into pure gold.

In February 2015 it was revealed that HSBC, the world's third-largest bank (assets estimated at $2.36 trillion), with over 7,000 offices in 80 countries, had apparently been unaware that its Swiss affiliate had not only connived at tax evasion by wealthy clients and global celebrities in the recent past, but had actually offered these oppressed people advice on how to place their money in shelters secure against the prying eyes of tax authorities.

Two years before this came to light, HSBC had reminded the world of its original roots in the global drugs trade: in December 2012, an agreement was reached between the US Department of Justice and HSBC over a 'deferred prosecution agreement' that would levy fines to the tune of $1.92 billion, as a result of the bank's numerous violations of the Bank Secrecy Act, for its role, according to the US Senate Permanent Subcommittee on Investigations, in money-laundering the assets of Mexican and Colombian drug cartels and, incredibly, dealing with financial entities that had ties to international terrorism.

Commercial homecoming

Perhaps this should have come as no great surprise. It could be seen as a kind of commercial homecoming for what had formerly been known as the Hong Kong and Shanghai Banking Corporation, founded in 1865 with money accumulated from the opium trade.

In the early 19th century, Britain wanted silk, tea and porcelain from China, but had no commodity the self-reliant Chinese desired. Opium from India, traded unofficially by East India Company employees, became the merchandise of choice. In 1839, William Jardine, an opium merchant in Canton, sought British military assistance when his stocks of opium were seized by the Chinese, who, as had been done in Britain, had forbidden the trade in opium. Imperial indignation at this act of confiscation led to Britain's launch of the First Opium War. As a result of this, the Treaty of Nanking in 1842 ceded trading rights and Hong Kong to Britain, in a 'perpetuity' that lasted until 1997. Following the Second Opium War between 1856-60, Britain and France enforced the 'opening up' of wider swathes of territory to foreign trade, residence and missionary activity.

In that enlightened time, imperial necessity evidently required large-scale drug-dealing, in the interests of bestowing upon China the emancipatory experience of 'free trade'. 'Did not the laws of nature oblige all peoples to mingle freely with each other?' asked James Matheson, senior partner with William Jardine in the opium-dealing enterprise. When the Hong Kong and Shanghai Bank was founded in 1865, as a conduit for accrued opium wealth, its principal founder, Thomas Sutherland (of the Peninsular and Oriental Steam Navigation Company), declared it would be run according to 'sound Scottish banking principles'.* It might well have adopted its contemporary abbreviation then, as a Heroin Smugglers' Benefit Corporation.

Epic malfeasance

With such antecedents and such illustrious parentage, should the world be astonished that in the epic work of malfeasance in the 21st century, no individual, no official or functionary of HSBC was prosecuted? US Senate inquiries discovered that HSBC Financial Services (Cayman) was the chief channel through which money cleansed through HSBC Mexico (HBMX) flowed. This was a mere 'shell' operation in the Caymans with no material presence, but it permitted accounts to be opened by any HBMX branch in Mexico. Total assets in the Caymans reached $2.1 billion in 2008.

The US Department of Justice stated that 'a four-count felony criminal investigation was filed in federal court', charging HSBC with 'wilfully failing to maintain an effective anti-money-laundering programme, wilfully failing to conduct due diligence on its foreign correspondent affiliates, violating the International Emergency Economic Powers Act and the Trading with the Enemy Act'. Because the bank agreed to the filing of this information, and accepted responsibility for its criminal actions and those of its employees, the 'deferred prosecution' was effectively replaced by a financial levy, derisory though this was, given the bank's total assets. It was, however, considered 'punishment' enough, since as financial crime grows in magnitude, it seems to decrease in culpability. 

In February this year, it emerged that in 2007, Herve Falciani, a French/Italian whistleblower (an image taken from the realm of sport, a referee), had made public a cache of documents revealing the accounts of 106,000 clients in 200 countries holding $118 billion, which showed how HSBC had helped them evade an unknown sum in taxes. Of these clients, over 9,000 were from France, while Britain was represented by 7,000 wealthy individuals.

In 2005, the European Savings Directive had required that Swiss banks take tax owed from undeclared accounts and ensure that it reached the relevant authorities. This measure, designed to catch tax evaders, was circumvented by HSBC, who wrote to its customers suggesting to them ways to circumvent this imposition.

Stephen Green was chief executive of HSBC from 2003-06 and became chairman from 2006-10, after which he was ennobled by the British government and became Minister for Trade and Investment, where he remained until he 'stepped down', no doubt decorously, in suitably elegant shoes, in 2013. He refused to make any comment on the affairs of HSBC 'on principle'; a principle evidently so high it could not be enunciated. He also has, at the time of writing, declined to appear before the Public Accounts Committee of the British Parliament; perhaps he is too busy investing his 'pension pot' of œ19 million accumulated as a result of his services to HSBC.

It should be noted that HSBC was praised for having come through the banking crisis of 2007-08 unscathed and without government 'bailouts'. Lord Green was also ordained as a minister of the Church of England in 1988. In 2009, he published a book called Good Values: Reflection on Money and Morality in an Uncertain World, in which he had advocated that business leaders should behave ethically, beyond the legal limit of 'what you can get away with'. It appears that while he took holy orders, he failed to give them to his subordinates. Much was also made of the Presbyterian tradition of HSBC, its dedication to 'Scottish' notions of frugality, restraint and high moral behaviour; the long shadow of Thomas Sutherland still provides shelter a century and a half after he founded his bank.


The ritual of self-exculpation which has become familiar in the wake of corporate wrongdoing was formally reenacted. First of all, the abuses were 'historic'. In the context of finance, it appears that the day before yesterday is prehistory; and the 'delete' button is the one most commonly pressed on the keyboard of instantaneous reckonings of contemporary bankers.

Secondly, nothing was known to the bank's senior executives of the 'behaviour' of its Swiss subsidiary. They pleaded, not exactly ignorance, but a kind of lofty nescience, which the Oxford dictionary described as 'a lack of knowledge'. It is a functional unknowing, invoked in extenuation of the role of senior figures in any kind of corporate wrongdoing.

Since then, everything has changed. 'Compliance' now takes precedence even over profitability. HSBC has completely revised its private banking business and, according to a statement put out by the bank, 'implemented numerous initiatives designed to prevent its banking services being used to evade taxes or launder money'. Appearing before the Public Accounts Committee, the current chief executive was asked to explain why he was paid through a Panamanian bank. He said he wished his rewards to be concealed from his fellow workers so as not to excite their jealousy. Chris Meares, in charge of private banking while the tax evasion was taking place, averred that he had never had his honesty and integrity questioned. The bank ran penitent advertisements in newspapers, admitting that this 'episode' was a 'source of shame'.

And there, for the moment, it rests for 'the world's local bank'. HSBC was reported to be facing criminal investigations in the US, France, Belgium and Argentina; but no such process has been initiated in Britain, where the headquarters of the bank are located.

This does not conclude the story in Britain. HM Revenue and Customs - the tax authorities - received all the data from Falciani in 2010. By early 2015, it claimed to have identified over a thousand people from the list passed to it. To date, only one has been prosecuted. HMRC declared that it had negotiated with other clients of HSBC and had 'recovered œ135 million in tax, interest and penalties' from those who had failed to declare their income  and  assets.  The  leniency with  which  corporations  and  the very rich are treated suggests that tax-paying has been, for them, transformed into a kind of elective alms-giving - as the tax arrangements of Google, Starbucks and Amazon suggest; these have become philanthropists, by whose grace our labour, our daily bread and sustenance are provided.

What a contrast with a government so eager to 'crack down' on those guilty of benefit fraud; their pathetic pence costs the exchequer nothing by comparison with the billions foregone from the Croesus, Midas and King Solomons of the contemporary corporate world. It is difficult not to contrast their impunity with the punishment meted out to one individual I met recently, discovered to have been 'overpaid' by the benefits system in Britain in 2001: his repayment, at the rate of œ7 a week, will continue until 2024. Meanwhile on the side of buses, the exhortation 'Shop a Benefit Cheat Anonymously' encourages people to denounce their neighbours. No such public-spirited invitation is extended to snitch on those who juggle millions in their deft, well-manicured hands.

The lords of money

Nothing demonstrates more clearly the elevated status of bankers in a globalised world. They, and the money they manipulate, are at the apex of a system on which we all depend; and as such, they have acquired semi-divine status. They are untouchable, since if they and the empires they run were to be toppled, we would all perish in the rubble of the unthinkable cataclysm.

So it is that the faux-monnayeurs of international finance go about their business of violence and injustice unimpeded, but for the occasional arrest of a symbolic rogue trader, bad apple or evader of regulatory oversight; in a more innocent age, lesser scandals would have caused empires to crumble. The commodity they control is the holy ichor that flows through the veins of capitalism, a system now so uncontested and incontestable that it has become coterminous with the known universe: it would be as foolish to attack 'the global economy' as it would be to question the cosmogony of Christianity or Islam or any other of the great world religions. We are now, it seems, living in a mythic time, where the lords of money, arbitrary, capricious and powerful as gods, work their mischief on a humbled and deferential humanity, which cannot do enough to placate and appease them.    


For ramifications in the historic relationships between banking, commodities and those who made fortunes out of them, see Dean Henderson, Big Oil and Their Bankers, especially Chapter 2: 'Hong Kong Shanghaied'.

by Jeremy Seabrook
15 March 2015
Jeremy Seabrook is a freelance journalist based in the UK. His latest book is The Song of the Shirt (published by Navayana).