Whistle-blower leaks details of 4,400 HSBC Jersey bank accounts

It is being reported this morning that a whistle-blower has sent to HMRC details of every British client of HSBC Jersey, including names, addresses and account balances.  The list apparently covers more than 4,400 accounts and almost £700 million in deposits.

Early press coverage of the leak is whipping up something of a storm regarding failures by the bank in its compliance standards, primarily on the basis that it is being suggested that there are 5 individuals on the list; one of whom has a conviction for arms offences eleven years ago, one of whom is wanted for questioning regarding the growing of cannabis some years ago, and three of whom are City bankers facing fraud allegations.  However, I can't help feeling that the bank is being castigated for failings here before the situation has been verified.  Those facing allegations have, I assume, not yet been convicted of anything.  It would be a strange and unjust situation indeed if people were denied  banking facilities as soon as any allegation of wrong-doing is made against them.  There is nothing at this stage to indicate that the bank has done anything inappropriate in relation to those accounts, and we should not rush to judgement before the facts are examined.  

Certainly it appears troubling on the face of it that there is an individual on the list who has past arms convictions, but again, we have no detail regarding what safe-guards the bank may or may not have put in place to verify the bona fides of that account or the purposes for which it is being used.  

And even if all of those  highlighted accounts are found to be opened in breach of regulations, five accounts out of more than 4,400 is hardly a pattern indicating a malignant culture and justifying the leaking of such a huge amount of data and such sensationalist reporting.  All banks have to be vigilant regarding their clients, but few would dare to cast the first stone as they all worry, whether onshore or offshore, that the occasional rogue customer can slip through the net.  Indeed, recent research (on the subject of which I have recently blogged) tends to show that on balance offshore jurisdictions are more inclined to challenge and question customers than onshore jurisdictions.

Perhaps there has been a wholesale failure of compliance at HSBC Jersey - clearly I don't have the facts to know at this stage.  But let there be a proper evaluation before we leap to judgement. If there are found to be serious shortcomings then the regulator should deal with the bank appropriately (the Jersey regulator has a reputation for dealing with compliance failures very robustly) and HMRC can deal with any individuals who have not properly disclosed their financial arrangements. But in the meantime it is dangerous to assume that the mere existence of the 4,400 accounts is in itself evidence of major compliance failings.

In fact, I would be very surprised if a large number of people on the list are involved in money laundering or tax evasion.  The fact is that there are plenty of very sound and legitimate reasons why people may have bank accounts in Jersey.  For example, someone who is UK resident but non-domiciled would be routinely advised to keep their cash offshore, and to bring it in to the UK tax net as and when required.  These arrangements are perfectly legal, and usually transparent to HMRC.  Indeed, if a money launderer or a tax evader did want to set up bank accounts to hide his ill-gotten gains there are many more conducive places to doing so than in Jersey, a territory with a large number of Tax Information Exchange Agreements with onshore territories and with a strongly regulated banking and fiduciary industry. The innuendo that the 4,400 people are involved in nefarious activities is, in my view, likely to be proved wholly wrong - but if this is found to be the case and the bank is exonerated no doubt the reporting of that would take up considerably fewer column inches than this morning's coverage.  

Indeed, the fact that the details of the individuals seem to have been leaked not only to HMRC but simultaneously to the press would seem to me to suggest that the action has been taken by someone with a general political anti-offshore agenda, rather than someone who is simply concerned with ensuring that people are not permitted to hide money from the tax man.  If the latter were true, then the details would have been passed only to HMRC to investigate with proper thoroughness, and without thousands of probably entirely innocent taxpayers having their confidential information touted around journalists.