By Tom Bergin
LONDON (Reuters) - British authorities may follow a trail set by their U.S. counterparts in investigating allegations that HSBC's Swiss private bank helped its customers dodge taxes, lawyers say.
Any prosecution against the bank or individuals could hinge on whether HSBC's Swiss private banking unit sent staff to the UK and advised clients on how to evade British taxes and whether top executives were aware of any such advice.
The U.S. has set the pace for legal action in such cases, where prosecutions of Swiss banks, including UBS and Credit Suisse, for helping U.S. clients evade taxes, have relied on the fact bankers not only serviced clients from Switzerland but traveled to the United States to drum up business. The banks ended up paying billions of dollars to settle the charges.
A similar legal argument could apply in the UK.
"If there were conversations here, in furtherance of an agreement to commit dishonest tax crime, then that would be enough to give the UK jurisdiction," said Monty Raphael, a lawyer who specializes in white collar crime and tax cases.
Three other tax experts echoed his comments.
A BBC report on Monday alleged that staff from HSBC's Swiss private bank traveled to the UK on at least two occasions to advise clients on how to evade paying taxes.
The report was based on data leaked by former HSBC employee Herve Falciani which was published on Sunday by news outlets and the International Consortium of Investigative Journalists (ICIJ) but which could not be independently verified by Reuters.
London-based HSBC admitted failings in compliance and controls at HSBC Private Bank (Suisse) SA on Sunday after allegations in news outlets that it helped international clients hide money. This has led to calls for the UK's tax authority and financial regulator to investigate its business.
It is not illegal to have a Swiss bank account but the allegations that HSBC's Swiss private bank helped some of its clients dodge tax could open the parent group up to prosecution by Britain's financial regulator, lawyers said.
British rules require organizations selling regulated financial advice or investment products in the UK to be regulated by the Financial Conduct Authority, or to "passport in" from another European Economic Area (EEA) country where the institution is regulated, FCA spokeswoman Ruth Wharram said.
There is no record on the FCA register of HSBC Private Bank (Suisse) SA.
Similar rules apply in the United States where Credit Suisse agreed last year to pay $196 million and admit wrongdoing to settle charges it violated securities laws.
Other countries are already taking action against HSBC based on data leaked by Falciani and previously obtained by tax authorities. In November Argentina charged the bank with helping more than 4,000 clients evade taxes. HSBC Argentina rejected the charge, saying it respected Argentine law.
HSBC in London did not respond to requests for comment but has said it has totally overhauled its Swiss private banking operation in recent years and introduced tougher oversight of the unit.
HIGH HURDLE
While establishing jurisdiction over HSBC Private Bank (Suisse) SA could allow UK authorities to pursue HSBC, they would still face a tougher challenge than U.S. peers in bringing a case against the bank rather than individuals.
Tax lawyer Harry Travis said successful prosecutions against HSBC staff were more likely than against HSBC itself because under UK law, in order to convict a company of a crime, a prosecutor must usually show the highest levels of management were aware of wrongdoing and condoned it.
"In U.S. law, you have a very different test, a much lower test. In the U.S., companies can be prosecuted for crimes committed for their benefit by their employees or their agents."
