Green, who was HSBC’s chief executive between 2003 and 2006 and then chairman until 2010, told members of the House of Lords economic affairs committee on Tuesday that neither he nor the senior management team had been aware of the problems at the Swiss private bank, which engulfed HSBC in a scandal at the beginning of the year after the Guardian and other publications revealed it had helped wealthy clients avoid taxes.
In the biggest banking data leak in history, the so-called HSBC files, which cover the period 2005-07, shone some light on about 30,000 accounts holding almost $120bn (£78bn) in assets.
Speaking in detail for the first time on the scandal, Green said: “With the benefit of hindsight – and this was complicated by Swiss law which prevented [HSBC’s board] seeing client details – it would have been good to know details of this earlier and we didn’t get everything right.”
Green, who left HSBC to become trade minister in 2011, added: “It would have been better to have drilled into the detail much earlier.”
When asked by the committee chairman, Lord Hollick, about “industrial-scale systems of tax evasion” at the bank, Green added: “We were very conscious there were going to be issues in the private bank. That there would be considerable need for work on, for example, politically exposed persons.
“I am not sure to what extent the due diligence at the time revealed issues of non-compliance. I do not believe that anybody was aware of the – to use your phrase – industrial-scale systems of tax evasion.
“We became aware of this situation, the extent of it, only in around 2010. Indeed the kind of activity that was described in the media reports earlier this year I was certainly not aware of before we read about them in the media reports, and I don’t think any other member of the senior management group was either.”
The Conservative peer also appeared to acknowledge that the bank’s own staff had warned the board about separate problems in its international divisions, including its acquired Mexican bank that was hit by a £1.2bn fine from the US authorities in 2012 to settle allegations it allowed drug traffickers and terrorists to move money around the financial system. Green said he regretted not paying more attention to internal reports highlighting potential problems.
When asked by Hollick if he had been surprised by the “lack of scepticism and questioning” by the HSBC board over foreign acquisitions, Green replied: “Things should have been done differently with the benefit of hindsight. There was insufficiently robust implementation of audit reports [which are provided to the board to assess risk].
“Clearly we didn’t identify the anti-money laundering work needed to be done. I’m sorry about that.”
In 2012 US prosecutors said HSBC was guilty of a “blatant failure” to implement anti-money laundering controls and wilfully flouted US sanctions. The bank’s chief executive, Stuart Gulliver, said at the time he was “profoundly sorry” for the failures, as assistant attorney general Lanny Breuer said Mexican drug traffickers laundered at least $881m throughout the bank’s accounts.
Breuer said at the time: “HSBC is being held accountable for stunning failures of oversight – and worse – that led the bank to permit narcotics traffickers and others to launder hundreds of millions of dollars through HSBC subsidiaries and to facilitate hundreds of millions more in transactions with sanctioned countries.”
Green, who still insisted he was “proud of HSBC” despite “not getting everything right”, gave his evidence alongside Sir Win Bischoff, the veteran banker who is a former chairman of Lloyds Banking Group and currently chairman of the Financial Reporting Council. Bischoff said he believed individuals found guilty of wrongdoing in the financial sector should face legal sanctions, as well as their employers.
“It’s not the institution that got things wrong,” he said, describing banks as inanimate objects. Green later agreed with him and said that there now existed a “much clearer legal framework” to accomplish this.
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