The City regulator will not pursue formal action over the tax evasion scandal which engulfed HSBC’s Swiss private bank last year, Slash News can reveal.
Sources said on Monday that the Financial Conduct Authority (FCA) concluded its examination of the HSBC unit several months ago, and that the bank was informed of its decision at the time.
The conclusion of the FCA’s so-called ‘deep-dive’ review of HSBC’s Swiss private bank – which was triggered by the re-emergence of evidence showing it had helped wealthy clients evade their tax obligations - was not announced publicly at the time, and has not been disclosed until now.
People close to the FCA pointed out that its work resulting from the affair was not a formal enforcement investigation and that a public announcement was not obligatory.
They added that a major tax investigation was a matter for Her Majesty’s Revenue and Customs rather than the FCA.
The news that no action will be taken could, however, intensify pressure on the FCA just days after it emerged that it had decided to discontinue an industry-wide review of bank culture.
Politicians reacted with incredulity to that decision by the regulator, which is without a permanent chief executive after last year’s ousting of the hardline Martin Wheatley.
Some MPs suggested that the FCA’s thematic review had been dropped at the instigation of the Treasury, which both sides denied.
The conclusion of the watchdog’s work on HSBC’s Swiss bank will have come as a rare piece of positive regulatory news for Europe’s biggest lender, which is due to decide within weeks on the outcome of a nine month review of whether it should relocate its headquarters.
In a statement last February when the political furore over David Cameron’s choice of Lord Green, the former HSBC chairman and chief executive, was at its peak, the FCA said:
"This [tax scandal] has served to reinforce the importance of firms operating with the right culture across all of their operations.
"The FCA is working closely with the firm and other agencies which have an interest in this matter to ensure that any questions this may raise in relation to any current practices and culture of HSBC are addressed."
Sources said that much of the watchdog’s work had focused on internal controls and culture at the bank.
Giving evidence to the Treasury Select Committee last year, Mr Wheatley said: "The allegations are about a Swiss unit of the bank, based on events of predominantly 2005-2007.
"We are very closely monitoring the ability of the bank overall … and we think significant improvements have been made."
Since the misconduct at HSBC's Swiss private bank initially came to light more than six years ago, the group has changed its senior management team and employed thousands more staff to work in compliance roles.
Stuart Gulliver, HSBC's chief executive, took over in 2011, and told the bank’s staff last year of his frustration that the re-emergence of the issue was obscuring his overhaul of the organisation.
The tax evasion scandal initially surfaced in 2008, when a whistleblower, Herve Falciani, stole data relating to tens of thousands of accounts and passed it to French authorities.
While many of the accounts were held legally, the details of tax-evading assistance given to wealthy customers by HSBC's Swiss private bank embarrassed bank executives and provoked fury in Westminster.
Mr Falciani was sentenced in his absence in November to five years in prison by a Swiss court for orchestrating the data leak.
Since 2012, HSBC has been subject to an independent monitor in the US following a $1.9bn fine for breaching money-laundering and sanctions laws.
The bank is bound by a deferred prosecution agreement running until 2017, although the Swiss tax-dodging scandal pre-dates the signing of that deal with US lawmakers.
HSBC and the FCA declined to comment
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