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By Tom Bergin
LONDON, Feb 11 (Reuters) - British authorities may follow atrail set by their U.S. counterparts in investigatingallegations that HSBC's Swiss private bank helped its customersdodge taxes, lawyers say.
Any prosecution against the bank or individuals could hingeon whether HSBC's Swiss private banking unit sent staffto the UK and advised clients on how to evade British taxes andwhether 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 CreditSuisse, for helping U.S. clients evade taxes, have relied on thefact bankers not only serviced clients from Switzerland buttravelled to the United States to drum up business. The banksended 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 anagreement to commit dishonest tax crime, then that would beenough to give the UK jurisdiction," said Monty Raphael, alawyer who specialises 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 Swissprivate bank travelled to the UK on at least two occasions toadvise clients on how to evade paying taxes.
The report was based on data leaked by former HSBC employeeHerve Falciani which was published on Sunday by news outlets andthe International Consortium of Investigative Journalists (ICIJ)but which could not be independently verified by Reuters.
London-based HSBC admitted failings in compliance andcontrols at HSBC Private Bank (Suisse) SA onSunday after allegations in news outlets that it helpedinternational clients hide money. This has led to calls for theUK's tax authority and financial regulator to investigate itsbusiness.
It is not illegal to have a Swiss bank account but theallegations that HSBC's Swiss private bank helped some of itsclients dodge tax could open the parent group up to prosecutionby Britain's financial regulator, lawyers said.
British rules require organisations selling regulatedfinancial advice or investment products in the UK to beregulated by the Financial Conduct Authority, or to "passportin" from another European Economic Area (EEA) country where theinstitution 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 Suisseagreed last year to pay $196 million and admit wrongdoing tosettle charges it violated securities laws.
Other countries are already taking action against HSBC basedon In November Argentina charged the bank with helping morethan 4,000 clients evade taxes. HSBC Argentina rejected thecharge, saying it respected Argentine law.
HSBC in Londondid not respond to requests for comment buthas said it has totally overhauled its Swiss private bankingoperation in recent years and introduced tougher oversight ofthe unit.
HIGH HURDLE
While establishing jurisdiction over HSBC Private Bank(Suisse) SA could allow UK authorities to pursue HSBC, theywould still face a tougher challenge than U.S. peers in bringinga case against the bank rather than individuals.
Tax lawyer Harry Travis said successful prosecutions againstHSBC staff were more likely than against HSBC itself becauseunder UK law, in order to convict a company of a crime, aprosecutor must usually show the highest levels of managementwere aware of wrongdoing and condoned it.
"In U.S. law, you have a very different test, a much lowertest. In the U.S., companies can be prosecuted for crimescommitted for their benefit by their employees or their agents."
(Additional reporting by Steven Slater and Kirstin Ridley inLondon; editing by Alexander Smith and Elaine Hardcastle)
