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HSBC leaks show up nefariousness

11 February 2015   (0 Comments)
Posted by: Author: BDlive
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Author: BDlive

Where is the capital of Africa?" asks the oft-shared Facebook riddle. The answer to which, we now discover thanks to leaked HSBC private banking records, should be: "In a Swiss bank account!"

It’s a wry joke, but no laughing matter. The leaked files, which reveal the inner workings of HSBC’s Swiss private banking arm, provide a rare glimpse into the highly secretive Swiss banking system. And what they show is not pretty. While not all of the accounts concerned, which together contain more than $100bn, are linked to nefarious activity, it is clear that an awful lot are.

There is nothing wrong with opening an offshore bank account per se. There are perfectly legitimate reasons for doing so. Indeed, even SA with its lingering exchange control regulations allows its citizens to operate overseas accounts, as long as their existence is declared and income deposited in them is recorded for tax purposes. Nor are the contents of such accounts anybody’s business other than that of the holder and the tax authorities — individuals are entitled to privacy in their personal finances.

However, such accounts become problematic when their intention is to launder ill-gotten gains or hide income in order to evade tax. And in the HSBC case it is apparent that this was not only permitted but actively encouraged. Confidential e-mails between HSBC employees indicate that clients — including former and current politicians in African states notorious for corruption — were routinely advised on how to hide funds to evade tax, and that the bank was aware that some of the funds it handled were the proceeds of crime.

It comes as no great surprise that Swiss banks have dodgy clients. The country has benefited from this morally repugnant but lucrative industry for many decades. However, the September 11 2001 US terrorist attacks and subsequent global crackdown on the financing of terrorist organisations was meant to have put an end to Switzerland’s uncooperative stance. It is apparent that these international agreements have been ignored.

The leaked documents, which were stolen by an HSBC whistleblower and handed over to the French government in return for protection from Swiss reprisals, reveal that hundreds of South Africans — including Fana Hlongwane, the man who vociferously denies having distributed hundreds of millions of rand in arms deal bribes to crooked politicians on behalf of arms suppliers — had as much as R23bn stashed in HSBC’s Swiss bank.

Much of this money may well have been transferred legally, but there can be no doubt that both the South African Revenue Service and police will be scrutinising those documents closely and asking some uncomfortable questions.

For instance, Mr Hlongwane is listed as the beneficial owner of an account that contained $888,000 in 2007, and is linked to two others that contained about $12m at one point. Even if he is able to account for every cent and prove that the accounts were linked to legitimate business activities, if they were undeclared he could still find himself in the tight spot arms deal critics have been trying to create for him for years.

The HSBC revelations mesh neatly with a report on illicit financial flows out of African countries compiled by an African Union panel chaired by former president Thabo Mbeki, which estimated recently that the continent loses $50bn a year through illegal transfers of funds obtained through corruption, bribery, tax evasion, organised crime and smuggling operations.

A large part of that is accounted for by companies using illegal methods to move capital off the continent to avoid paying tax, but there is every likelihood that much of the rest ends up in offshore tax havens or Swiss bank accounts much like those operated by HSBC.

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Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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