Clifford Hill looks at drugs and money laundering in the banking industry...

HSBC has been a lot in the news recently, not simply for the celebration of its 150 year anniversary, but for what many commentators have said to be its questionable banking practices. The revelation by a Geneva-based whistle-blower that hundreds of wealthy clients have been shielded from tax obligations by the use of a private bank, has created both political and moral shock waves. This is being investigated in London and now HSBC says it is considering moving from London. Is this just coincidence?

The Hong Kong and Shanghai Banking Corporation (HSBC) was born in controversy following the two Opium Wars, in which Britain inflicted what 20th Century Chinese historians labelled “A Century of Humiliation” upon China.

The 1830s was a time when Britain faced economic ruin, largely because of its enormous trade imbalance with China. The British were addicted to drinking tea: huge quantities of tea together with silk and porcelain were imported from China, but the Chinese wanted very little manufactured in Britain. Instead they demanded payment in silver. Stocks were rapidly running out in the British Exchequer. In 1833 Britain passed the Act of Emancipation setting African slaves free in the Caribbean islands and other parts of the British Empire. But this cost the Exchequer £20 million in compensation paid to the owners of slaves (though not one penny was paid to the slaves themselves, an injustice that is yet to be acknowledged by any British Government!).

HSBC was born in controversy, at a time when Britain was struggling to pay China for its growing addiction to tea..."

The Opium Trade

The East India Company had for some time been exporting opium from its poppy fields in India. By 1838 this trade reached 1400 tons of opium a year, which was doing immense harm to the population in China, millions of whom were now addicts. The Emperor of China appealed to Queen Victoria, citing the harm that was being done to his citizens by the immoral actions of the British. But his letter never reached the Queen. It was said to be “lost in transit” (no doubt diverted by some corrupt official).

The Emperor of China appealed to Queen Victoria by letter, but it mysteriously disappeared and never reached her..."

Send in the Navy

China reacted by closing the port of Canton and seizing and destroying 1,200 tons of opium in the East India Company’s warehouses. The British answered by sending the Navy – at that time the most powerful fleet in the world – to destroy Chinese ships and occupy the port. Thus began China’s Century of Humiliation with an ‘Unequal Treaty’ whereby China was forced to pay compensation to Britain and to grant British colonial status to Hong Kong. This unjust settlement of 1842 led directly to the Second Opium War of 1856 to 1860, when France joined Britain in invading Chinese ports and enforcing a settlement that legalised the opium trade and opened the Chinese interior to British merchants.

Just five years later HSBC was founded, primarily to deal with the huge profits from the opium trade, providing banking facilities for wealthy entrepreneurs who were happy to make fortunes out of a trade that many considered to be unethical. Now, 150 years later, they have been caught pursuing another trade that many would also consider to be unethical. They are reported to have provided facilities for storing the wealth of over 100,000 of the world’s richest individuals and organisations by offering them the anonymity of the Swiss private banking system.

Tax Evasion

According to reports in The Guardian,¹ evidence was given to the British tax authorities and to the British Government in 2010 of those individuals and corporations who were using the HSBC system; yet only one individual has been prosecuted for tax evasion. HM Revenue and Customs justify this by saying that they have used the information to recover millions of pounds in unpaid tax and have thus benefited the Exchequer more than if they had pursued these matters through the courts. But is this really an ethical use of national tax policy?

In effect HMRC are saying that money is more important than righteousness."

But there is no doubt a further reason for the Government not wanting to expose the alleged misdemeanours of powerful banks that are said to have aided clients in tax avoidance schemes. It is well-known that revenue from the City of London plays a major part in the British economy and anything that disturbs the activities and prosperity of the City could have a devastating effect upon the national economy.

Stephen Green

Perhaps the strangest element in the entire HSBC saga is the appointment of Stephen Green as Minister of State for Trade and Investment from January 2011 for two years. He had been working for HSBC since 1982 and had been its CEO and latterly Chairman, reportedly earning more than £25 million a year. If the Government had known since 2010 the information provided by the whistle-blower on HSBC’s alleged tax evasion services to clients, why did the Government honour him with a peerage and appoint him as a Minister of State? What was David Cameron’s role in this appointment?

Stephen Green had been at the helm of HSBC when it was fined by the USA for money laundering for Mexican drug cartels, as well as running a banking system in the Cayman Islands (where it had no staff and no office), and assisting states such as Iran and North Korea to break international sanctions.

Christian Initiative

Stephen Green is also an ordained Anglican minister and I was introduced to him by Dr Rowan Williams when he was Archbishop of Canterbury. I met him a number of times without knowing the nefarious practices in HSBC that were allegedly taking place behind-the-scenes. I had high hopes that he would back a Christian initiative to launch a new national newspaper in the UK which would break the monopoly of secular humanists on British journalism.

That initiative had the backing of many leading Christians as well as Christian journalists, but it required a substantial capital investment for a successful launch. Stephen Green could, of course, have provided this out of his own pocket without calling upon investment from the bank. But instead of seeing it as a faith project for which God would supply the prosperity he looked at it as a banker and said it was not a sound investment. He did not catch the vision of a newspaper declaring the truth of the word of God to the nation. In hindsight, maybe he feared the same for his bank!

References

1 The Guardian, 9 February 2015