Clearly, any allegations involving criminal activity including money laundering warrant serious and urgent attention, and it is encouraging to see HSBC commit to full and immediate cooperation with the inquiries launched by the authorities.
I am not going to address specifics in this commentary, as they are the subject of current official investigations, but I will return to this once the investigations are complete.
However, aspects of the reporting on the matter, and the impression conveyed to the public at large are worthy of comment; there are some important issues in play here, which echo those highlighted by the Lord McAlpine affair.
Jersey has an exemplary track record of implementing measures to fight financial crime, which have been recognised over the years by the IMF, FATF and the World bank.
These defences were recently subjected to industrial-strength testing by Griffith University, Australia, and found to be among the most effective in the world, easily out-ranking the UK and USA in performance terms. A link to this research can be found by clicking here.
The IMF has also tested Jersey’s compliance with international standards, through on-site inspections, and have described Jersey as a top-tier centre.
It seems most unlikely, then, that these comprehensive and stringent tests could have missed something fundamental, which further reinforces the need to address the evidence underpinning the allegations. It at this point I believe there is cause for concern.
‘Impression of widespread collusion’
The press coverage to date gives the impression of widespread collusion with drug traffickers, gun runners and criminals. The reality is that the Telegraph article cites two instances, which have subsequently been brought into question, and even in those instances, there is no evidence of any wrongdoing as far as Jersey is concerned.
The impression conveyed is that criminal activities are supported through the provision of banking facilities, but without a scrap of evidence advanced to support this insinuation.
Customers living in the UK and in other countries have many legitimate reasons to bank in Jersey. The issue is not whether they have an account in Jersey, but whether the funds in that account are the proceeds of crime. This consideration is the same, whether the account is in Jersey, London, Paris or New York.
The fact someone is subject to criminal investigation is not a reason to withdraw their banking facilities, unless of course we have departed from the principle in law that all parties are presumed innocent until and if convicted of a criminal offence.
Nor is it a crime for someone who has been convicted of a criminal offence to hold a bank account. If this were the case, what chance would there be of any individual being encouraged to rehabilitate their way back into society?
A crime would only have been committed if the value placed in that bank account was the proceeds of crime, including tax evasion. At present, no evidence has been forthcoming to indicate that is the case in these instances.
Other categories cited in the Telegraph article in particular are very likely to be non-domiciles, who are not taxable on value outside of the UK, and or will be individuals who have had or retain international interests, where the retention of an account in Jersey makes great sense in terms of multi currency cross border payments.
The press rightly argue they are acting in the public interest in uncovering wrongdoing, and there is no doubt that an independent press is an important check and balance in any democratic system.
However, the problem with naming and shaming without evidence is that the innocent have doubt cast on their integrity; after all, mud sticks, and a good reputation once tainted can be difficult to repair. We have seen how damaging this can be in the McAlpine case already referenced.
Of course it is possible that bad business may slip through the net. There isn’t a jurisdiction in the world with a 100% fail-safe system.
But Jersey is no friend of tax evaders and money launderers, and has done more than most to tackle criminal activity, including tax evasion. With a higher ‘suspicious transaction reporting rate’ than the City of London, and a successful track record of pursuing the proceeds of crime and repatriating them to their rightful owners, Jersey can confidently claim to be doing more than most.
Against this backdrop, it is disappointing to see the UK tax authorities cheerleading data theft, which is encouraging citizens in other countries to break the law.
Voluntary information exchange by Jersey bank account holders is now above 80%. The reality is that eight out of 10 customers on the list recently provided to HMRC are customers whose details they already have. Much of the balance is likely to be non-domiciles, who don’t need to report in any event.
Only on Friday, news broke of threatening letters being issued by HMRC to around 1,500 individuals in the UK, because they had entered into legal tax planning schemes.
All citizens of whichever country should pay their taxes: those who don’t leave those who do to shoulder an unfair burden. However, the deeply worrying nature of recent events is not the impact on places like Jersey, but the willingness of governments to set aside the rule of law when it suits their short term interests.
This should worry all of us, because once the rule of law is set aside for expediency, all citizens are at risk from an overbearing State.
Geoff Cook is chief executive of Jersey Finance
