The 32 pages of admissions from the bank make for shocking reading. No bank executive was prosecuted, despite the Americans’ desire to press criminal charges. That was because the British government, in the form of George Osborne, who was chancellor at the time, dramatically intervened at the last minute, claiming that seeking convictions of individual bankers risked bringing down the giant corporation, indeed the entire financial system.
The fact that Stephen Green, now Lord Green, who ran HSBC for much of the period in question, was by now a minister in the same government as Osborne had no bearing on the official response. Of course not.
HSBC was penalised – the fine amounted to just five weeks of the banks’ profits – and that was that. There was no official inquiry in Britain, despite HSBC being the country’s biggest bank. Parliament and the financial watchdogs all looked the other way.
If there is a case that perfectly encapsulates the UK’s lackadaisical attitude to economic crime it is HSBC and Mexico. It does not fit with the nation’s role as a leading global financial centre, as a magnet for international capital, to ask too many questions, to crack down too heavily on the sources of that wealth.
In theory, the UK has a body called the Serious Fraud Office, or SFO, that is meant, as its title suggests, to pursue such activity. But its track record is lamentable – Private Eye calls it the “Serious Farce Office”. To be fair, ranged against it is the full panoply of City law firms that specialise in tying SFO investigations up in knots, stalling and blocking at every opportunity.
UK fraud regulators are understaffed and underfunded compared with the banking behemoths. Reuters.
Not only that – despite the best efforts of its staff and successive directors, the suspicion persists that on high, the SFO is regarded as an inconvenience, a burden, not something worthy of full-on backing, from the government and establishment.
This is borne out by a new report from the Institute of Economic Affairs, or IEA, think tank, calling for radical reform of the organisation, claiming that its problems stem from “cultural and institutional inadequacies”. The report says juries should be replaced with expert tribunals in complex fraud cases, but goes further, arguing the SFO could be abolished altogether and its responsibilities divided among existing law enforcement agencies.
If there is a case that encapsulates the UK’s lackadaisical attitude to economic crime it is HSBC and Mexico
Dr James Forder, the report’s author, claims anti-fraud measures in England and Wales are “in crisis”. Says Forder: “The effective control of serious fraud is [essential to] being a global business centre, but in England and Wales this aspect of law enforcement is in crisis. The law and legal procedure have failed to keep pace with the growing complexity and scale of modern business. This requires serious and urgent attention.”
He believes that “over a period of decades”, the SFO has “fallen far below the standards that should be expected and required of it” and a “radical shake-up is now urgent”.
The report was published as the attorney general, Victoria Prentis, KC, MP, is commencing the search for a successor to the SFO’s current director, Lisa Osofsky, who has confirmed she will stand down at the end of her five-year term in August.
It’s hard to think of a more difficult, thankless job, such is the lack of support for the SFO. The government could devote more resources to it – and not just funding, but love and attention, ensuring its status and power are recognised and appreciated – yet chooses not to do so. Meanwhile, it’s expected to tackle a City that is supremely well funded, employing the best lawyers, accountants and financial brains to run rings round the hapless SFO officials.
British banks have frequently failed to ask difficult questions about the source of their clients' wealth
Coincidentally, too, the home secretary, Suella Braverman, has just unveiled The Economic Crime Plan 2023-2026. Delayed by nine months, it includes measures for tackling money laundering and recovering the proceeds of crime, reducing fraud and enforcing sanctions. Given that an estimated £100 billion in criminal proceeds are laundered through the UK every year and fraud is reckoned to cost the country £136 billion per annum, the report is clearly welcome, even if overdue.
But is it enough? Braverman says she will employ an additional 475 financial investigation staff. That seems like a lot, but we’re dealing with decades of neglect in this area and the level of catch-up is enormous.
Helena Wood, co-head of the UK Economic Crime Programme at the Royal United Services Institute think tank, says: “The plan aims to improve the policing response to economic crime, but does little to deal with the fact that economic crime represents only 1 per cent of policing resources; the additional 475 staff earmarked in the plan are not enough to stem a multi-jurisdictional, multibillion-pound threat to the UK’s national security.”
We still await, as well, the government’s Fraud Strategy, also delayed since July 2022. There’s no detail forthcoming either on cohesive legal rules for tackling the assets of those made subject to sanctions. Until they are introduced, bans, such as those currently imposed on Russians, have little prospect of being properly effective.
Charles Bott, KC, a leading fraud and white collar crime barrister and head of advocacy for asset recovery law firm, Martin Kennedy & Co, in the British Virgin Islands, says: “The UK currently lacks a credible system to tackle serious economic crime and its record in criminal asset recovery is weak.” Bott calls them, “stale proposals that have not succeeded in the past, and the extra resources are unlikely to make a real difference. A better understanding of the complex nature of economic crime and how money laundering works is needed. I’d hoped for more, I’m afraid”.
Bott is right. Hard as it is for ministers and the authorities to swallow, and in the face of intensive City lobbying, we really must stop pussyfooting about where economic crime and fraud are concerned.
Chris Blackhurst is the author of Too Big To Jail: Inside HSBC, the Mexican drug cartels and the greatest banking scandal of the century (Macmillan)
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
MATCH INFO
What: 2006 World Cup quarter-final When: July 1 Where: Gelsenkirchen Stadium, Gelsenkirchen, Germany
Result:
England 0 Portugal 0
(Portugal win 3-1 on penalties)
MATCH INFO
Uefa Champions League semi-finals, first leg
Liverpool v Roma When: April 24, 10.45pm kick-off (UAE) Where: Anfield, Liverpool Live: BeIN Sports HD Second leg: May 2, Stadio Olimpico, Rome
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Troy Payne, head chef at Abu Dhabi’s newest healthy eatery Sanderson’s in Al Seef Resort & Spa, says singles need to change their mindset about how they approach the supermarket.
“They feel like they can’t buy one cucumber,” he says. “But I can walk into a shop – I feed two people at home – and I’ll walk into a shop and I buy one cucumber, I’ll buy one onion.”
Mr Payne asks for the sticker to be placed directly on each item, rather than face the temptation of filling one of the two-kilogram capacity plastic bags on offer.
The chef also advises singletons not get too hung up on “organic”, particularly high-priced varieties that have been flown in from far-flung locales. Local produce is often grown sustainably, and far cheaper, he says.
U19 WORLD CUP, WEST INDIES
UAE group fixtures (all in St Kitts)
Saturday 15 January: UAE beat Canada by 49 runs
Thursday 20 January: v England
Saturday 22 January: v Bangladesh
UAE squad:
Alishan Sharafu (captain), Shival Bawa, Jash Giyanani, Sailles Jaishankar, Nilansh Keswani, Aayan Khan, Punya Mehra, Ali Naseer, Ronak Panoly, Dhruv Parashar, Vinayak Raghavan, Soorya Sathish, Aryansh Sharma, Adithya Shetty, Kai Smith
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
