Joko Calls on British Businesses to Diversify in Indonesia as He Meets With PM Cameron

Jakarta Globe, Ezra Sihite & Novy Lumanauw, Jul 27, 2015

British Prime Minister David Cameron, left, with Indonesian President Joko Widodo
 meet at the Presidential Palace, Jakarta, on Monday. (Reuters Photo/Darren Whiteside)

Jakarta. President Joko Widodo asked Britain to diversify its businesses in Indonesia and lower import duties for Indonesian products entering the United Kingdom during his bilateral meeting with British Prime Minister David Cameron in Jakarta on Monday.

Joko told Cameron he welcomed Britain’s increased investments in Indonesia, which rose 34 percent last year, but added he wished Indonesia’s fifth largest foreign investor to diversify its range of businesses in the archipelago.

“I want to encourage Britain to diversify its investment in infrastructure development, including [for the construction] of sea ports, toll roads, railways, power plants and the maritime industry. Britain has vast experiences,” said Joko, who has repeatedly invited foreign nations to invest more in Indonesia to support his ambitious infrastructure development projects — including in the maritime sector.

“I also hope that Britain will impose lower import duties for Indonesian products, such as timber, clothing, coffee and fishery products,” he added.

Joko said Indonesia was committed to continually improving its economic partnership with Britain.

The Indonesian president also expressed his wish that Britain would reciprocate Indonesia’s visa-free policy applicable to British visitors.

“We hope that there will be a visa-free facility for Indonesian citizens [going to] Britain. This issue has been discussed during limited meetings,” Joko said.

Cameron in an e-mail interview with the Jakarta Globe on Sunday said his government would offer £1 billion ($1.55 billion) of credit financing for infrastructure projects in Indonesia.

A press statement from the British Embassy in Jakarta said the fund would be made available through Britain’s export guarantee scheme.

“This financing could pave the way for growth of £200 million worth of exports to UK,” the statement says.

It adds that projects “up for grabs” include a sewage treatment system in Jakarta worth £400 million and geothermal power projects worth £66 million.

Moazzam Malik, the British Ambassador for Indonesia, the Association of Southeast Asian Nations (Asean) and Timor Leste, on Sunday said that Britain was keen to offer Indonesia its vast expertise in a number of areas — specifically in maritime infrastructure development and maritime defense, satellite technology and public-private partnerships to finance infrastructure projects.

Cameron himself told the Globe in the e-mail interview: “The UK shares a common history as a maritime nation and while we may only have hundreds of islands compared to 17,000 here, we do understand the challenges that this presents and we want to share our experience and expertise to help develop this vital sector.”

“We have a wealth of experience in using advanced technology to monitor and manage our national waters and we are also a world leader in developing marine energy.”

The British prime minister is accompanied by a delegation of leaders of 30 prominent British brands in his two-day visit to Jakarta.

Among them are Airbus Group UK president Paul Kahn, Lloyd’s of London chairman John Nelson, Rolls-Royce international director Ann Cormack, Surrey Satellite Technology group executive chairman Martin Sweeting and UK Higher Educational Unit director Vivienne Stern.

Cameron is slated to attend a business forum with the Indonesian business community in Jakarta on Tuesday.

Jakarta is the prime minister’s first stop in his four-day tour of Southeast Asia which will include Singapore, Vietnam and Malaysia. Cameron had visited Indonesia once before, in 2012 where he met with then president Susilo Bambang Yudhoyono.

The Southeast Asian tour is Cameron’s first foreign visit outside Europe after his re-election in May.

The British Embassy says the tour is part of the British government’s efforts to increase the country’s exports to £1 trillion a year and to get 100,000 more British companies exporting by 2020.

“The prime minister is taking the first trade mission of the new parliament to a region [Southeast Asia] forecast to grow at 5 percent this year and with potential to unlock huge opportunities for jobs and growth in the UK,” the embassy says in the statement.

It adds that while the focus of the trip is about “opening doors” to future trade, deals worth over £750 million are expected to be sealed by the end of the trip.

On EU-Asean free trade

Aside from boosting bilateral trade, Cameron will also put his weight behind an European Union-Asean deal. He will call for the EU and Asean to jump start negotiations talks on a free trade agreement during his scheduled visit to the Asean secretariat in Jakarta on Monday evening, after the meeting with Joko.

A deal between these two trading blocs has the potential to benefit the British economy by £3 billion every year — nearly £120 per household — “by creating one of the biggest free trade areas in the world with combined GDP of over $20 trillion,” the press statement says.

Speaking ahead of the Southeast Asian tour, Cameron said Britain could open up more markets for its businesses by leveraging the power of the EU’s single market with 500 million consumers to secure “bold, ambitious trade deals with these fastest, growing economies.”

“The EU has shown this can be done with the trade agreement with Singapore and the recent breakthrough in talks with Vietnam but an EU-Asean trade deal would really turbo charge growth across the single market,” the prime minister was quoted as saying in the statement.

He added he would make the case in discussions with Asean Secretary General Le Luong Minh.

Cameron’s call comes as Asean countries prepare to establish an economic community by the end of this year.

The statement from the British Embassy notes that Australia, Japan and China “are already ahead of the game,” having implemented free trade deals with the Southeast Asian bloc.

“As the largest foreign investor in Asean, the EU should seize on this position to secure a new trade deal,”  it says.

To support Britain’s objectives in the region, Cameron has appointed a trade envoy specifically for the Asean Economic Community, Richard Graham.

Graham, who will join the prime minister for talks with Le, will take on the role alongside his existing role as trade envoy to Indonesia.

Joko on his part said Indonesia would restart this year its talks with the EU concerning Indonesia-EU comprehensive economic partnership agreement.

Swiss account secret of HSBC chief Stuart Gulliver revealed

Leaked files covering 2005-2007 show bank chief executive sheltered £5m of his own money at Panamanian company with Swiss HSBC account

The Guardian, James Ball, Juliette Garside, David Pegg and Harry Davies, 22 February 2015

Stuart Gulliver in Hong Kong in 2012: leaked files show that the HSBC chief
 executive was a client of the bank’s Swiss subsidiary at the centre of the scandal.
Photograph: Bloomberg via Getty Images

Stuart Gulliver, the HSBC chief executive who has vowed to reform the crisis-hit bank, sheltered millions of pounds in a Swiss account through a Panamanian company and remains tax domiciled in Hong Kong.

Leaked files show that the Derby-born Gulliver, who is due to present HSBC’s annual report on Monday in the wake of the international controversy over its Geneva-based private bank, was also one of its clients, holding about £5m in a Swiss account.

The bank executive was listed as the beneficial owner of an account in the name of Worcester Equities Inc, an anonymous company registered in Panama, containing a balance in 2007 of $7.6m. It was through this entity that Gulliver’s HSBC bonuses were paid until 2003. He also held a second account in the name of Worcester Foundation, which had been closed before 2007.

Although now based in the UK, where HSBC has its headquarters, Gulliver is domiciled in Hong Kong for legal and tax purposes.

The banking details have emerged as the 55-year-old Oxford University graduate, who became chief executive in January 2011, is due to face questions from reporters and investors for the first time since the Guardian and other media outlets published the leaked HSBC files, which revealed misconduct at the bank’s Swiss subsidiary.

The documents, covering 2005-07, detailed how the private bank was complicit in tax evasion and aggressive tax avoidance, doled out bricks of cash in mixed currencies to clients, and provided banking services to criminals, drug smugglers, and friends and families of dictators.

Gulliver has already personally signed a “sincere apology” which appeared in three newspapers last Sunday, saying “the standards to which we operate today were not universally in place in our Swiss operations 8 years ago”.

The bank is expected to announce on Monday full-year profits for 2014 in excess of £13bn – and Gulliver’s total compensation package has been predicted to be around £7.5m, although it was reported over the weekend that he may surrender some of his remuneration because the bank agreed to pay fines to settle unrelated allegations of foreign exchange rigging last year.

In response to queries from the Guardian about his personal account as revealed in the leaked files, a representative for Gulliver said he had made use of HSBC Suisse to hold his bonus payments prior to 2003, when he moved from Hong Kong to London.

Lawyers for Gulliver said that Hong Kong tax had been paid on this income – and explained that he “followed this procedure because he wanted his taxed bonus earnings to remain private from his then colleagues in Hong Kong, which they would not have done if he had kept them in an HSBC Hong Kong account”.

The Guardian asked Gulliver why he used a Panamanian company to hold the funds, given Swiss accounts already offer secrecy. His lawyers declined to answer.

Gulliver’s legal representatives added that his Swiss accounts have “for a number of years” been voluntarily declared to UK tax authorities. They declined to specify the exact date they were first declared.

Gulliver is also among those current and former clients of HSBC Suisse to take advantage of non-dom status. Gulliver is a registered non-dom based on his long residence in Hong Kong – now a special administrative region of China – which he considers to be his home, despite his UK-based position.

A representative for Gulliver said: “Having lived there since the 1980s, our client has become a permanent Hong Kong resident with right of abode, as has his wife who is an Australian national. Hong Kong continues to be their home albeit that our client now works primarily in the UK. As a matter of law, our client is domiciled in Hong Kong.”

Non-dom status can confer several tax advantages on those who claim the status compared with those domiciled in the UK. These include advantages in how inheritance tax is applied, but can also exempt worldwide income earned from outside the UK from incurring UK taxes – a system known as the remittance basis.

Gulliver’s lawyers confirmed he was “entitled to claim the benefit of the remittance basis”, but did not say whether or not he did so. If Gulliver were on the remittance basis, he would not need to pay tax on investment income held outside the UK – which would include holdings in Swiss bank accounts.

A representative for Gulliver said that he had paid all relevant income taxes: “Full UK tax has been paid on the entirety of his worldwide earnings less a credit for tax paid additionally in Hong Kong (where he is also tax resident) on that part of the same earnings doubly taxed.”

John Christensen, director of the Tax Justice Network, which has campaigned for abolition of non-dom tax benefits in the UK, said the non-dom quirk was particularly attractive for anybody who had accumulated assets such as homes and bonuses offshore, because any gains on offshore assets would be sheltered from UK tax.

“For my part I think it illustrates the absurdity of the rule, which should have been abolished many years ago. It serves no useful purpose and is hugely discriminatory against ordinary UK taxpayers,” he said.

Separately, Gulliver did not become employed by HSBC’s main holding company when he took over as chief executive of the bank in 2011. Documents seen by the Guardian at the time showed that Gulliver took the job of chief executive officer as a secondment from the Dutch-headquartered HSBC Asia Holdings, rather than take a straightforward appointment to the UK parent company.

A spokesman for HSBC said around 350 of its staff were employed through the Netherlands. “About 350 of the bank’s most internationally-mobile employees are employed by HSBC BV,” he said. “This enables them to be employed/seconded to any part of the global group without the need to change contracted employer.”

Representatives for Gulliver declined to explain for what purpose he was employed through the Netherlands subsidiary.

Gulliver has repeatedly emphasised to the public and to lawmakers that the culture of the bank, as well as its safeguards, has changed – both in the wake of the HSBC Files, and previous scandals including Libor rigging, and involvement with Mexican money laundering.

Since the publication of the HSBC files, the bank has been keen to stress that it has downsized the Swiss business, reducing the number of clients by 66%, to around 10,000. However, the total value of assets in those accounts – $68bn (£44bn) – has fallen by only 42%.

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The Future Is Bright for Europe, Indonesia

Jakarta Globe, Giacomo Tognini,  May 23, 2014

According to data from the Ministry of Manpower, 6,351 Europeans currently
call Indonesia their temporary home. (JG Photo/Boy T. Harjanto)

Jakarta. Indonesians and Europeans don’t always get along. When asked how they felt about one another, one source asserted that “British people keep to themselves,” while another exclaimed that “Indonesians are rude.” Stereotypes abound whenever diverse cultures meet, even in the supposedly globalized world we live in today. Indonesia and Europe are no exception, yet trade, travel, and cooperation between the two continue to grow.

The two cultures made contact for the first time when Portuguese explorers reached the Sunda Kingdom in 1512, leading to centuries of Dutch and Portuguese colonization of the archipelago. Nowadays, an estimated 6,351 Europeans live in Indonesia, 13.8 percent of all the expatriate residing in the country, according to a May 10 report from the Ministry of Manpower and Transportation.

While the history between the two is hardly pleasant, Indonesia’s rapid economic development and the advent of the European Union have led to strengthened ties and increased cultural exchange. According to a December 2013 report by the Indonesia Diaspora Network, 185,512 Indonesians make the Old Continent their home, in addition to approximately 700,000 people of mixed or Indonesian descent in the Netherlands.

In the post-war era, Europeans arrived to work in diplomacy and Indonesia’s expanding industries, and many more traveled to experience its natural and cultural wonders. Conversely, some Indonesians emigrated to seek a better life in Europe during economic trouble at home.

Whereas Europeans continue to come to Indonesia for the same reasons, today people increasingly move in the opposite direction for higher education. The European Union’s recent push to attract more foreign students to study in its renowned universities by providing scholarships through its Erasmus Mundus education outreach program has been successful. Around 7,000 Indonesians studied in the EU as of 2013, many of whom receive financial aid from the European Commission.

However, a clear cultural divide remains between Indonesians and Europeans across the continent.

“I definitely love living here, but I have to say it takes a lot of effort to make friends,” said an Indonesian student in London. “My closest friends here aren’t British.”

When it comes to other nationalities, she had a different perspective: “French people are a bit condescending, I feel like Italians are the friendlier bunch.”

Europeans in Jakarta mention a similar experience adapting to their host culture.

“We have a completely different mentality because we are separated by centuries of history,” said an Italian woman who has lived in Indonesia for a year. While she admires the natural beauty of the country, she “cannot stand the traffic that paralyzes this city and the complete lack of respect for the environment.”

The EU and the Indonesian government have long collaborated on a variety of bilateral projects to aid in the resolution of significant issues. The Blue Book on EU-Indonesian Development Cooperation published in 2013 outlines six areas of partnership: education, economic cooperation, the environment and climate change, good governance and human rights, disaster preparedness and conflict prevention and health, water and sanitation. Many of these target specific regions of the island nation that require more help in certain areas and less in others to maximize efficiency.

Along with the EU as a whole, Indonesia is among the members of the G-20, an organization that represents the world’s 20 largest economies. Indonesia is now the 10th largest, as revealed in a World Bank report published in 2014. As a result of Indonesia’s growing economic clout, the EU is seeking a Comprehensive Economic Partnership Agreement (CEPA), a deep free trade agreement. The union was Indonesia’s second largest source of foreign direct investment (FDI) behind Japan in statistics released by the Indonesia Investment Coordination Board in 2012, although it has fallen in the rankings since due to slower yearly increases of investment compared to South Korea and Singapore.

As the second-largest democracy and the world’s largest Muslim nation, Indonesia has tremendous geopolitical importance. This is likely to increase, given the archipelago’s strategic location in a region witnessing the ascent of China and India. Europe is taking note: President Susilo Bambang Yudhoyono visited at least four European countries in his second term, and German Chancellor Angela Merkel, Dutch Prime Minister Mark Rutte, and British Prime Minister David Cameron visited Indonesia between 2012 and 2013. These are signs of the country’s rise as an influential player in the international arena.

In the future, a continent emerging from an economic crisis and still searching for its place in a global chessboard dominated by the United States and China could gain from increased cooperation with a nation seeking a role commensurate to its massive demographic and economic expansion.

The two have much to learn from one another. Sarah Braga, a Portuguese-Luxembourg student in Jakarta, believes that “Europe has become a very individualistic region, whereas in Indonesia it’s more about a sense of community.”

“Indonesians are a people that know how to laugh and be happy even in times of difficulty,” said an Italian resident of Jakarta. “This is something that Europeans should learn from.”

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Asian logging companies 'use British islands for tax dodging'

Calls for crackdown as investigation finds huge Indonesian corporations evading tax through network of secret shell companies in British Virgin Islands and other tax havens

The Guardian, The Observer, John Vidal, environment editor,  Saturday 10 May 2014

In the British Virgin Islands it is easy to set up shell companies, which makes
them popular with companies and the wealthy. Photograph: Neil Rabinowitz/Corbis

Giant Asian logging companies that make billions from destroying rainforests use a labyrinth of secret shell companies based in a UK overseas territory, the British Virgin Islands (BVI), which operate as a tax haven, according to documents seen by the Observer. The 13 companies own millions of acres in Indonesia, provide much of the world's palm oil, timber and paper, and use complex legal and financial structures to keep their tax liabilities low.

An unpublished two-year investigation by anti-corruption experts, and seen by the Observer, says Britain should launch a major investigation into the use of the BVI and other tax havens by "high-risk" sectors such as Indonesian forestry. This follows a court case in Jakarta in which one of the world's largest palm oil companies, owned by billionaire Sukanto Tanoto, was fined US$205m after being shown to have evaded taxes by using shell companies in the BVI and elsewhere. The company has agreed to pay the fines.

Documents arising from the case show that Tanoto's company, Asian Agri, systematically produced fake invoices and fake hedging contracts to evade more than $100m of taxes.

According to evidence contained in more than 8,000 papers, the company, which employs 25,000 people in 14 subsidiaries and owns 165,000 hectares of plantations, was engaged in "routine and systematic fraudulent accounting and book-keeping practices" using British jurisdictions.

It is easy to set up shell companies in the BVI, and this makes them a favourite destination for Asian corporations and individuals. A cache of leaked documents obtained by the International Consortium of Investigative Journalists showed last year that nine of Indonesia's 11 richest families had used tropical tax havens.

Although there are legitimate uses for offshore companies, critics say tax havens fuel corruption and allow corporations and individuals to dodge taxes. "Powerful forest and palm oil conglomerates have set up shell companies in the BVI, Cayman Islands and Bermuda, but lack of transparency – including public access to the names of the actual owners of shell companies – makes it difficult for governments to monitor the legality of their activities," said Stephanie Fried of Ulu Foundation, a US organisation that tracks international financial flows. "Clearly, a full international investigation is needed not only by Indonesian authorities, but also by those in the BVI, the UK and other jurisdictions."

A government spokesperson said: "The government put tax and transparency at the heart of the UK's G8 presidency. As a result, the UK's overseas territories are consulting on establishing a central registry of beneficial ownership and on whether it should be publicly accessible. We believe a registry of this kind would provide the best outcome for sound corporate behaviour and for helping authorities, including those in developing countries,prevent misuse of companies for illicit purposes." 

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-----------------------------------------------------------------------------------------

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HMRC in offshore tax evasion crackdown after receiving fresh data

Biggest tranche of information ever received by HMRC contains 400GB of information on offshore tax evasion

guardian.co.uk, Press Association,  Thursday 9 May 2013

The Cook Islands, a dream holiday destination for some, a tax haven for
others. Photograph: Alamy

A fresh crackdown on offshore tax evasion has been launched after HM Revenue and Customs said it had received data showing extensive use of schemes to hide assets.

HMRC is working with the United States and Australia to analyse 400GB of data showing the use of tax evasion schemes via companies and trusts in territories around the world including Singapore, the British Virgin Islands, the Cayman Islands and the Cook Islands.

It is understood to be the biggest tranche of information ever received by HMRC about offshore tax evasion and has so far identified more than 100 people who are benefiting from these tax evasion schemes, with a number of individuals already being investigated.

HMRC has also identified more than 200 UK accountants, lawyers and other professional advisers who advise on setting up these structures who will also be scrutinised.

It is calling on anyone using offshore tax schemes to seek advice to ensure they are not breaking the law, which can result in criminal prosecution, hefty fines and possible naming and shaming.

The chancellor, George Osborne, said: "The message is simple: if you evade tax, we're coming after you.

"The government has invested hundreds of millions of pounds to fund the fight against tax evasion, both at home and abroad. This data is another weapon in HMRC's arsenal."

The Association of Chartered Certified Accountants said while it welcomed moves to clamp down on tax evasion, "we should never lose sight of the fact that it is a small number of people who are evading tax in these markets".

Chas Roy-Chowdhury, head of taxation at ACCA, said: "The majority of accountants, lawyers and other professional advisers, as well as their clients, are not breaking any laws in these locations.

"There is a large gulf between what amounts to tax avoidance, which is within the law, and tax evasion, which is illegal."

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Blow for Cameron as China welcomes Hollande

Beijing punishes PM for his meeting with Dalai Lama while French president gets full state visit treatment

The Guardian, Nicholas Watt, chief political correspondent, Friday 26 April 2013

The French president, François Hollande, meets his Chinese counterpart,
 Xi Jinping, in the Great Hall of the People in Beijing, China. Photograph:
Pool/Getty Images

David Cameron's mission to change the focus of British foreign policy by boosting trade links suffered a setback after Downing Street was forced to abandon a trip to China as Beijing punished the prime minister for meeting the Dalai Lama.

In a blow to Cameron, who had hoped to hold an annual summit with the Chinese leadership, the French president François Hollande was on Friday feted in Shanghai on a full state visit a few weeks after the prime minister was due to visit China.

Cameron is understood to have abandoned the planned trip after Beijing indicated that he was unlikely to be granted meetings with senior figures. He is now expected to visit in the autumn, two years after his first and only visit as prime minister.

Britain accepts that Beijing is exacting punishment after Cameron met the Dalai Lama, the spiritual leader of Tibet, at St Paul's Cathedral last May. The meeting, which was similar to Gordon Brown's discussions with the Dalai Lama at Lambeth Palace in 2008, was designed to minimise offence in China by showing that Britain regards him as a spiritual leader. Downing Street has made clear to Beijing that it accepts Tibet is part of the People's Republic of China.

Government sources said that tentative plans for the prime minister to visit China this month were put on hold before his visit to India in February for the simple reason that the new Chinese leadership only took over in March. Cameron spoke to Li Keqiang, his new Chinese counterpart, after his appointment.

But the Guardian understands from diplomatic sources that a visit was firmly placed in the prime minister's diary for earlier this month. This was abandoned when it became clear that the prime minister would be denied the access usually granted to a G8 leader.

Douglas Alexander, the shadow foreign secretary who has just returned from China, told the Guardian: "David Cameron came to office claiming he would prioritise the UK's diplomatic and trade relationship with China, and yet the real difficulties in relations have now been laid bare. I was in China this week and it is clear that the new Chinese leadership are focused on the French president's visit, along with a large number of French companies looking for business.

"In the past, UK prime ministers have met with the Dalai Lama without the deterioration in relations with China that we are now seeing. For all of their initial boasts and bluster, the UK government has lacked a strategic or a joined-up approach to China since it came to office, and that's now showing."

A No 10 source said: "Of course, as any good diary planner would, we pencil in early on dates when the prime minister could potentially travel overseas without going firm on destinations. We decided several weeks ago that we wanted to visit some European capitals in the time we had earlier this month. When the prime minister and Premier Li Keqiang spoke in March they looked forward to meeting in due course."

Officials said trade with China is still rising and the two countries are on course to achieve £1bn in bilateral trade by 2015. Exports to China grew 13.4% last year.

But the decision to abandon the visit is a personal setback for Cameron, who said after coming to office that he would place trade at the heart of foreign policy, with a particular emphasis on the so-called Bric countries of Brazil, Russia, India and China. A visit to India in February fell flat after private complaints that the prime minister appeared to regard the country as a trading opportunity rather than an emerging world power.

Hollande was greeted by Xi Jinping, the new Chinese president, when he arrived in Beijing with his partner Valerie Trierweiler on Thursday. They agreed to hold an annual summit – Cameron's original aspiration when he first visited China in November 2010 – after Hollande said he hoped to build a "multipolar" world. This is the classic French ambition to ensure the US cannot dominate the world in a "unipolar" world.

Cui Hongjian, director of European Studies at the China Institute of International Studies, a foreign ministry thinktank, told the South China Morning Post that this message was well received in Beijing. "France sometimes has different ideas from the US. China may co-operate with France."

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Boost for City as Sir Mervyn King does currency swap deal with Bank of China

Independent, Russell Lynch, 22 February 2013

 

The Bank of England today took a crucial step towards boosting the City as a centre of trading in the Chinese renminbi after agreeing a currency swap deal with the Bank of China.

The announcement of the three-year swap — to allow Threadneedle Street to draw down renminbi from China’s central bank to supply to UK firms and vice versa — came after talks between Governor Sir Mervyn King and his counterpart in Beijing.

Bankers have long called for a swap to allay fears over a lack of liquidity in China’s tightly-controlled currency, which has hampered trading in the renminbi. The Bank of England had resisted as it usually reserves swap lines for emergencies.

A Standard Chartered spokesman said the deal “will have a positive psychological effect on the market in the City and encourage more companies to do business in renminbi.” HSBC UK economist John Zhu said: “This will provide greater confidence for businesses that trade with China and represents a positive step to improving convertibility between sterling and renminbi.”

Hong Kong currently has 80% of off-shore renminbi trading, with London and Singapore sharing the rest.

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"The U in Kundalini"- Oct 18, 2012 (Kryon channeled by Lee Carroll) - (Subjects: Kundalini, Unification, EU, Nobel Peace Prize 2012, Middle East, South America, Only 5 Currencies on Earth, Old Souls, Duality will dismiss, 3D Humanity will melt with Multi dimensional higher self, Global Unity… etc.)

Bleak day for British banking as Libor arrests follow record fine for HSBC

HSBC hit with £1.2bn fine by US regulators, while SFO arrest three in connection with investigation into interest rate rigging

The Guardian, Jill Treanor, City editor, Tuesday 11 December 2012

HSBC had allowed drugs traffickers to launder billions of dollars and
 billions more to be moved to countries facing sanctions. Photograph:
Mike Segar/Reuters

The reputation of Britain's banking industry took a fresh battering when HSBC was slapped with a record £1.2bn fine by US regulators for money laundering and sanctions busting, the first arrests were made in the Libor-rigging investigation, and nationalised Northern Rock handed the taxpayer a £270m bill to compensate customers affected by a mistake in its paperwork.

The US Department of Justice (DoJ) detailed how HSBC, Britain's biggest bank, allowed drug traffickers to launder billions of dollars in the US and billions more to be moved across borders to countries facing sanctions, such as Burma, Cuba and Libya.

The department spared HSBC a criminal prosecution only because it considered the bank too big to prosecute. Listing a catalogue of mistakes by HSBC over almost a decade, the DoJ admitted that "collateral consequences" were a factor in its decision not to pursue criminal charges. Those consequences, it said, could have included a ban on doing business in the US, resulting in huge job losses.

The fine being paid by HSBC, and a five-year deferred prosecution agreement which will keep the bank under intense scrutiny and restrict top executive bonuses, was even larger than the £940m HSBC had warned it might face to settle the allegations in July.

HSBC's chief executive, Stuart Gulliver, apologised for the events which included laundering $881m (£547m) for two drug cartels in Mexico and Columbia and accepting $15bn in unexplained "bulk cash", across the bank's counters in Mexico, Russia and other countries.

The embarrassment heaped on HSBC came just hours after close rival Standard Chartered, based in London, was forced to pay out a total of £415m to US regulators for breaching sanctions with Iran.

The Serious Fraud Office announced on Tuesday it had arrested three British men, aged 33, 41 and 47, in connection with its criminal investigation into the rigging of the benchmark interest rate. The investigation was sparked when Barclays was fined £290m by regulators in June for Libor manipulation. None of the three men arrested worked at Barclays.

The fines are just the latest setback for an industry which is reeling from the revelations in the Libor investigations at Barclays, where traders offered each other bottles of Bollinger to fix rates. The scandal prompted the departure of Barclays' chairman Marcus Agius, chief executive Bob Diamond and Barclays also received a £480,000 fine from Spanish authorities for under-rating the risk of bonds it sold to clients in 2008.

The rest of Britain's banks are now braced for a series of fines from the Financial Services Authority for manipulation of Libor. The Royal Bank of Scotland and Swiss bank UBS are expected to settle with the FSA in the coming days and both will face huge fines.

Taxpayers were forced to take more pain from the five-year-old banking crisis after the nationalised "bad bank" part of Northern Rock revealed a blunder in the information it had sent to borrowers. The error has landed Northern Rock Asset Management with a bill for £270m to repay 152,000 customers the interest they had paid for the past three years – the equivalent to £1,755 per customer. Lord Oakeshott, the Liberal Democrat peer, calculated that was the equivalent of a contribution of £8 to £10 per taxpayer. "This is £270m straight out of the taxpayers' pocket. I've been repeatedly assured in parliament that there was no black hole in Northern Rock. UK Financial Investments and the Treasury didn't know what they were talking about," he said.

At HSBC, Gulliver was at pains to insist that the bank was "a fundamentally different organisation" now to the one which allowed the breaches of US rules to take place. The focus turned on his predecessors, including the former chairman Stephen Green who was awarded a peerage and a role as a trade minister two years ago.

"Lord Green is not only a senior minister in the government, but an adviser to George Osborne on banking and a member of the cabinet committee on banking reform. He cannot continue to duck detailed questions about his time in charge of HSBC," said Chris Leslie, shadow financial secretary to the Treasury.

A spokesman for the Department for Business Innovation and Skills, which Green represents, said that Lord Green had already said that he shares the bank's regret for the events. But campaigners for "better banking" urged HSBC customers to move their money. "Sorry is not good enough. The size of this fine shows just how flawed our financial system is and how morally bankrupt many UK banks are. Ultimately its bank customers that will pay the price for HSBC's criminal activity," said Laura Willoughby, chief executive of Move Your Money.

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