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HSBC feels heat from regulator over 'criminal' accounts in its Jersey banks

List of account holders gives to HMRC includes known international criminals

Financial watchdogs have demanded explanations from HSBC after it emerged that the bank is at the centre of an HM Revenue & Customs investigation over offshore accounts opened in Jersey, including some for criminals living in Britain.

The Financial Services Authority (FSA) is understood to have asked to be kept informed of what could be the second major scandal to hit a bank in a matter of months.

HSBC is already preparing to pay $1.5bn of fines to American authorities after subsidiaries funnelled money for drug runners and Iran through the bank in breach of money-laundering laws.

The bank has admitted that it could face prosecution and that the final payment could be even higher.

According to the Daily Telegraph, the tax authorities have obtained details of “every British client of HSBC in Jersey” based on information provided by a whistleblower. It is reported that the 4,000 offshore account holders include a man once called London’s “number two crook”, a well-known drug dealer living in Central America and bankers facing fraud allegations.

The FSA last night said it could not comment on the claims, but The Independent understands that if there is any link found to the bank’s British operations a full investigation could be launched within days.

The Jersey Financial Services Commission also warned: “Any concerns regarding the use of the banking system in Jersey involving money of criminal origin... will be robustly investigated.” But it did not refer to HSBC by name.

While most of the accounts are likely to be lawful, regulators on both sides of the Atlantic have been increasingly cracking down on banks seen as having weak controls on the issue of money laundering. Were HSBC or any other bank found to have failed in this regard, they could face a severe penalty.

Investigations by The Independent have revealed that HSBC has three separately run banks on the island. The first is a retail bank dealing with the day-to-day banking needs of Jersey’s citizens. The second is HSBC International, which looks after ex-pat Britons. The third is HSBC Private Bank Jersey.

It is not yet clear from where the list of HSBC clients hails, but it could involve either one or both of the second two banks. A former member of staff said there were “skeletons in the closet” dating from before the financial crisis. “We would check up on the names of people who wanted to open accounts and demand explanations for where any large sum of money came from. But there were definitely skeletons in the closet,” they said.

The HSBC leak identifies 4,398 people holding £699m in offshore accounts, with potentially billions more held in investment schemes. The Independent’s source said the main area for the “skeletons” referred to was in the bank’s investment arm.

HM Revenue & Customs said of the HSBC data: “We can confirm we have received the data and we are studying it. We receive information from a very wide range of sources which we use to ensure the tax rules are being respected. Where we uncover evidence of tax evasion we will crack down on it.”

HSBC said in a statement: “We are investigating the reports of an alleged loss of certain client data in Jersey as a matter of urgency. We have not been notified of any investigation in relation to this matter by HMRC or any other authority but, should we receive notification, we will cooperate fully with the authorities.”