1 JULY 2008

MR CHRIS MEARES AND MS CATHERINE WEIR

  Q80  Mr Breed: Were you rather surprised at the lengths the authorities were prepared to go to get hold of this information?

  Mr Meares: Globally?

  Q81  Mr Breed: Yes.

  Mr Meares: Not really. What is important is the certainty of law. As an institution dealing with private clients, we want to comply with the law of that jurisdiction. We also do not want to be sued by clients. We need to know that we are acting in the law and that we can defend any actions that we can take. For example, when there is a request for information, we like to receive that through a legal channel, so that we have the law behind us rather than any doubts. Certainty is quite important.

  Jim Cousins: I have been trying to work out what happened in all of this. You may have heard the previous evidence session, where there was some discussion of the qualifying intermediary programme in the United States. I was able to turn up a deposition made in a court in Southern Florida within the last month, following a plea bargain in a tax case. It involves an employee of a well-known Swiss bank (which if I named it would be familiar to us all). I hasten to add that neither of your two banks are mentioned at all in this deposition. I am going to turn through some of the things that are recorded here.

  Chairman: Could I just make the point that if it is an ongoing case we cannot discuss it in this Committee.

  Jim Cousins: No, it has been settled. This is from a deposition that has been tabled in front of the court. It has been agreed by all the parties as being a fair statement.

  Chairman: On you go.

  Jim Cousins: With the assistance of this well-known Swiss bank, US clients were prepared false and misleading IRS forms through sham entities in Liechtenstein. Is this the sort of thing you yourselves have come across?

  Q82  Chairman: The reason I mentioned that is that this involves a well-known Swiss bank (which Jim has not identified) but I think there is another case coming up with a well-known Swiss bank, and whether it be the same bank or not I do not know. That is the reason for my intervention.

  Mr Meares: It is an ongoing case.

  Jim Cousins: It is not an ongoing case.

  Mr Fallon: The other one.

  Q83  Jim Cousins: Okay.

  Mr Meares: We are all fully aware of it and the answer is: no, we do not promote that sort of thing. Any US clients that we might have outside of the US—so we would have an investment banker who may be working in London as a US client—have to fill out their W8 forms under the qualified intermediary and they have to fill out all the other forms. We certainly would not be encouraging any fraudulent forms.

  Q84  Jim Cousins: I went through all this very interesting stuff that comes to light: placing cash and valuables in Swiss safety deposit boxes; purchasing jewels using the funds in the Swiss bank account while overseas; misrepresenting funds; destroying all offshore banking records existing in the United States; using Swiss bank credit cards; and, on one occasion, rather entertainingly from some points of view, purchasing diamonds and smuggling the diamonds into the United States in a toothpaste tube. All of this is recorded in this court in Southern Florida within the last month. All of these activities are completely unknown to you. I mean, neither of your organisations would ever have recommended that somebody uses a Swiss bank credit card or the credit card based in an onshore jurisdiction. You would not have done anything like that.

  Mr Meares: We would not have done all the rather bizarre things mentioned there. Yes, clients may have a credit card in Europe or Switzerland or other jurisdictions, but most of the other things, I have to say no.

  Q85  Chairman: Nothing interesting in your tube of toothpaste.

  Mr Meares: Unfortunately not.

  Ms Weir: We have no direct knowledge of those activities currently.

  Jim Cousins: I would not have asked you if there had been any mention of your organisation in this deposition. But it makes entertaining reading.

  Q86  Mr Fallon: Chris Meares, we heard discussion earlier this morning about amnesties. Do you think tax amnesties are an effective tool?

  Mr Meares: They have been used in a number of countries. I really cannot comment on how effective they are because I do not work for the governments and see the numbers and see whether they have really made a big difference. We are conscious that countries like Italy and Germany have introduced them. I really do not know how effective they have been. I mean, Italy at the same time repealed estate duty. Whether that had an impact as well, I am not sure.

  Q87  Mr Fallon: How would you describe the relationship between private banks and HMRC? Is it adversarial?

  Ms Weir: From Citi's perspective—I can only comment on Citi—we like to think our relationship is sound. I have no knowledge that our relationship is not sound. I am not personally responsible for that relationship for the company. It is much beyond the scope of Private Bank, but we have no outstanding issues that I am aware of.

  Q88  Mr Fallon: Have either of you had experience of section 20 notices?

  Mr Meares: Yes.

  Q89  Mr Fallon: What has that experience been?

  Mr Meares: HSBC has received a section 20 notice. It was first served on HSBC Bank plc. We have a section 20 notice served on the Private Bank.

  Ms Weir: We have not.[3]

  Q90 Mr Fallon: What has happened as a result of that?

  Mr Meares: We are processing that and we will be providing the information that is being asked for.

  Q91  Mr Fallon: You are able to comply with the scale of information required?

  Mr Meares: Yes.

  Chairman: No further question. Thank you very much for your time.