Paradise Papers: ANZ threatened by HSBC for Cook Islands ‘privacy breach’ to ATO
HSBC in the Cook Islands threatened to sue ANZ for allegedly handing over customer details to the Tax Office without telling clients first, the Paradise Papers reveal. ANZ’s relations with the providers of secret trusts in the remote Pacific Islands tax haven turned suddenly nasty in 2012 after ANZ caved in to pressure from the ATO. HSBC Trustee of the Cook Islands, which had customers in the tax haven who banked with ANZ, said ANZ should be sued or even prosecuted for breaching local privacy laws.
The battle was part of the confusion caused by a Federal Court decision in March 2012 forcing ANZ to hand over all the information on any Australians who held secret accounts in ANZ’s Vanuatu subsidiary even though they were protected by local bank secrecy laws. This posed a wider problem for ANZ and Westpac in other tax havens around the South Pacific including the Cook Islands which has come to light from emails of offshore advisory firm Asiaciti. The documents were obtained by the German Süddeutsche Zeitung
newspaper and then shared via the International Consortium of Investigative Journalists with media partners including The Australian
Financial Review. According to those emails, the association of Cook Islands trust companies in May 2012 after the Federal Court’s judgment resolved to ask David Dennis, ANZ chief executive for the Cook Islands, whether ANZ could move its information storage out of Australia. In September the full bench of the Federal Court upheld the lower court’s decision and Mr Dennis wrote to Asiaciti on December 28 that ANZ had decided after considering the “ramifications of the case” that it would no longer provide “protected” services to Cook Islands customers after January 31, 2013.
Taki Anaru, HSBCs general manager private wealth, however wrote on March 26, 2013 to the other trust managers that he had learnt that ANZ had recently illegally released client information to the ATO. Mr Anaru said this breached Cook Islands privacy laws and was subject to “prosecution and possible civil action”. He accused the Cook Islands Financial Supervisory Council of giving ANZ an illegal waiver from prosecution. “The HSBC and other trustee companies have been injuriously affected,” he wrote.
Unlawful release
He said ANZ had given “no notice to affected parties prior to the unlawful release of information and thus deprive them of the ability to access the High Court”. He said the matter was being taken seriously within the HSBC group and he would have to report internally.
The manager of Portcullis, a locally owned trust company, replied that she had sent an email to ANZ and the regulator about the same issue.
HSBC’s Mr Anaru on March 27 sent an email to other trust company managers including a reply from Mr Dennis who said ANZ gave information on its “protected customers” in the Cook Islands to the ATO on 12 December.
Mr Anaru said: “Suggest we review the narrative on this.” An ANZ spokesman told The Australian Financial Review it had complied with its Australian legal obligations by providing information requested by the ATO relating to Australian taxpayers.
The spokesman said regulators in the Cook Islands were informed and customers were also notified their data was being sought and subject to a legal ruling by the Full Federal Court in Australia. He said ANZ has not been charged with breaching Cook Islands bank secrecy laws, nor has it been sued by any account holders.
The ANZ and Westpac departures caused problems for many of Asiaciti’s US clients in the Cook Islands, including Kevin Wessell, a director of US-based Companies Incorporated and 1800company. com.
He was then facing a multimillion-dollar lawsuit under US racketeering laws for operating a fake “asset protection” scheme which promised to set up offshore companies for investors but then trousered the money. Wessell lost the racketeering case in October 2013. Wessell wrote on February 12, 2003 to Asiaciti that he wanted to set up a new Westpac merchant account linked to credit cards for “his customers”. He added, “naturally we will report all taxes to US authorities as required”.
Prohibitive cost
Adrian Taylor, managing director of Asiaciti in the Cook Islands, wrote back that Westpac was no longer opening new “offshore accounts”.
He said ANZ and Westpac banks had decided “the cost of trying to fight the orders of Australian courts to reveal information contrary to South Pacific Islands confidentiality legislation was prohibitive”.
He said Asiaciti was instead directing clients to use Capital Security Bank, a Cook Islands-based bank.
On March 13, Asiaciti wrote to a Kevin, likely Wessel, saying that in the interim Asiaciti would move his account to an “existing LAP account” at Westpac in the Cook Islands.
John Evans, operations manager of Capital Security, told Asiaciti on March 18 that he was talking to ANZ about a means of opening new deposits with ANZ via a “domestic entity”.
Mr Evans said this system could help with price and diversification. He added that, “Any funds that are held with ANZ as mentioned above would be beneficially owned CSB funds and would have no links or information trails back to our client base.”
The ANZ spokesman said it had robust “know your customer” policies in place, including in the Cook Islands and it had no arrangements with CSB to provide banking services without a proper trail and information back to its client base.
Westpac sold its operations in Vanuatu in 2015 to Papua New Guinea-based Bank South Pacific.