First We Bailed Out Coutts, Then They Helped People Dodge Tax, Now We're Paying Their Fines

Happy birthday, the Queen! Many happy returns to our longest reigning monarch! Let’s hope you’re getting loads of birthday cards with cheques in them so you can buy something nice, paid into your account at Coutts – a bank recently fined by the US Department of Justice over tax avoidance.

Coutts – the royals’ bank of choice, owned by British taxpayers – was recently named in the “Panama Papers” for asking Mossack Fonseca to create offshore companies for its clients. Less well-known is that it recently paid a $78 million (£50 million) fine for helping ultra-rich clients evade tax by using Panamanian and other offshore structures. Coutts is a subsidiary of the Royal Bank of Scotland (RBS), which is mostly owned by the UK government, so the fine was largely paid by you and I, the UK taxpayers. Taxpayers are paying for tax avoidance.

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Coutts were fined by the US Department of Justice at the end of 2015 because they “aided and assisted certain US clients with undeclared accounts at Coutts to evade their income taxes by placing their assets in the names of structures formed, maintained and managed by various subsidiary trust companies of Coutts”. However, a search shows that the huge fine was not reported by any British national newspapers. The US Department of Justice announced the fine on 23rd December and the news appears to have been lost in the Christmas period.

The Panama Papers show Coutts asked Panamanian lawyers Mossack Fonseca to create over 500 offshore companies for their clients. Coutts said that this didn’t mean they did wrong, as “The provision of trust and administration services is an entirely legitimate and key aspect of wealth management and succession planning.”

However, the US Department of Justice fined Coutts for precisely that kind of behaviour. The services Coutts offered included “the creation of foundations, trusts and companies incorporated or based in offshore locations such as the Bahamas, British Virgin Islands, Liechtenstein and Panama”.

The US authorities give examples, like the Coutts manager who “had three US clients with undeclared accounts held in the names of British Virgin Islands companies. These three accounts totalled approximately $130 million.”

Even after the 2008 bailout of RBS, when it became “majority-owned by the United Kingdom government”, US authorities say Coutts continued with their offshore offerings. The US Department of Justice says that “since August 2008, Coutts has accepted over $150 million in inflows from other Swiss banks that were being investigated by the department”. As well as taking on accounts from other Swiss banks, Coutts’ “relationship managers” travelled to the US to help their super-rich clients with offshore accounts. The US give another example, showing how “between July 2011 and April 2014, Coutts assisted a US client in transferring $33 million from an undeclared account held in the name of a Belize corporation to 11 other accounts at Coutts held in the names of nominee entities”, giving the US taxman the slip.

Coutts paid the £50 million penalty as part of the US Government’s “Swiss Bank Program”. The US gave Swiss Banks a chance to avoid a full criminal prosecution if they admitted they “had reason to believe that they had committed tax-related criminal offenses in connection”, gave the US full details of any US taxpayers involved and paid a fine.

RBS also paid German authorities £17 million to settle charges of tax evasion against their Coutts subsidiary in December 2015. Again, this is essentially British taxpayer’s money being paid to a foreign government because a bank we own helped the super-rich avoid tax.

Coutts are a central part of the British establishment. Founded in 1692, Coutts has long held the Queen of England’s account. The bank also has strong links with the Conservative Party. Throughout the period covered by the US and German fines, Coutts was run by David Douglas-Home, the only son of Tory Prime Minister Alec Douglas-Home. He sits in the Lords as a Conservative, under the name Earl Home. He was Coutts’ Chairman from 1999 to the end of 2013. Coutts is currently chaired by another Tory Lord, William Waldegrave, who was a Minister under both Thatcher and John Major. Waldegrave joined the Coutts board in December 2012. Douglas Hurd, another former Tory government minister, sat on the Coutts board from 1998 to December 2009, including a spell as Deputy Chairman.

I approached Coutts for comment, but they declined to respond.

The Financial Conduct Authority have now written to Coutts and the other banks named in the “Panama Papers” asking for details of their involvement with the law firm Mossack Fonseca. However, they are clearly far behind US and German authorities in looking at the bank’s involvement in tax avoidance.

@SolHughesWriter

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