That said, for very many ways, my greatest concern was with Rona Fairhead, who as a non-executive director (but chair of HSBC USA) chaired the audit committee of the bank throughout much of the period of concern. There were a great many reasons why her evidence seemed to me to be indicative of serious failings.
The first was her lack of understanding of audit. She kept saying that one of the people she relied upon to make sure that there was no fraud was the external auditors. There is no way on earth that this was a reasonable assumption on her part: this tax evasion would never have misstated the accounts of HSBC as a whole, and as such it was quite unreasonable of her to think that they would report any error of this sort.
What she also kept saying was that tax evasion was illegal, and therefore HSBC should not have been doing it in Switzerland. For that reason she actually said she never asked directly about it because it had never occurred to her it might happen. But, she was completely wrong to think this. Tax evasion has not been illegal in Switzerland. It is not been a crime. And it has not been, certainly during the relevant period, what is called a predicate offence for money-laundering purposes, which means that no money laundering system in Switzerland was required to look for tax evasion. Her assumption that these systems would therefore provide her with assurance were, therefore, completely inappropriate, and I think she should have known that, especially given the amount that she was paid to know it.
Thirdly, she kept saying that when matters were drawn to the attention of the audit committee they took action. What she clearly did not understand was the fact that the audit committee is not there to be a reactive body, but is there to be a proactive body, consciously seeking to make sure from a position of non-executive authority that the systems in place in the bank are appropriate. There was, again, a fundamental lack of understanding in my opinion on her part when saying this.
Fourthly, and just as troublingly, was a continual claim that she was entitled to rely upon the systems of the bank and the information that they supplied. This appears to me to be wholly misplaced faith, especially in an audit role when there must always be reasonable doubt that data is wrong. It is also wrong as a non-executive because I believe that the role of a non-executive director is to question whether the systems are reliable, and the information that they produce is of use. The whole purpose of paying people a lot of money to be non-executive directors is to get them to apply their sound judgement to the data they get to test its credibility. It seems apparent she did not do this, and so it is reasonable to assume others did not do so either.