World's mega-rich tax dodge exposed: Meet the HSBC IT bloke at the heart of damning leak In 2008, HSBC IT exec Hervé Falciani blew the whistle on the huge tax-avoidance maneuvers used by some of the planet's wealthiest people. This week, sensitive documents obtained by the 43-year-old have been published online for the world to see. Falciani has fled across Europe, swerved extradition requests, and, fearing for …
Will a raid now be performed on politician's private suites? How about we shut the money-printing ECB with all the employees inside and then we pop it with a few 155mm packages? No? Then the primary problems will remain. And they will blow up in our faces sooner rather than later.
"Banks such as HSBC have created a system for making themselves rich at the expense of society, by assisting in tax evasion and money laundering,"
It's a bank, man. That is the only actor in the economy who can legallly do with your money what it damn well pleases - in particular, give to to other people and pretend it didn't. See also: Bank Run.
>Then the primary problems will remain. And they will blow up in our faces sooner rather than later.
The problem has already blown up. It isn't complicated at all and doesn't depend on jargon-strewn economic policies and tricks. The problem is that people both individually and through government have been spending more than they earn.
Keynesian flim-flam tried to hide the fact that this is a bad thing - even saying its a good thing, but the chickens always come home to roost. I missed the point when people forgot the 1970's and decided printing money was a good idea. You can go broke and stop paying for stuff, or you devalue/print money, (which means you can't import) and you keep going internally, paying in worthless money until the internal debt is paid. In the meantime you can't import which means you need to be self-sufficient for that to work.
GFC? You ain't seen nothin' yet. Massive layoffs but record stock prices? That would be because currency looks worthless. Crazy stock bubble? Any hope is better than no hope of return.
You'll see a surge in the left-wing but that is probably doomed. In the past, the West made things, which was handy when it came to nationalisation - there was something to redistribute so people didn't really starve. Now, its all imported which means we'll just all be very poor and have to do without.
I'd expect a surge by the far right too with nationalism on the rise as people look for other people to blame. Governments will look to distract their populations with foreign wars.
We've seen it before. South Seas stock anyone? How about the early twentieth century and if you look carefully out of your windows now...
-
"Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry."
-Polonius in Hamlet
>Keynesian flim-flam tried to hide the fact that this is a bad thing
You have no idea what you're talking about. Do you even know what Keynesianism is, or how well it worked to dig the Western economies out of the post-war slump, or how it was taken out and shot in the 1970s because banks like HSBC and their oh-so-important clients could no longer stomach paying a decent tax contribution to public schools, public universities, public hospitals, and other public infrastructure?
Do you know who sponsored that nutter Hayek or how he came to be canonised as the saviour of Western capitalism?
>In the past, the West made things
The West still makes things. Often they're made out of code and ideas.
The difference is that the West used to pay people for making things. And people who got paid had money to pay other people.
Now paying people who make things is no longer fashionable, so all the money that could be circulating in the economy and doing Useful Stuff is sitting and rotting in offshore bank accounts.
You're not going to blame Keynes for illegal money laundering and tax evasion too, are you?
And you have no idea what you are talking about either. Keynesianism was not the saviour of the postwar slump. The war created the slump, stop the war and the economies recovered. Keynes has a point that a certain amount of state spending can counter a boom-bust but everyone who is a Keynes disciple seems to think that the state can solve all boom-busts. Keynes said a certain amount of spending can allievate the problem, but it's not a cure. Hayek is just as much a nutter as Keynes. They both have valid points. Thinking one is a god and the other the devil makes you a nutter.
PS. How does money sitting in an offshore bank account rot? Does the bank just sit on it and do nothing. Or does it loan money out to entrepeneurs and invest in business in order to get a return and pay an interest on the money banked in them?
"Stopping the war" is easier to say than to achieve. It could have been a bit difficult to say Nazis "hey, let's stop the war, please". Chamberlain tried, and the results were not good...
Offshore banks are often just a dead end where you can store a lot of money but you can't easily move elsewhere (unless using other escamotages). What investor a bank in a small island in the Carribeans or Pacific could lend money to? Also, those kind of accounts can be very "volatile", today the money are there, tomorrow they could be somewhere else...
Why Apple, Google & C. are asking the US government a tax reduction to move those money back to US? Because if they do without them, they would have to pay the taxes they didn't want to pay when they stored the money in those tax havens - just, as long as the money is there, they can't take much advantage of them (pay dividends, buy backs, etc...)
"I missed the point when people forgot the 1970's and decided printing money was a good idea"
Stagflation happened in the face of tightening money supplies. The UK govt in particular spent a lot of effort pulling money out of circulation only to see inflation keep climbing.
Quantative easing looks like it might trigger deflation.
Money is a perverse thing. What counts more than availability is confidence in it. When the roman empire finally imploded, the final straw was over coinage. Within 18 months noone across the empire would take roman coins - and that was despite them being solid silver.
On the track of the story itself, I know several people in the UK who've been caught in the net and the reaction is amazingly selfish, as you'd expect from people caught systemaically tax evading. I can't see any country extraditing Herve to Switzerland, but some of these folk are pissed off enough that they might try kidnapping him there as revenge.
I'm way too poor to avoid tax
It's illegal, for me.
Well, you're wrong about that. All avoidance is legal, it's only evasion that is not. From what I've read of the HSBC thing, that smells like evasion, but I'd need to see the paperwork.
Got a pension (public sector or defined contribution), an ISA, or use your tax free earnings allowance? That's all tax avoidance.
Tax evasion is illegal, tax avoidance by definition is not.
@ac
No he is not confusing it, tax avoidance is avoiding tax, your earnings are declared but your tax liability is reduced, hmrc know that my gross income is x and I should be taxed x*.40 but because there are plenty of LEGAL ways to avoid tax they they actually tax me ((x-y)*.40) where y is my pension, cycle to work bike, student loan payment etc.
Evasion would be me earning 40k and declaring 20k pocketing the 30k difference.
@Roy Blake.
Sounds like a perfect accountant to me. I've never been able to understand how accountants work out good will and such like in business accounts. Seems to be a means of adjusting profit up or down according to what you want the accounts to say. This sort of maths seems pretty par for the course with accountants.
@d3vy.
'No he is not confusing it, tax avoidance is avoiding tax, your earnings are declared but your tax liability is reduced, hmrc know that my gross income is x and I should be taxed x*.40 but because there are plenty of LEGAL ways to avoid tax they they actually tax me ((x-y)*.40) where y is my pension, cycle to work bike, student loan payment etc.
Evasion would be me earning 40k and declaring 20k pocketing the 30k difference.'
In Britain at least, this is simply not true anymore. There are ways of avoiding tax that are perfectly legal in every way except being a construct whose sole reason is avoiding tax. This was the legislation change (which is completely open ended and open to interpretation) that the coalition have put into place. Basically, it says that if the government/HMRC approve of it, it's OK, but otherwise it isn't. The new law says that any financial arrangement created solely to avoid (note the word avoid, not evade) tax is now classed as evasion. So, what about an ISA? The sole reason for an ISAs existence is to avoid income tax on the interest. Therefore, according to the new law, they are actually illegal. Anyone know of someone prosecuted for it? No. Why? Because it's approved of by the government/HMRC.
The new law is a completely opened ended farce, which is open to huge amounts of abuse. An accountants job is (in part) to minimise your tax liability, but with a law like that, it is very difficult to work out what is, and what is not legal. There is no longer a line, but a blurry non-mans land.
So the canned statement from HSBC is pretty much "Yarp - we got caught and would've continued if we didn't, actually, we're not saying we aren't continuing".
$120b - it should be held frozen whilst investigations proceed, that'll teach 'em, especially as such a case could last decades..
Never going to happen.
More like the canned statement is saying that HSBC Switzerland followed Swiss law but now that countries are making agreements to cut back on secrecy Switzerland is changing its laws and HSBC Switzerland is changing too. HSBC Switzerland is not the same company as HSBC England. They might be managed by the same overarching group, but they have to follow local laws. If you say otherwise then Chinese companies might as well setup here and follow Chinese law when employing staff with Chinese H&S regs etc.
"bank secrecy" != "allowing known illegal activities, and actively cooperating with them"
You may have a perfectly legal secret bank account - money are from legal activities and you paid taxes. Maybe you just have greedy relatives and want to keep something away from their hungry fingers...
Or you can use those hard to track accounts to sustain illegal activities. From what is known, it's pretty clear that HSBC Switzerland very well knew it was cooperating in illegal activities and actively helped "customers" to achieve their unlawful aims - even for the Swiss law....
@Richard Taylor 2
'I don't believe anything in Swiss law makes it compulsory to aggressively push tax evasion services and hide money from taxation authorities around the world. Now the spirit of Swiss laws is another thing.'
I think you're asking the wrong question. It should be; is there anything in Swiss law that makes it illegal to aggressively push tax evasion services (where it happens in another country)'? Now, I'm pretty sure the answer is no. I'd be pretty certain it isn't even illegal if the evasion occurs in Switzerland, as I suspect the law makes the person giving the return the perpetrator rather than their bank. However, that is irrelevant.
Therefore, in Switzerland, HSBC have not broken any laws. The only person who has broken any laws is the man who stole all the data!! Don't forget that it isn't illegal to incite someone to commit most offences (some like riot are). Even in the UK, I could incite you to file a false tax return, but I wouldn't be committing an offence as it is actually you (the filer) who has committed the offence, as the tax return itself states!! Indeed, one of the jokes about accountants is that when they make a mistake, the person whose finances they've messed up is found guilty and he has to seek redress from the accountant under civil negligence laws........
"HSBC has no record of [Falciani] ever escalating any concerns to his line management, or using the whistleblowing hotline that was in place at the time of the [data] theft,"
There was no need to report his concerns to management. He needed to go right to the appropriate legal authorities.
One of the few things the ex-Communist Bloc countries did right, and that we need to do too, was to execute people for large-scale financial crime.
"There was no need to report his concerns to management. He needed to go right to the appropriate legal authorities."
Actually, there is. As far as I can see, HSBC didn't break any Swiss laws. And even if it did, he would have first needed to raise his concerns with management, if he wanted to avoid legal troubles in Switzerland. Unless a whistle-blower really tried to report an issue internally, it would look rather bad in front of the court and Swiss judges would probably regard it as breach of trading secrecy.
Sure, even Snowden shoud have reported his concerns to NSA management... nor that "legal authorities" would have been helpful here too....
Sometimes you know all you could do is talk to journalists or legal authorities... otherwise you would just get fired and with nothing in your hands to help yourself.
Sometimes you know all you could do is talk to journalists or legal authorities... otherwise you would just get fired and with nothing in your hands to help yourself.
Had he done that you may have a point. Instead what he sought to do was hawk the loot to the highest bidder. That's just plain theft right there.
ETA: As I mentioned in another post, the defining difference is that as far as I'm aware Snowden made absolutely no effort to profit from his actions. That places him in a category well above this petty thief.
Snowden, on the other hand, ended up to seek asylum in countries very well know for performing the very same actions he accused NSA of, and with far worse punishment for whistleblowers and dissidents. Nor China nor Russia are good example of countries respectful of human rights and privacy.
Both blown up their lives, when you decide to do it you have to find a way to go on....
Given the nature of this, denial by the bank would be expected. To admit that he followed procedure would be to admit that their guilt in this which would be bad for the bank.
Also, there's people involved who are going be royally pissed to have to pay back taxes (people not necessarily of good character), he probably would have disappeared if he had gone through the channels.
" has no record of [Falciani] ever escalating any concerns to his line management"
Well, HSBC management were the ones enabling the tax fraud, so what would he gain from escalating to them? Yes, it was not technically illegal in Switzerland but surely HSBC knew it was aiding it's clients to evade tax illegally in their home countries.
There was no need to report his concerns to management
Professionalism requires that he follow the internal process first. It also requires that he not steal the client data. People like this give the industry a very bad name.
People use Twitter, Google, and Facebook to break the law every day. Would you feel it right and proper for someone in their IT department to arbitrarily decide, based upon zero legal expertise within your jursidiction, that you might be one of them, and steal all of your data and hawk it around the world?
He wasn't trying to prevent tax evasion, he was trying to profit from data theft. No better or worse than the card scammers and id fraudsters.
He needed to go right to the appropriate legal authorities.
If, after following the internal procedures, he felt the law was being broken, then yes, he should have gone to the authorities, but that does not excuse, justify, or even require that he steal the client data. The authorities can legally obtain it with a warrant.
execute people for large-scale financial crime
I hear ya... but first lets have the death penalty for murder, rape, and noncing... crimes that actually do real world harm, before we get to worrying about money. Or, you could take the civilised view that having the state murder people doesn't set the best of examples to society.
"People like this give the industry a very bad name."
No, the industry gives itself a bad name. They may like to dance along the avoidance/evasion line, but to everyone else, it's just evasion.
And yes, normally he should have used internal channels, but presumably he felt that the authorities would be unable to obtain the data with a warrant, because it would either be hidden, or deleted if such a warrant was presented. A warrant is only of use if the person/entity on the receiving end feels like obeying the law.
"People like this give the industry a very bad name."
No, the industry gives itself a bad name.
I was referring to the IT industry. Sorry if that wasn't clear.
They may like to dance along the avoidance/evasion line, but to everyone else, it's just evasion.
The legal/illegal line you mean? It is an important distinction.
presumably he felt that the authorities would be unable to obtain the data with a warrant, because it would either be hidden, or deleted if such a warrant was presented
Not so. He would simply have cached his loot internally instead of externally, thus not violating anyones privacy. He may well turn out to be wrong and some of those whose details he has leaked may have complied fully with the law.
A warrant is only of use if the person/entity on the receiving end feels like obeying the law.
If he had enough access to the data to copy it externally he could have just as easily hidden an internal copy and given the location to law enforcement.
Your reasonong is just an excuse because you dislike tax avoidance. This was an invasion of privacy of the individuals about whom he stole the data. That's all it is. There's zero moral or legal justification for his actions.
"I was referring to the IT industry. Sorry if that wasn't clear."
No it's not a bad name. I'm happy this is happening. Maybe banks (and other companies) eventually will learn who actually holds the safe keys today. And stop thinking about IT people as somebody not at the same level of the "finance" ones....
Here in Italy banks create separate companies to hire and manage their IT people using the "metal and mechanical" workers contracts, the least expensive one for a company (historically widely used because Olivetti was such a company when it made typewriters...), instead of the vastly more appealing (for the employee, of course), bank workers one. It's good they understand what a disgruntled employee can lead to....
Maybe banks (and other companies) eventually will learn who actually holds the safe keys
That would be genuinely brilliant were it to happen, but sadly, I can't envisage a time when it will come to pass. This, absolutely will not bring forth that day.
Here in Italy banks create separate companies to hire and manage their IT people using the "metal and mechanical" workers contracts
Here in the UK they just outsource us all to India.
My professionalism is mine because it is immutable. The employer can't change it.
"My professionalism is mine because it is immutable"
Not all people are equal. And sometimes someone breaks, for many different reasons. Keeping the people who actually run your business and may have a so deep access to sensitive information down the ladder, or even outsource them, can result very risky...
"you could take the civilised view that having the state murder people doesn't set the best of examples to society."
I do take that view, I also take the view that embezzling billions can destroy lives as much as aggravated assault, rape and even murder. So fraudulent city types caught with their hands in the till should be getting life without parole in max-security, not 20 years in min-security reduced to 10 on appeal and out on parole after 3
I also take the view that embezzling billions can destroy lives as much as aggravated assault, rape and even murder.
Then your view is badly out of whack with reality and you should see someone about it. Seriously.
Your definition of tax avoidance, evasion, and embezzlement are wildly inaccurate too.
@LucreLout - Stealing someone's life savings is a very bad crime and is certainly extremely traumatic for the victim. When it's perpetrated by people in a position of trust, it's even worse. Destroying someone's life is destroying someone's life, and just because pain,anguish and fear are mental rather than physical does not make them any less traumatic.
In the individual case, certainly rape and murder are far worse than simple robbery, which is why these crimes carry life sentences (or capital punishment) for a single offense. In the case of financial fraud however, perpetrators are stealing the life savings of thousands of people at a time, so the sentencing should to be equivalent to a murder sentence.
"Your definition of tax avoidance, evasion, and embezzlement are wildly inaccurate too."
Regarding this,I was responding to a post that was talking generally about serious financial crimes, NOT specifically the tax evasion mentioned in the article, hence my use of 'embezzle'. And what the clients of HSBC Switzerland were doing was evasion, not avoidance (ie illegal in their own home countries).
Stealing someone's life savings is a very bad crime and is certainly extremely traumatic for the victim. When it's perpetrated by people in a position of trust, it's even worse
I agree completely. Thing is though, that taxes are levied upon money earned and owned by the target of that taxation. It is not stolen from others. This tax, were it definitively due, would not make a single penny difference to your tax rate: the scale of waste is unimaginable and this but a drop in that ocean.
Outright loss of my assets would be distressing, and I'm too old now to recover the lost ground. I'll take that everytime rather than harm come to my family.... so even though your point about harm is relevant, it is not of the same scale. Not even remotely. Hopefully you already know that.
> And what the clients of HSBC Switzerland were doing was evasion, not avoidance (ie illegal in their own home countries).
The clients of HSBC Switzerland? What, all of them? Well, no: in the UK's case, there were 3600 leaked files, of which only 1000 were even investigated, as the remainder, according to HMRC, had no case to answer. So that's at least 2600 innocent people whose private financial records were illegally leaked by an insider at the bank.
Very easy to be blase about those innocent people when there's no chance of your being one of them. But here's a question for all those who think the guy's a hero. Would you be happy for an institution which held some of your records -- your bank, say, or your local GP -- to leak your records if it led to HMRC being able to claim some back-taxes? Even if they were only catching approximately one miscreant for every four records leaked? That's OK, is it? You wouldn't complain about the data breach? Because it seems like only yesterday people round here were having conniptions at the idea that their private data might be used in a controlled and audited manner in order to help study disease.
"So fraudulent city types caught with their hands in the till should be getting life without parole in max-security, not 20 years in min-security reduced to 10 on appeal and out on parole after 3"
That's just crazy talk! Haven't you heard? It's only the little people who pay taxes or go to prison for as long as they deserve, don't you know...
And as for Switzerland, can't we just build a bloody great wall around the place and not take it down till they stop facilitating this sort of crap right under our noses?
It looks to me that a citizen reporting a crime to the authorities in charge to deal with that crime is a perfectly right option. In no way a commercial company has the authority, nor the right, to decide what is a crime or not, and if to disclose it to authorities or not. Employees are citizens first, and only then employees, nor they are a property of the company they work for. The first responsibility of a citizen is towards the Law - and the rights of his or her fellow citizens (including that of payinf fair taxes even it you can't hide money away), and only after that his or her company.
In this situation he would have not been reporting something which was damaging the company, something any company would be very happy to know (and give a nice recompense for), but of course he was reporting something that the company was taking a big advantage from, and his very report would have damaged the company badly if acted upon. Sure, maybe he would have obtained a recompense to stay silent and keep on business as usual... but it doesn't look that was he was looking for. Or he could have obtained a far nastier return...
> The only ones claiming that are the Swiss authorities, who seem to be working for HSBC in this matter.
Since HSBC did not break any Swiss laws, the Swiss authorities are supposed to work for them in this matter. That's their job. In much the same way as, if your house is burgled, the British authorities are supposed to help you and to go after the burglar.
I realise a lot of people round here don't like Swiss law. But it is still the law in Switzerland. Demanding that Swiss authorities prosecute Swiss people and Swiss companies for things that are not illegal in Switzerland but that some Londoners dislike is ridiculous. And the only reason to suppose that we can foist our laws on the Swiss but they can't foist their laws on us is sheer imperialist colonialism.
" Demanding that Swiss authorities prosecute Swiss people and Swiss companies for things that are not illegal in Switzerland"
Well there actually have been repercussions in Switzerland, for example US treats banks as multinational entities and if their Swiss branches were found to have been hiding US-taxable assets from Uncle Sam, they slapped a few mega-fines (10 or 11-digit) on the bank. Banks who wish to operate globally can't very well claim that they don't know what their Swiss subsidiary is up to... and in fact while officially Swiss still have their banking secrecy, there are now various bilateral agreements that allow some data sharing with foreign tax authorities.
So this HSBC guy HAS been able to kick off some pretty major change,hats off
> Banks who wish to operate globally can't very well claim that they don't know what their Swiss subsidiary is up to
Can they claim that their Swiss subsidiary has to obey Swiss law?
> US treats banks as multinational entities and if their Swiss branches were found to have been hiding US-taxable assets from Uncle Sam, they slapped a few mega-fines (10 or 11-digit) on the bank.
The withholding tax under the FATCA legislation, yes -- which is frankly a disgusting extraterritorial power-grab by the White House -- and it should be a national disgrace in the UK that our government cooperated with it. It seems a tad less noble when you consider that the US has international income tax and so those "US-taxable assets" include things like Boris Johnson's house sale. Or that poor disabled guy in Canada whose parents ran a charity drive to raise money for his care and Uncle Sam declared that the money raised was his, despite the kid not being, in any reasonable sense, American.
Not sure why you bring it up, mind, as HSBC's excellent response to FATCA was to withdraw all their business from the US rather than agree to fuck their customers. Good for them. So the FATCA "withholding tax" cannot be apllied to them.
The law comes down pretty hard on tax evaders, actually, and they do end up in prison if they don't pay HMRC's bill. If you're referring to HSBC staff, though, there is that pesky legal technicality that you're ideally not supposed to do prison time unless you've broken the law.
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