back to article 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 …

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Unhappy

Presumably that would include Bernie Ecclestones *alleged* £2Bn in unpaid tax.

Which IIRC the HMRC took about £11m off him.

IE about 0.5 % of the total.

Nice deal if you can get it (and of course if you need, as perhaps he really doesn't own that much m'lord).

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Anonymous Coward

Re: Presumably that would include Bernie Ecclestones *alleged* £2Bn in unpaid tax.

Not sure that story has fully played out yet - the funniest part of tax evasion by using your wife is the havoc it creates when you dally with other girlies and she divorces you. Oops :)

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Re: Presumably that would include Bernie Ecclestones *alleged* £2Bn in unpaid tax.

I reckon the divorce is PART of the tax evasion, i.e. if they're divorced it isn't his anymore.. yet he still seems to be able to spend it suspiciously enough

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Anonymous Coward

Re: Presumably that would include Bernie Ecclestones *alleged* £2Bn in unpaid tax.

No - AFAIK she needs to pay him his own money as alimony, which must be pretty funny if you're the wronged party. That's like giving him a kick in the gonads every single month. Couldn't happen to a nicer person, really.

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Falciani is a petty criminal, nothing more; stealing from his employer and trying to profit by selling his stolen goods. He's just another data thief, no better or worse than any other. Trying to wrap it up in a bow and call it "preventing tax evasion" is missing the point: he had no requirement to sell the data to outside parties, or even move it beyond his corporate firewall. Just another thief trying to excuse his greed.

The data Snowden stole would have been of far greater value, but I've not read a single report of his trying to sell it (and that would have been real easy for the NSA to set up). I might disagree with his actions, but I certainly wouldn't call into question his belief that he was doing the right thing, and I'd certainly not suggest he profitted from it personally.

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Many legitimate reasons to hold a Swiss bank account?

1. You're Swiss.

or 2. You live in Switzerland.

Am I missing any others?

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Re: Many legitimate reasons to hold a Swiss bank account?

3. You do business in Switzerland.

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Re: Many legitimate reasons to hold a Swiss bank account?

And the business in Switzerland is that you use a Swiss bank account. Sorted.

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Anonymous Coward

Re: Many legitimate reasons to hold a Swiss bank account?

- You don't trust the competence of the banks in your own country (Greece, Italy, Cyprus,...)

- You don't trust the currency of your own country (Euro, Rouble,...)

I wish that I, living in the (P)eurozone, had had my savings in a Swiss bank last month

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Re: Many legitimate reasons to hold a Swiss bank account?

4. Your savings are in a currency rapidly losing value (Rubel, Drachma, Euro) and you'd like to protect them.

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LDS
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Re: Many legitimate reasons to hold a Swiss bank account?

Don't put everything in the same basket. There are different types of accounts, and different types of banks. Having a bank account abroad is perfectly legal - as long as the money are legal too, and your local laws allow for moving and keeping money abroad - for many reasons - business, travels, savings etc. etc. Usually, these accounts are tied to a real person or entity - nothing to hide.

Then there are all those "anonymous" or "secret" accounts, usually hidden under a fantasy name, often moving money through "fake" entities created ad hoc, especially through shady tax havens.

These are usually used to hide money. Sometimes you may have a good and still legal reason for such kind of account, but more often than not, they are used for illegal activities. With the right help, they can be created and destroyed easily, and help a lot to mask and hide money flows.

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Anonymous Coward

Re: Many legitimate reasons to hold a Swiss bank account?

4. Your savings are in a currency rapidly losing value (Rubel, Drachma, Euro) and you'd like to protect them.

You forgot to mention US dollars. That currency is 100% dependent on the too big to fail concept - the only reason that bubble doesn't burst is because it would tear everything else down with it.

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Re: Many legitimate reasons to hold a Swiss bank account?

I spent almost 10 years working for a Swiss bank in Switzerland (as a contractor); I needed a Swiss bank account for my day to day existence. Naturally (?) I opened an account with another Swiss bank to process my salary (I didn't trust Swiss banking secrecy at that time, and imagined that half of the office would become intimately aware of my finances were I to bank with the bank I worked at).

Now, a while down the track, my relationship with my Swiss bank account providor has been gradually detiorating (maybe I'm not rich enough?).

A couple of years or so ago they sent me some forms for 'my financial advisor' to fill in to certify my wealth as being above some specified amount (maybe 2.5m USD). Without this documentation my account would become restricted, losing certain privileges such as a credit card.

Unfortunately I didn't have a financial advisor or enough money. I had to forfeit my credit card (that I was paying CHF 100 a year for), and was no longer allowed to buy equities through my account (I wasn't an avid share trader, I held shares in a couple of blue chips to keep my account above the minimum balance requirements, hoping I might beat the 0.001% interest offered on the current account.

As my finances have dwindled I've sold some of the shares, unfortunately at a small profit. My Swiss bankers expect me to provide them with documents from certified professionals assuring that these profits have been declared to the relevant taxation authority. Obviously the cost of producing said documentation would exceed the small profit, so, due to non compliance my account is now scheduled for closure.

All the way through this process I've been getting signals from the bank that everything would be much smoother if I could just prove that I had enough money for their documentary requirements.

Maybe they really would love me long time if I had that few million they're drooling over.

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Re: Many legitimate reasons to hold a Swiss bank account?

'I wish that I, living in the (P)eurozone, had had my savings in a Swiss bank last month'

The value of my euro-denominated assets in my Swiss account declined. I would surmise that location of bank doesn't help. However, just imagine how much money I could have made if I'd had advanced warning of the removal of the upper limit of the Swissy against the Euro ... or the birth of Jesus or Buddha. I'm not a bookie; never mind.

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4. you choose to invest your money in a country where the currency is stable.

The selling point for investing your money in Switzerland was and still is stability. Many customers from outside of the Eurozone/Americas put their money here, because they don't trust their government at home to manage the economy.

These idiots at HSBC give all of us a bad name, especially when most of the banks, have been following a 'white money' strategy, and speaking for where I work, have closed many accounts where the Clients did not fulfill the Compliance requirements.

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In Monaco he had installed computers and software designed to detect fraudulent transactions

Oh come on. Detecting fraud in Monaco is like shooting dairy cattle with a sniper rifle.

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Re: In Monaco he had installed computers and software designed to detect fraudulent transactions

No, detecting fraud in Monaco is like shooting dairy cattle with a machine gun and managing to miss all the cows.

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Re: In Monaco he had installed computers and software designed to detect fraudulent transactions

I'm not sure how much installing of anything the guy did himself given...

"The data was not relinquished by Falciani voluntarily. Since that time, the French authorities have subsequently shared the data with numerous governments around the world.

implies he doesn't know what encryption is.

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Politcally created issue

Not sure about other countries, but the UK has created this problem all by itself by implementing some very dodgy laws. Originally, tax evasion was illegal and tax avoidance was legal. You could do anything you liked to avoid tax using allowances, companies etc.etc. and it was all perfectly legal, even if its sole purpose was to avoid tax.

Now, the coalition has implemented legislation that says anything implemented with the sole intention of avoiding tax (note the word avoid), actually becomes tax evasion (again, note the word evasion). So now, financial constructs have to have a reason other than tax avoidance for their existence. Of course, the presence of products such as pensions and ISAs etc., whose sole purpose is to avoid tax and they approve of, doesn't strike them as a little odd. After all, why would you put money into an ISA rather than a normal savings account if it weren't for the tax free nature? So, this law basically makes it evasion to use any financial instrument not approved of by government, which of course, changes with the wind!!

Not only did they do that, but they also made the law retrospective, a practice that has become more common over the last decade or so, but used to be never done. I believe Tony Blair implemented the first such law. This means that even if the financial construct you used WAS legal at the time, at a later date it can be declared ILLEGAL and you can be fined/prosecuted etc. for using it!!

As a for instance. Jimmy Carr and his investment antics. The mechanism he used at the time it was created was perfectly LEGAL. Immoral maybe, but legal. It is only this law that has made that type of financial arrangement illegal and because the law allows backdating, it became not just ILLEGAL from that moment on, but since it was created!! Now, I'm not defending what Jimmy Carr did and it may well have been immoral, but there is a big difference between immoral and illegal. After all, can anyone honestly say they have never avoided tax (cash in hand etc.etc.). I suspect almost nobody can claim to be totally free of guilt.

So, what's the difference? Maybe it's simply down to the level of avoidance? A few quid, that's fine, but thousands (or maybe tens of thousands) and it becomes wrong? I don't know. But financial instruments that were perfectly legal at the time they were created and for many years since are now being declared illegal and people being chased for tax on them. Whilst one can argue about the morality argument, it does seem perverse to find someone guilty of an offense before it even became an offense!!

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Re: Politcally created issue

Since you raised Jimmy Carr... at the same time it was known that as Carr avoided £2Million Gary Barlow was avoiding £20Million and yet was not being pilloried by press. Surely it cant have been that Barlow was a tory party donor as that would suggest even greater corruption across the board but why the hell did Carr get attacked and Barlow was 'ignored'?

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Re: Politcally created issue

"Alternate comedian" hides money in complex off shore tax scam = man bites dog = news

Millionaire rock star doesn't pay tax = dog bites man = not news

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Re: Politcally created issue

@Tom 7.

Jimmy Carr is but one example and there are many, many more. Why one is pilloried and others are not is probably more due to the public perception and newspapers bent. Gary Barlow always has seemed a bit of a 'golden boy', whereas Jimmy Carr has always been a bit near the edge and told jokes in dubious taste etc. Does that make him more of a target? Maybe, maybe not. Does one give to the Tory party and the other not? Don't know.

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Re: Politcally created issue

>Now, the coalition has implemented legislation that says anything implemented with the sole intention of avoiding tax (note the word avoid), actually becomes tax evasion ...

Not sure if this really has changed things that much. For decades many financial investment products have been sold with a caveat concerning HMRC approval. Remember the infamous scheme Jimmy Carr, Gary Barlow et al used, was initially approved by HMRC, but had it's approval retrospectively removed due to the way it was actually operating. Interestingly, this is something (ie. HMRC withdrawing their approval) that can also happen to Pensions, ISA's, Endowment's and other mainstream tax avoidance products that HMRC approve - I know having had several investments do exactly this over the decades.

Also the new law doesn't alter the legality of the infamous scheme referred to, because the papers defining the scheme satisfy HMRC's guidance. HMRC will continue to give such schemes provisional approval and watch to confirm that the scheme actually does what it says it will do, in this case invest in film production and generate returns based on this activity. Hence it can be some years before you know whether that high-growth ISA/EIS/Pension etc. investment you made did actually satisfy HMRC or not.

What the law does do is permit HMRC to more easily reject arrangements and schemes that, whilst using legal constructs, are obviously only intended to avoid UK tax.

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Re: Politcally created issue

@Roland6.

You're quite right, but confusing different things. In some cases, HMRC was asked to rule on the legality of some financial instrument and gave an opinion on the basis of the information they were given. Now, if this information proves to be false or the instrument isn't run in the manner described, then they can retrospectively withdraw their opinion (and therefore make you very open to legal action) due to the deviation between the two. This has always been the case.

However, HMRC and the government have to obey the law just as much (said laughingly) as anyone else and therefore can't just make up their minds what is and is not allowed on a whim. There has to be a law that says it isn't allowed. HMRC are merely being asked to interpret the law from their perspective and give an opinion. If you disagree with their opinion, you can still do it and it is up to HMRC to take you to court and get a judge to agree with their opinion and not yours. Now, for obvious reasons, the judge normally sides with HMRC, although there have been cases where this hasn't happened.

In the past, there was no law that said avoidance was illegal. Even if the sole purpose of the instrument was to avoid tax, it was still legal and this is what many accountants would play professional oneupmanship on. Who could come up with the cleverest way to stay within the law, whilst minimising tax. The law change has effectively said that unless you can prove the instrument exists for reasons other than tax avoidance, it is illegal, which is a wholesale change.

So, ALL ISAs are illegal in every way. They are setup with the sole intention of avoiding the payment of income tax on the interest earned. The difference is that government has said they like them and they're OK, so HMRC are ignoring it. However, a loan from a company that you never intend to repay (a common occurrence in the past and I believe similar to what Jimmy Carr was doing) has gone from legal to illegal!! Both are purely trying to evade income tax. One is legal, one is not. How come?

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Re: Politcally created issue

"A few quid, that's fine, but thousands"

Nah mate, you don't get it. A few quid, they want you to pay it back with punitive interest.

A few billion quid and they're queueing up to suck you off, letting you know that a few (more) quid in the right direction will magically make all your problems disappear.

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Re: Politcally created issue

@Mad Max

Yes there is much about HMRC that is 'different' to other organisations. In some respects all the new law concerning tax avoidance is bring HMRC's take on the matter into line with it's general position on tax demands; namely, under UK law HMRC doesn't need to be reasonable, the onus is on you to demonstrate that their demands are wholly unreasonable (not just unreasonable!). So as you say "unless you can prove the instrument exists for reasons other than tax avoidance, it is illegal".

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Anonymous Coward

why the hell did Carr get attacked and Barlow was 'ignored'?

10x as much money buys far better lawyers?

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No, 10x money buys much larger party political donations

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Down to the Real Nitty Gritty of the Matter

Surely the more worrying concern is that some members of the Cabinet and in Government with Parliamentarians were aware of the shenanigans and thought it appropriate to remain remarkable silent and inactive in ensuring that there be prosecutions for what is popularly perceived as wanton criminality.

And that smacks of an aspiring conspiracy to prevent and pervert the course of justice in the political parties now vying for future power through upcoming elections Are there then proven crooks squatting in the offices of power in Westminster, and avoiding straight answers to awkward searching questions?

The available evidence, which is not disputed, would appear to suggest and prove that it be so. So who thinks it is a good idea to have crooks ruling lives and for one to be electing them into office rather than rejecting them at the ballot box?

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Didn't realise it was so long ago!

So an IT bod, decides to run off with 100 Gb of data from a bank and finding that he can't sell it, he decides to go all julian assange! What's the story?

His moral outrage is neutralized by what he did having broken enough written and unwritten laws to make sure nobody will ever trust him again with their data.

The legal issue doesn't even exist in that EU law is not relevant in Switzerland, and advising people of the law abroad is also not illegal.

Since the US successfully introduced their worldwide financial laws (how do their enforce such a thing, except through raw threats?), the EU wants to do the same, and this story is helping bring it into the social agenda.

While I seem to be in the minority opinion that Tax is theft, it does seem to me that far too many people think there is something illegal in not paying too much tax. Funny enough, none of these people are willing to pay bonus tax - maybe just a few percent of their annual wage?

Not paying too much tax isn't just a rich thing then?

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Re: Didn't realise it was so long ago!

@F0ul.

I do find a lot of the pompous outrage in the press and amongst people quite funny. Most people (probably all) evade tax on some occasions. Completing some transactions in cash is simply one good example. People pretend that it isn't their fault as whether the person declares it or not is up to them, but in reality, they know and are complicit in what is occurring.

Whilst the tax evaded is large in some cases, the morality of it is surely a question of relativity. If you should have paid £2,000 in tax, but actually paid £1,800 (£200 tax loss), is that any better or worse than someone who should have paid £200,000 paying £180,000? The level of evasion (in percentage terms) is actually the same. However, the second will almost certainly attract far more criticism than the first. Is that fair?

Whilst I've always believed people should pay their fair share and accept the country can't function without tax and understand what they get back for it, those who do all the complaining are probably just as guilty of evading tax on occasion. Almost nobody is genuinely free of some culpability at some level.

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Anonymous Coward

Re: Didn't realise it was so long ago!

"accept the country can't function without tax"

Doh, well just fuck off to some other country that appears to suit you better vis a vis your perceived level of contribution to their tax system.

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Re: Didn't realise it was so long ago!

>The level of evasion (in percentage terms) is actually the same.

But their level of evasion would have payed for teachers, nurses, etc

Your level of evasion would only have paid for an MP's lunch

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Re: Didn't realise it was so long ago!

@Yet Another Anonymous Coward.

"But their level of evasion would have payed for teachers, nurses, etc

Your level of evasion would only have paid for an MP's lunch"

I don't disagree with your summary, but does that make it a worse crime? I'm asking a question and not postulating an answer. I'm asking people to consider if the severity of the crime is proportionate to the percentage you've evaded, or the absolute amount. I can see arguments both ways, but often with tax evasion, it seems people with a lot of money and who have evaded the most in absolute measure, but not necessarily by percentage, are massively pilloried compared to those who evade a large percentage, but smaller absolute amount.

Take for example a builder. He agrees to do some jobs tax in hand. He evades £5k in tax, but still pays £20k in total. Then, take a millionaire. He should have paid £400k in tax, but actually managed to evade £10k. Which is the bigger criminal? If they actually evaded the same amount (both £5k), do you not think the millionaire would get a much worse time of it and be more pilloried in the press? Is that fair?

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Re: Didn't realise it was so long ago!

"So an IT bod, decides to run off with 100 Gb of data from a bank and finding that he can't sell it, he decides to go all julian assange! What's the story?"

Reread it. He went to swiss police in the first instance but they couldn't guarantee his protection.

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Meh

It would appear that there is not a hole lot of difference twixt Swiss banks and Swiss cheese.

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HSBC is not a cop

The US law requiring banks to "know your customer" is just an end run around our Fourth Amendment. Our law enforcement can't just go fishing for 'bad people' based on some profile. They need a warrant. So they just create a regulation that requires private entities to stick their nose in customers' business. And file reports with the regulators.

That said, HSBC are idiots if they had someone walk in the lobby and ask for advice on dodging the US taxman. Apply for an account under the name Mr Smith. Fine. Just make sure you comply with Swiss law. If the IRS comes in with a warrant based on some probable cause that Mr. Smith has commited some crime, then the account information will be delivered. But having money and a common surname isn't prima facie evidence of wrongdoing.

Our cops are getting lazy. And they are expecting private organizations to do far too much policing for them.

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Re: HSBC is not a cop

> If the IRS comes in with a warrant

To a Swiss bank? Under what authority?

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Re: HSBC is not a cop

If you hold or exchange US $... that is their authority.

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Re: HSBC is not a cop

Er, no, it really isn't. I hate to break this to you, but the authority of the IRS extends as far as the borders of the USA. It's called a "jurisdiction".

Just to be clear, do you think the Swiss tax authorities can descend on a bank in Connecticut with a warrant? Because I can assure you there are banks in Connecticut dealing in Swiss francs.

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Coat

A Swiss account

" tax-avoidance maneuvers used by some of the planet's wealthiest people. "

That too, but apparently there are also billions of drug money and money laundering.

It's perhaps too much to demand that a bank should know exactly the background to each transaction and then say - "try next door".

The solution is then that authorities dealing with dirty money of any kind are allowed a more open access to those accounts and transactions.

And that is exactly what the Swiss don't want to happen, as it's such a good business, not that they are alone in that respect, of course.

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Anonymous Coward

Re: A Swiss account

The solution is then that authorities dealing with dirty money of any kind are allowed a more open access to those accounts and transactions.

And that is exactly what the Swiss don't want to happen, as it's such a good business, not that they are alone in that respect, of course.

Absolutely not. The Swiss will happily assist in an investigation if you show enough probable cause to Swiss legal standards. The latter is quite a high bar as Switzerland is a direct democracy and laws are thus generally applied properly unless economic blackmail of epic proportions takes place (the favourite tactic of the good ol' US of A).

The whole Wall Street marketing strategy of blaming other nations and other financial centres for their problems is getting old - most nations (including Switzerland) have been cleaning out some of the crud which, ironically, tended to be inspired by what took place in the US. That doesn't mean that all is well, but I would venture that it's time to ignore the obvious distractions and start looking at what Wall Street is been trying to divert your attention from.

If you need any more help to work out what the US has really been inspiring I suggest you look for the Citibank memos issued in 2005, 2006 and 2007. They have been trying to suppress them, but a bit of Google will still find you the Plutocracy memos. They're worth reading, as they will tell you why they needed to keep you distracted. Be warned, it's not a very nice read if you're not mega rich.

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Flame

"Although there are numerous legitimate reasons to have a Swiss bank account"

Bullshit.

There is only one legitimate reason to have a Swiss bank account : you are Swiss.

If you're not, you're evading taxes. Period.

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Re: "Although there are numerous legitimate reasons to have a Swiss bank account"

A second is that you wish to get paid!

Sometimes in international business it is easier to get monies paid into a non-UK/US account than it is to have monies paid into a UK account. It is probably due in part to the Swiss banking reputation. So you, a UK company, can get paid for delivering an air traffic control system for example, without there being a 'public' audit trail to indicate who actually paid and from which of their many bank accounts...

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Re: "Although there are numerous legitimate reasons to have a Swiss bank account"

Friend of mine lives and works in Switzerland. She's British. I assume she has a Swiss bank account, just as my American friend who lives in the UK has a British bank account. None of this strikes me as suspicious.

Then there are the people who travel around the world a lot, such as oil rig workers, NGOs that help build infrastructure in the developing world, etc. They need one central point to keep their money whence it can be readily accessed internationally.

Then there are entities who trade on international currency markets, who might well have a Swiss bank account for the obvious purpose of keeping their Swiss francs in, just as they maintain American accounts for keeping dollars in, Japanese accounts for keeping Yen in, etc.

There are lots of people in the world whose lives aren't like yours. They're not all criminals.

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Anonymous Coward

Re: "Although there are numerous legitimate reasons to have a Swiss bank account"

Hey, you don't know what you are talking about. I'm British and live outside the UK, I have no income in the UK and no Tax liability, save for the comedy dividends from BT (that are taxed). If I have a UK mainland account it would be taxed on interest that I cannot claim back.

So am I 'evading tax' by not having a UK bank account?

I'd be more than a bit hacked off with this bastard stealing my data and perhaps making me the victim of identity theft and so on. It's none of his or rest of EU or US business.

(I pay my local taxes too BTW)

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