TAXLITIGATOR – Tax Controversy (Civil & Criminal) Report

THE INTERNATIONAL CONSORTIUM OF INVESTIGATIVE JOURNALISTS(ICIJ) have released information regarding “a trove of almost 60,000 leaked files that provide details on over 100,000 HSBC clients and their bank accounts.” See  http://www.icij.org/project/swiss-leaks/explore-swiss-leaks-data

ICIJ DISCLAIMER – A Disclaimer on the ICIJ site states “There are legitimate uses for Swiss bank accounts and trusts. We do not intend to suggest or imply that any persons, companies or other entities included in the ICIJ Swiss Leaks interactive application have broken the law or otherwise acted improperly. If you find an error in the database please get in touch with us.” (emphasis added).

THE DATA – The ICIJ site indicates that the information revealed is “based on data secreted away by Hervé Falciani, a former HSBC employee-turned-whistleblower. He turned the data over to the French government in 2008 and its tax authority launched an investigation.”

“The French newspaper Le Monde obtained a version of the tax authority data, which covers accounts of more than 100,000 clients (individuals and legal entities) from more than 200 countries. The newspaper shared it with ICIJ with the agreement that it would assemble a global team of journalists to explore the data and produce this reporting project.”

“The data comes from three types of internal bank files from different time periods. One reflects clients and their associated private accounts at the Swiss branch of the bank mostly from 1988 to 2007. Another is a snapshot of the maximum amounts in the client accounts during 2006 and 2007. The third is of notes on clients and conversations with them made by bank employees during 2005.”

“The files show the accounts to hold more than $100 billion in total, from $12.6 billion held in the name of governmental institutions from the oil rich nation of Venezuela . . . to amounts recorded as zero. The confidential files also provide a wealth of other detail, such as secretive offshore companies linked to some accounts.”

“The approximately 11,235 Swiss account holders were the single biggest group in terms of total assets held, with $31.2 billion. The U.K. was second with $21.7 billion (8,844 account holders), Venezuela had $14.7 billion ($12.6 billion of which was apparently in the name of Venezuelan government institutions), and the U.S. had $13.3 billion (4,183 account holders).” More than 19,000 account holders were apparently not associated with any particular country.

ICIJ DATA SCREENING PROCESS – Before revealing the data, the ICIJ reached out to many individuals identified within the data. Their typical inquiry stated something like: “I am a reporter with the International Consortium of Investigative Journalists, an independent network of reporters with headquarters in Washington, DC. Our investigations appear regularly in leading media organizations including BBC, The Guardian, Le Monde, Washington Post and many others.”

“You can check our work here http://www.icij.org We are writing because the International Consortium of Investigative Journalists, in concert with  other media outlets, is currently conducting a detailed investigation of Swiss bank accounts, past and present.”

“It is not illegal to have Swiss accounts. But as you may know, it is  a topic of considerable public debate, and several governments have been investigating the  owners of such accounts.”

“There are a number of ways such accounts and also offshore trusts have been used to avoid taxes imposed by national governments. Such  accounts have also been used to launder money.”

“We have seen records identifying you as a Swiss banking client. The account related to you, with the corresponding maximum amount in US dollars held in 2006/2007, is as follows: …”

“We are particularly concerned to answer four questions: 1. Why did you hold a Swiss bank account? 2. Do you currently hold any bank account in Switzerland? 3. What was the nature of your relationship with [the account]? 4. How much back tax have you settled with tax authorities following their investigation of your affairs, assuming there was such investigation?”

“ICIJ and its media partners intend to publish the results of this investigation shortly in the US, the UK, France and several other countries.”

“As responsible journalists acting in the public interest, we would first like to give you the opportunity to comment.”

“If we do not hear from you by 18:00 on Friday 23rd January 2015 (preferably by email to this address), we shall proceed on the basis that you do not wish to comment on or amend our information.”

“We have approached you in a straightforward fashion and hope you will take this opportunity to respond if you wish. Your substantive responses to each of our four numbered points will be carefully considered and published if appropriate.”

“(For the avoidance of doubt, we do not normally regard any generalized assertion of “inaccuracies” as a substantive response; nor any generalized statement that the holders acted on advice. Neither will we regard as substantive any comment that only refers to the present State of affairs and not to the past.)”

“We are, of course, happy to discuss directly any concerns you may have. We would be most grateful  if you would acknowledge receipt of this letter. This will save us  from chasing.”

FALCIANI – The Swiss attorney general has allegedly charged Mr. Falciani with data theft from HSBC on Dec. 11, 2014, releasing a press release announcing the indictment of allegedly compiling “data and information on the Bank’s clients that was both personal and financial in nature, thus creating complete client profiles with the intent – as is the hypothesis of the (Office of the Attorney General) –at least in the initial phase in Lebanon, of cashing in on this data.” See https://www.news.admin.ch/message/index.html?lang=en&msg-id=55629

PUBLIC INTEREST? The ICIJ information does not reveal any wrongdoing by anyone identified as associated with the data received, although the ICIJ site includes profiles of 61 people allegedly associated with the leaked data in some manner. ICIJ clearly states it does not intend to imply any wrongful motive and acknowledges there are legitimate reasons for holding Swiss bank accounts and trusts.

What have the French been doing with the data since 2008? Has this information actually been released to other government authorities? If so, what are they doing with such information? Any U.S. Person having an undeclared interest in a foreign financial account should take note that such information can find its way to government authorities thru non-official channels – whistleblowers and informants might be resident within many financial institutions, foreign and domestic, waiting to claim financial rewards for similar information.

The overriding question would seem to be whether the release of such otherwise private information is in the “public interest” before there has been any indication of potential wrongdoing by the account holder? Some would assert that disclosure of private banking information turned over to French authorities in 2008 from “a former HSBC employee-turned-whistleblower” should not be publically disclosed until there has been some indication of wrongdoing on the part of any particular account holder.

Certainly, many Swiss residents hold accounts in Swiss financial institutions. As such, it is not surprising that the Swiss data has numerous Swiss account holders. For the 11,235 Swiss identified as holding Swiss accounts, an issue would seem to be an invasion of their privacy in some manner. For many of the remaining 100,000 HSBC clients, there are likely 100,000+ stories associated with the leaked data . . . and for some, sleepless nights ahead.