SwissLeaks — Big Bank Protects the Privacy of Criminals
There are numerous ways and means of hiding money (concealing the existence and location of cash assets) but generally speaking, one wouldn’t expect one of the largest banks on the planet ($2.7 trillion in assets), to actively encourage this type of behavior. And not simply encourage, but facilitate. And not just facilitate, but knowingly and actively manage and protect the cash assets of unseemly types: “tax dodgers, arms dealers and drug smugglers” according to CBS News, 60 Minutes.
The mix of clients includes politicians, billionaires, religious leaders, entertainers, sports figures and just about any other individual one might imagine needs a Swiss bank account.
Briefly, here’s what happened:
HSBC Holdings is headquartered in London and operates a private bank in Switzerland, HSBC Private Bank (Suisse) SA. One of the Swiss bank’s IT specialists didn’t agree with the bank’s “policies” and overall illegal practices, so he copied copious amounts of data; customer account information, internal memos, etc.
He then left the country in 2007 and after a bit of international drama, turned over information on 100,000+ of the bank’s clients to French authorities. The French needed a hand combing through the data, so they contacted the International Consortium of Investigative Journalists (ICIJ).
Nearly 150 journalists from 45 countries rolled up their sleeves and got to work.
60 Minutes, the only American news agency involved, released a video yesterday, “The Swiss Leaks” that provides an overview of the investigation (transcript provided).
The Guardian also has some splendid coverage of this issue.
The minute governments began assessing taxes, this inspired individuals and businesses (the very next minute) to construct ways of avoiding them.
“Tax avoidance” is legal. For instance, anyone who elects deductions and exemptions, is legally avoiding paying taxes. There is nothing wrong with that.
“Tax evasion” is illegal. For instance, not reporting income means tax will not be paid on it, consequently, anyone who does so is evading paying taxes.
Opening and maintaining a Swiss bank account is perfectly legal and a good way to keep your money safe and undisclosed as they will protect your privacy (with exceptions). For instance, if you are living in a country that is executing its citizens and taking their assets (cash or otherwise), it is a good idea to secure funds in a Swiss account. Then, you will have something to live on if and when you manage to escape your circumstances.
A Swiss bank account (the Cayman Islands have also got into the action) can also be used by people who have a money they don’t want anyone to know about — including their own government — to evade taxation.
Governments aren’t wild about this, so in the European Union (EU), an agreement was made with the Swiss banks that withholding would be accomplished and then forwarded to the country of the account holder’s stated residence.
Great! Account holders maintain their privacy, governments get their taxes, and the banks earn a few bucks.
Enter the “loophole” — there always seems to be one, but I digress. The agreement pertained only to individual account holders; not to corporations.
The creative folks at HSBC simply turned individuals into corporations. Awesome.
So what we have here, is tens of thousands of individuals impersonating corporations and not paying taxes. Bank employees created shell corporations to assist and facilitate their client’s tax evasion.
Before the IT specialist leaked the data, there was no method of determining who or whom had accounts and whether or not the funds had already been taxed or not.
Accepting deposits from criminals is also illegal. HSBC paid a $1.9 billion dollar fine to the US Government in 2012 for laundering money on behalf of a drug cartel.
Sidebar: Personally, I find it fascinating that government officials around the globe, do not trust the banking system in their own country, thereby necessitation a (formerly) undisclosed Swiss bank account.
People (and corporations) don’t necessarily like paying taxes. No brainer. I get it.
I know of and have read of hard-working average people end up with stress related heart conditions and even homelessness when they couldn’t pay their tax bill. Maybe some of you know folks like this.
For instance, if you owe $250,000 on your home, but it’s only worth $200,000, your property is what’s referred to as “upside down”. You owe more than it’s worth.
One day, you realize you can no longer afford the monthly note because you lost your job, got sick, or maybe cannot due to some other unfortunate circumstances.
You decide to sell it but cannot for the amount you owe. You sell the home for $200,000 however, you still technically owe $50,000 to the bank. They won’t chase you down for the balance but what they will do is send a 1099-C to the IRS. The $50,000 dollar difference must be reported as regular income and taxed accordingly (there are exceptions) if this occurred before 2007 and after 2014.
This is the part that pisses me off:
Not one single HSBC account holder was ever in jeopardy of becoming homeless due to having to pay tax on a few million dollars.
Every single one of the account holders could afford to pay their tax liability.
So while millions of ordinary people around the globe have become financially decimated over the past few years, our banking institutions have or are
• Laundering money for drug cartels and terrorists
• Hiding assets on behalf of their clients
• Manipulating currencies
• Manipulating LIBOR
• Using depositors money to “invest” in hedge funds
All of this certainly makes for great theatre and that’s precisely what it is.
No one will go to prison.
No one directly responsible will have their assets attached.
The taxpayers of every country involved in the investigation of this matter will generously pick up the tab.
Business as usual.
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Mae is currently pursuing graduate degrees in accounting (MSA) and business (MBA). She provides consultation services to small businesses with less than $10 million in annual revenue and is known for bringing order to chaos. In her spare time, Mae is writing a (somewhat) fictional tale of financial fraud, the murder used to cover it up, and the family torn apart by greed.
Originally published at www.linkedin.com on February 9, 2015.