08456081878 and 08456052324 are legit Fraud squad number for HSBC,

In 2008, an employee of HSBC stole the details of 24,000 Swiss bank accounts from

his employer. Now that data is being used across Europe to investigate tax evasion.

HSBC revealed earlier this year that IT worker Hervé Falciani stole the data from its

Swiss subsidiary over the course of many months. Falciani, who has said he wanted

to raise awareness of the insecurity of the bank’s IT systems, handed the data over

to French authorities, although it has been alleged that he tried to sell the data in the

Lebanon first. In March 2010, Falciani claimed that he had been kidnapped by the

Israeli intelligence agency Mossad, which he says was investigating links between

HSBC and Lebanese political and paramilitary group Hezbollah.

Whatever the truth of the matter, the data has been used in tax evasion

investigations in France, Italy and now Spain. According to Finextra, Spanish officials

have gained access to the details of around 3,000 Swiss bank accounts containing

as much as €6 billion.

Some 79,000 customers with 127,000 accounts have been identified from data

stolen from a Swiss unit of HSBC bank, a far higher number than previously

made public, according to a French prosecutor.

    However, French prosecutor Eric de Montgolfier said the stolen files, which have

now been decrypted, allowed for the identification of 127,000 accounts belonging to

79,000 people. He said that 8,231 French account holders have been identified and

about 7,000 Italians also appear to be concerned. The major security breach has

helped fuel pressure on Switzerland over tax evasion.

French authorities in January 2009 acted on a Swiss warrant and seized HSBC

customer data from former computer specialist Herve Falciani’s home in France.

  They then said they intended to investigate suspected evasion by French taxpayers

with secret Swiss accounts. French prosecutors have since opened an investigation

into money laundering and authorities have used the data to identify suspected tax

cheats.

Italian authorities have now asked French judicial authorities to provide them with the

data as well and more may follow suit.

  

Last month, Alexandre Zeller, chief executive of HSBC Private Bank (Switzerland),

said 15,000 of its remaining customers were concerned by the case, while 9,000 of

them had left the bank since the data theft. The bank said it came up with those

numbers after authorities provided it with a significant amount of the stolen data.

  US and German authorities are also looking at stolen data that may provide them

with details of account holders with Swiss banks who may be tax evaders

The bank had previously said "less than 10 clients" had their details stolen when Herve Falciani, a former computer specialist, took the data and handed it over to French tax authorities.However, it may leave rich investors fearful of investigation by tax authorities in their home countries if they failed to declare the money held in their Swiss accounts.

Ex-employee Herve Falciani"The theft, which was perpetrated by a former IT employee about three years ago, involves approximately 15,000 existing clients who had accounts with the bank in Switzerland before October 2006," HSBC said in a statement."On top of that, up to 9,000 accounts that had been closed in the past were affected."These accounts often were not big enough to be eligible for private banking services, said the bank, which has 100,000 clients in Switzerland."We deeply regret this situation and unreservedly apologise to our clients for this threat to their privacy," said Alexandre Zeller, chief executive of HSBC Private Bank (Suisse) SA."We are determined to protect our clients’ interests and are taking every necessary measure to do so, actively contacting all our clients with Swiss-based accounts."Britain's Financial Services Authority, the lead regulator of HSBC, is understood to be "aware" of the situation and Switzerland's financial regulator FINMA is investigating.The bank said it has contacted the affected customers and stressed that the stolen information only affected accounts in Switzerland with the exception of its former subsidiary HSBC Guyerzeller Bank.A further 9,000 account holders affected by the theft had since changed banks, HSBC confirmed. It also insisted that client data in the bank's branches outside Switzerland or other parts of the banking group were not affected because of distinct computer and security systems.The theft triggered a brief spat between Switzerland and France last year after the data was handed over by the former employee, Hervé Falciani, to the French authorities who wanted to probe suspected evasion by French taxpayers with secret Swiss accounts.

The dispute came against the backdrop of international pressure on Switzerland to play ball in tax evasion cases and ease banking secrecy. As part of the agreement to move forward on a double taxation agreement, France said it would not request administrative assistance in obtaining information about suspected tax evaders

whose details were contained in the stolen data, and it agreed to provide Switzerland with copies.Sophisticated computer files

Zeller said the bank had only been able to evaluate the extent of the leak after it received the copies on March 3. The data came in the form of "sophisticated computer files" rather than a list of customers, he explained.

"We are determined to protect our clients’ interests and are taking every necessary measure to do so, actively contacting all our clients with Swiss-based accounts," Zeller added.

The case has raised questions about the HSBC’s security system, and prompted the Swiss financial regulator to begin formal investigations into how the theft of the data could have happened.

A data security expert told swissinfo.ch that large companies like HSBC had complex systems that were difficult to control.

“Technically, it’s possible to monitor and detect virtually anything. Burning sensitive information onto a CD, for example, is relatively easy to detect,” explained Marco Marchesi of the Zurich-based data security company, ISPIN.

Fine line

But he pointed out that firms had to weigh up the benefits of introducing security systems that did not infringe on individual rights of staff, or hinder them in their work.

“It comes down to a balance between security and the cost and effort of maintaining systems,” he added.

Perhaps more importantly, Marchesi said, is the fact that in the current political climate, banks can no longer afford to risk any breaches. “Four years ago, the security reputation of the big banks was so high that even if they had suffered data leakage, it would not have damaged their reputation as seriously as today.”

As part of the HSBC statement, the bank underlined that it has “made significant improvements to its security, spending over SFr100 million ($93 million) to upgrade systems and improve security”.

Switzerland is also involved in a separate stolen data affair with Germany. The federal government in Berlin is supporting German states who want to purchase CDs that contain information on presumed tax cheats with assets hidden in Switzerland.

One CD offered to the state of Baden-Württemberg could hold data on as many as 1,000 tax cases. Who is selling the information and for how much has not been made public. The state of North Rhine-Westphalia has already bought a CD containing similar data.

A dispute between Switzerland and France over stolen bank data and tax evasion is threatening to undermine diplomatic relations between the two countries.The Geneva-based HSBC private bank case has so many sub plots and has thrown up so much conflicting information that it could read as spy novel. Both sides accuse the other of encouraging criminal behaviour.

At the centre of the affair lies the ongoing dispute between Switzerland and other countries over banking secrecy and the role of Swiss banks in hiding the assets of foreign tax evaders.

Several weeks ago it emerged that a former employee of the HSBC operation had stolen confidential client information and had given it to the French authorities.

Hervé Falciani is currently hiding in France from a Swiss arrest warrant as lawyers and politicians squabble over the validity of using illegally obtained information to suppress the crime of tax evasion in other countries.

The incident bears the hallmark of a similar case last year when the German authorities bought data stolen from a Liechtenstein bank. In that instance, Germany appeared to gain the upper hand, but Switzerland is now fighting hard to protect its interests.

Mysteries unsolvedThe first signals of the current dispute emerged in the summer when French Budget Minister Eric Woerth announced France had obtained details from Swiss banks of some 3,000 suspected tax evaders. At the time, the statement was vague and mentioned no names or institutions.

At the beginning of December it emerged that some of this information had derived from data stolen from HSBC Geneva, although the French denied paying for the information. Falciani broke his silence to tell the media that he was motivated by conscience rather than money.

A string of conflicting pieces of information then emerged with many of the discrepancies still yet to be properly explained. 

The exotically named Eric de Montgolfier, state prosecutor of Nice (the French town to which Falciani fled), popped up to say he had received information on 130,000 HSBC clients spread around the world.

However, HSBC Geneva insisted the theft only affected around 100 clients and stated it did not have anywhere near as many as 130,000 foreign accounts on its

books.

The strangest rumour to emerge was that the Swiss Federal Prosecutor’s Office had handed over information needed to decode the data to France. But this story was flatly denied by the Swiss authorities.

Backpedalling fast

Last weekend some Swiss newspapers ran stories implying that Falciani had tried to sell some of his stolen information in Lebanon. It has also emerged that Falciani was held by the Swiss authorities before they let him slip through their fingers.

As the plot thickened, France said on Monday that it would return the stolen data to Switzerland only to add a day later that it had made copies that could still be used to track down tax evaders.

Switzerland had already suffered a number of reversals in the international crusade against tax evasion this year. It was forced to renegotiate several double taxation treaties with other countries to get itself off the Organisation for Economic Co-operation and Development (OECD) “grey list” of uncooperative tax havens.

More damagingly, Switzerland was compelled to hand over details of thousands of UBS clients to the United States to ward off the threat of the bank losing its license to trade there.

Line in the sand

But the Swiss are keen to show that enough is enough and recently refused to agree to the automatic exchange of information with foreign tax investigators. Switzerland has also suspended ratification of the new double taxation agreement with France in protest at its neighbour’s behaviour.

Hans Geiger, emeritus professor of finance at Zurich University’s Swiss Institute of banking and Finance, said the recent French actions smacked of hypocrisy. 

“It is unacceptable that France is using criminal activities in Switzerland to investigate crimes in their own country,” he told swissinfo.ch. “The Germany-Liechtenstein case was dirty and this looks like turning dirty too.”

“It seems that big countries do not always care what smaller countries think.” 

But with Swiss Finance Minister Hans Rudolf Merz – who also holds Switzerland’s rotating presidency in 2009 – appearing to draw a line in the sand, showdowns with powerful neighbours such as France may be on the cards next year.

HMRC letters target taxpayers with Swiss bank accounts

Hundreds of wealthy UK taxpayers have been sent letters by HM Revenue & Customs over possible large-scale tax evasion, the BBC has learned.

It is understood HMRC has acquired a list of high net-worth individuals with accounts at the Swiss division of HSBC.

The list was stolen by an employee and passed to the taxman by the French authorities. The bank is not accused of any wrongdoing.

The campaign comes after the government announced a crackdown on tax avoidance.

Chief Secretary to the Treasury Danny Alexander told the Liberal Democrat conference in Liverpool it was hoped that closing loopholes and ensuring wealthy people paid the full top rate of tax would generate an estimated £7bn a year by 2015 in additional income tax revenue.

Secrecy laws

Tax evasion and avoidance cost the Treasury an estimated £14bn a year and successive governments have vowed to take action against the problems.

BBC business correspondent Joe Lynam says the letters sent out by the HMRC are known as Code of Practice 9 and advise the recipients that they are suspected of committing illegal tax evasion which may lead to a criminal conviction.

HMRC hasn't been able to stay out of the headlines of late. September started with the embarrassing revelation it had miscalculated the tax affairs of nearly six million people, 1.4m of whom would face additional tax.

Now a week after its political boss, Treasury secretary Danny Alexander, said there would be a clampdown on evasion, hundreds of "high net worth" individuals have been sent the kind of letter which could see some of them end up in jail.

This may prove to be a rich seam of income for the taxman as no-one is likely - in public at any rate - to support people who have broken the law in an attempt to minimise their tax bill.

But it may encourage some of the super-rich to take their entire tax affairs offshore, denying the UK billions in revenue at a time when it is needed most.

A HMRC spokesman said: "The days of hiding money offshore to evade tax are now over."

Due to its secrecy laws, Switzerland has long attracted the very wealthy as a place to save their money.

This is changing in light of a worldwide clampdown on "offshore" tax havens ordered by the G20 last year.

It also follows similar efforts by Germany in 2008 against wealthy residents suspected of using banks in neighbouring Liechtenstein, another tax haven.

Germany's finance ministry paid an informant a reported 5 million euros (£4.2m) for a stolen computer disc containing the names of hundreds of clients at a wealth management firm.

In the HMRC case, a former staff member at HSBC's Swiss division stole highly sensitive data belonging to 15,000 high net-worth account holders earlier this year and fled to France.

The list was passed to the French authorities, who in turn handed the relevant details to HMRC.

HSBC fired the employee and the Swiss authorities are pursuing criminal action against him but cannot extradite him from France for legal reasons.

No more than 10% of the list of suspected tax evaders pertained to any one country.

HSBC said it had no comment to make on the matter

I-T asks local clients of HSBC’s Swiss bank to come cleanA few months ago, wealthy clients of HSBC’s Swiss private bank were rattled when a former employee of the British bank stole a mountain of data on thousands of accounts. That list, containing many Indian names, appears to have found its way into the hands of Indian tax authorities who are now telling these account holders to come clean.

In the past one month, nearly a dozen residents have received notices from the investigation wing of the Income Tax department, asking them to share details on funds parked abroad and whether tax was paid on the money.

Indian taxpayers are required to disclose their global income when they file tax returns. If they fail to do it, they have the option of filing a revised return to fork out the tax money along with the interest at a later point.

“The notices make no mention of their offshore bank accounts. But all those who have been asked to appear to clarify before the tax department figure in the stolen list. Notices have gone to holders of accounts with transactions of `1 crore and above,” said a senior chartered account who is advising some of them.

While a good part of the money lying in these accounts could well be undisclosed income stashed abroad and never brought back into the country, in some cases the account holder could just be a ‘beneficiary’ and not the real ‘owner’ of the fund. These are instances where resident Indians help relatives who are settled abroad to plan their estate duty and other tax matters.

According to a tax official, the department is in the process of sending notices

relating to offshore accounts on which it has received information from other governments. For instance, French authorities, who got hold of the HSBC data on 24,000 Swiss accounts, are believed to have shared with their counterparts in the US and the UK. It may be recalled that Germany had paid for information stolen from Liechtenstein’s top bank, LGT, in 2008.

Interestingly, many Indians in LGT list had also received notices from local tax authorities. In some cases they had denied any involvement with the dealings in the respective offshore accounts. “These cases are still on,” said a lawyer handling one such matter.

The current string of notices have been shot at a time when New Delhi is reportedly considering to approve a revised Double Taxation Avoidance Agreement (DTAA) with Switzerland. The proposed pact may make it easier for the Indian government to obtain information on Swiss accounts opened by Indian citizens. Besides Switzerland, India has completed negotiations with Bermuda and the Bahamas to amend the bilateral tax agreements.