Falciani's Tax Bomb

Herve Falciani is responsible

for the biggest banking scandal in history: Swiss Leaks.

In 2006, while working as an IT specialist

for HSBC Private Bank, he obtained access

to their secure client database.

For the next two years, he copied customer data.

Do you have to do all this by yourself?

There are person that help me, of course,

to organize a few things.

So did they check me out?

Yeah?

Actually it's better.

How big is your database,

how many gigabytes?

It's over 100 gigabytes.

God, that's enormous.

The battle against tax evasion is a war.

Do you think you can win this war?

Well, of course the first step is to know where,

what we have to fight.

HSBC is the second largest bank in the world.

Then, as now, the Geneva branch specializes

in managing the assets of major private clients.

This is Falciani's list, the data he took from HSBC.

What you see here is the names, their official address,

and the amounts on the accounts.

For example, here you see a couple of million dollars,

but also $70 million, $200 million are even found.

It's a lot of money that was kept in Switzerland.

There are diamond dealers on this list,

a politician, nobility,

entertainment people, tennis players, football players,

lawyers, heads of companies, known companies, bankers.

It's incredible, all this data

has been stolen by Herve Falciani.

For decades, governments treated tax evasion

by the wealthy as a minor crime.

People who became rich moved to tax havens

or found ways to transfer their money across the border

where it could be hidden from the tax man.

Some banks were renowned for the special services

they offered clients.

Whether it was the Bahamas, Cayman Islands,

or Luxembourg, tax havens offered low rates of tax,

and their banks guaranteed the utmost discretion

when dealing with foreign assets.

Bank secrecy is something which is absolutely useful

and necessary, because I don't want to know

about your bank account, and you don't want me to know

about your bank account, except that, for tax purposes,

for the tax man, their should be no such secrecy,

otherwise you facilitate fraud.

If I can hide from my tax man by putting my money

in another country which will not exchange information

with other countries, like Switzerland,

then I can avoid taxes.

In secrecy thrive all kind of criminal activities.

You can also do money laundering,

you can facilitate corruption or fraud.

In the 1910s, 1920s, Germany, France, the U.K.

introduced personal income tax.

The Swiss bank industry realizes there is a lot of money

to be made from people who's gonna hide their assets

to escape, to avoid personal income tax.

And then bank secrecy, for tax purposes,

is spread over the world through small jurisdictions

in the Caribbean and then financial centers

like Singapore or Hong Kong which did specialize

in this type of business.

According to the data that we have,

Switzerland is the number one center

for cross-border wealth management.

They may estimate there's about 8%

of the world's financial wealth stashed

in tax havens globally.

And one-third of this is in Switzerland approximately.

So that's the number one tax haven.

The evidence that we have suggests that 80%

of the wealth held by European account holders

is not declared to the country of origin

of these depositors, so 80% of the offshore wealth

in Switzerland seems to be evading taxes.

Herve Falciani is himself the son of a banker,

and he grew up in one of Europe's oldest tax havens: Monaco.

They set up these offshore companies in tax havens,

which you can hide behind, and this company

will be the official owner of your account,

but no worries, you will be beneficial owner.

Nobody can trace who is behind these secret companies,

and for just a couple of thousands of dollars,

they can set it up, and it's in fact HSBC itself

that has set up all these…

offshore companies for their clients.

In a way that makes it hard for investigators

to track the ownership of wealth,

because if a tax authority has a suspicion

that Madame Pierrot in Paris has an undeclared bank account

in Geneva, then French tax authorities

are going to ask Swiss authorities,

"Does Madame Pierrot have a bank account in Geneva?"

But if the account is held through 30…

trusts, shell companies, holding companies, foundations,

intertwined, you know, then there's a higher probability

for the Swiss banks to actually say,

"No, there's not such thing as a bank account

"belonging to Madame Pierrot."

In 2008, the American government

launched a major campaign against tax evasion.

For the first time, representatives of a Swiss bank

were summoned to give evidence to a U.S. Senate committee.

Today we will look at banks that relied

on secrecy and deception to facilitate U.S. tax evasion.

Swiss bankers regularly traveled to United States

to target U.S. citizens for net new money.

These Swiss bankers maintained a low profile,

using business cards that did not mention wealth management,

sometimes declaring they were in the United States

for non-business purposes, and carrying encrypted computers

that allegedly even U.S. Customs agents could not read.

The subcommittee even obtained a document

showing that major international banks

provided its Swiss private bankers with training

on how to detect surveillance by U.S. Customs agents

and law enforcement officers while traveling here.

Think about that.

Falciani continued to collect

more and more data: accounts, transfers,

the complete financial histories of HSBC's clients.

The question was: what would he do with it?

Georgina Mikhael and Herve Falciani

founded a company called Palorva.

In January 2008, their website went live,

offering sensitive information about wealthy individuals.

The contact name on the site was one Ruben Al-Chidiack.

Palorva also contacted financial services businesses directly

by email, offering the data at $1,000 per client.

The emails did not lead to any deals.

So, in February 2008, Falciani and Mikhael flew to Lebanon.

They showed banks in Beirut

their profiles of potential customers.

After a week, the couple returned to Geneva,

empty handed again.

The Swiss police placed Georgina Mikhael under surveillance,

but they had no idea who Ruben Al-Chidiack was.

At the same time, another case of data theft

was making the headlines.

The German Secret Service have bought stolen data

about Lichtenstein's banks from an informant.

They had given him a large sum of money and a new identity.

The Lichtenstein scandal occurs in February 2008,

and it spreads over the world in one night.

The German Secret Services got information

from a whistleblower who was an employee

of the LGT Bank, which is the bank

in Lichtenstein owned by the prince family.

And the guy just copied the name

of all the beneficial owners of trusts in Lichtenstein.

He sold that to the German Secret Service,

who shared it with the tax administration,

which shared it with 41 tax administrations.

Billions of euros, thousands of people, massive fraud.

But there was doubt

if this stolen bank data could be used in court.

There had never been a case of this kind

in the history of German tax law.

In March 2008, the German Secret Service

received an email:

"I have the whole list of clients

"of one of the world's top five private banks."

The German Secret Service rejected the offer.

Instead, they requested the full name, date of birth,

and address of the anonymous sender.

Later, Falciani got in touch

with the German tax investigations department.

But nothing came of it.

In summer 2008, French tax investigators

offered to meet Falciani secretly

in a French village close to the Swiss border.

In spring 2009, the heads of state

of the world's 20 leading economies

met at the G20 Summit in London.

For the first time, the topic of tax evasion

was on the agenda, and they came to a decision.

The tax havens of the world

should be identified and abolished.

11 ministers from OECD countries turned to us

and say we need to put an end to bank secrecy.

We'll identify jurisdictions that fail to cooperate,

including tax havens, and take action

to defend our financial system.

We have agreed that there will be an end to tax havens

that do not transfer information on request.

The banking secrecy of the past must come to an end.

So you could see the huge political pressure

which was expressed there.

That was the first time that neighbors of Switzerland

had such an undiplomatic language.

The 34 most important economies of the world

are members of the OECD, the Organization

for Economic Cooperation and Development.