Monday, February 16, 2015

HSBC documents show bank helped clients hide billions from tax man

Documents obtained by International Consortium of Investigative Journalists show Canadian connections

CBC News Posted: Feb 09, 2015 1:45 PM ET Last Updated: Feb 09, 2015 8:44 PM ET
How HSBC bank allegedly helped Canadians hide money from the tax man 7:34


RAW: Reaction to HSBC allegations
RAW: Reaction to HSBC allegations2:01
British bank HSBC helped hundreds of Canadians hide Swiss accounts from authorities to avoid paying millions of dollars in taxes, CBC News has learned.
That’s one of the takeaways gleaned from a massive collection of documents collected by Hervé Falciani, a former employee of the bank, who blew the whistle on his former employer and handed over reams of data to tax authorities. 
Those documents were subsequently obtained by French newspaper Le Monde and the International Consortium of Investigative Journalists (ICIJ) who shared them with CBC/Radio-Canada along with a collection of 140 journalists around the world. In total, the documents show emails and banking records for 106,000 customers of HSBC’s Swiss banking arm — altogether they have more than $100 billion US stashed away in their secret accounts. 
The value of accounts tied to Canada is around $4 billion Canadian, spread across 1,859 people and companies with ties to this country. A CBC analysis of the Canadian clients' files, show the level of paranoia and secrecy that the account holders — and their banks — went to in order to keep that money out of reach of tax authorities. 

Offshore accounts

The amounts in question in each account vary greatly from one bank account to another. Some appear to be either closed, or empty. But others contain amounts of hundreds of millions of dollars.
Almost half of the accounts tied to Canada are numbered accounts, where the owner isn’t named to ensure privacy. And hundreds of accounts owned by Canadians are registered in the name of companies located in tax havens such as the British Virgin Islands and Panama. 
The Canada Revenue Agency says 264 Canadians involved in the HSBC leak have come forward under the agency's voluntary disclosure program, and the tax agency has recovered $28.4 million in unpaid taxes from them. But those figures don’t include numbers from Quebec, where Revenue Quebec is aware of at least 88 individuals who had undeclared assets, from whom $34.4 million in unpaid taxes has already been recovered. 
But not a single one of those individuals has been charged with any tax offences, because they all came forward in the CRA’s voluntary disclosure program, which shields them from prosecution and penalties as long as they came forward willingly. 
Canada isn’t alone in that strategy. In Britain, where HSBC is based, the tax agency clawed back 135 million pounds ($255 million Cdn ) from some of the 3,600 Britons identified as using the Geneva branch of HSBC, but only one has been prosecuted. 
France, by contrast, has launched 103 actions against individuals ensnared in the scheme.
Citing numerous academic studies, the ICIJ report contends that worldwide, roughly $7.6 trillion US is held in overseas tax havens, depriving governments of $200 billion US a year in tax revenue. "We acknowledge and are accountable for past compliance and control failures," HSBC said in a statement accompanying the release of the report. 
The bank blamed lax compliance for not fully integrating the Swiss private banking arm into the bank's regular level of diligent scrutiny following its purchase in 1999.
The bank also said it shed 70 per cent of its Swiss private bank clients, including those who were suspected of having tax compliance issues, and it was co-operating with authorities investigating tax matters. The number of accounts has fallen from 30,412 in 2007 to 10,343 at the end of last year.
With files from The Associated Press and Reuters
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HSBC's private bank in Switzerland used by several Canadian billionaires

HSBC's private bank in Switzerland used by several Canadian billionaires

CBC News looks at secret numbered accounts and a tax haven bank

By Frederic Zalac, CBC News Posted: Feb 12, 2015 10:09 PM ET Last Updated: Feb 13, 2015 2:27 AM ET
Information from HSBC’s private bank in Switzerland was leaked to reporters.
Information from HSBC’s private bank in Switzerland was leaked to reporters. (Remy de la Mauviniere/Associated Press)
Canadian billionaires Frank Giustra, Joseph Kruger II and Marcel Adams declared the assets they held at HSBC in Switzerland, but many other rich Canadians used Swiss banking secrecy to hide their fortune, according to a CBC News investigation.
Several Canadian billionaires held accounts at HSBC’s private bank in Switzerland, a financial institution catering to the very wealthy that was the target of the largest leak of confidential information in banking history. Specific names and details of their Swiss bank accounts were part of that leak.
Some of them were audited after Canadian tax authorities obtained the data in 2010. The numbered, private HSBC accounts are not illegal as long as they aren't used to evade taxes or launder money.
That data was also obtained by French newspaper Le Monde, which shared it with the International Consortium of Investigative Reporters, CBC News and Radio-Canada’s investigative program Enquête.

Marcel and Sylvan Adams

According to the leak, one of Quebec’s wealthiest families opened several accounts at HSBC private bank in Geneva in 2004. Billionaires Marcel Adams and his son, Sylvan Adams, made a fortune in commercial real estate – including large shopping centres in Quebec City and the Montreal area.
Sylvan Adams says his Swiss bank accounts have been declared to tax authorities since the very beginning.
"We provided all the information to Revenue Canada and Revenu Québec and it’s all legitimate," he said. "All of this is normal, there’s no hidden account."
The HSBC documents reveal that Sylvan Adams was the beneficial owner of an account with a staggering balance: over $800 million US. That account was in the name of "Summit International Bank," a private bank formed by the Adams family in Barbados in 2006. Their bank’s website says it was "founded to manage the wealth of a Canadian family," but without disclosing the name. 
According to Summit’s web site, the bank holds assets of over $1 billion and offers its wealth management services "to a select group of wealthy families, individuals and institutions."
Any income generated by the Adams assets held in Switzerland are taxed at an extremely low rate in Barbados – from  0.25 to 2.5 per cent.
According to Laval University tax law professor André Lareau, profits from their Barbados bank could then be sent back home tax free because Canada has a tax treaty with that Caribbean tax haven. It’s legal but Lareau says it creates unfair competition, "especially considering the amount of money coming back to Canada untaxed." 
Sylvan Adams says he can no longer benefit from that tax advantage because of recent regulatory changes.

​Frank Giustra

The leaked data shows that mining mogul Frank Giustra opened an account at HSBC’s private bank in 2002.
Giustra is president of Fiore Financial Corp and is founder of the movie studio Lions Gate films.
The Vancouver billionaire is one of the biggest donors to former U.S. president Bill Clinton’s foundation. According to his HSBC file, Giustra used a numbered account, which replaces the account holder’s name with a series of numbers and letters. According to his lawyer, there was never an intention to deceive or hide the fact that Giustra was the account holder.
The data also shows that Giustra instructed the bank not to send his correspondence to Canada, asking instead that HSBC bankers hold all mail in Switzerland. This was requested for security purposes, according to his lawyer, who adds that the funds and any income generated from them "have been fully and completely reported to Canadian tax authorities."

Joseph Kruger II

The head of Kruger, a large pulp-and-paper company based in Montreal, was also a client of HSBC’s private bank in Switzerland. The Canadian billionaire has always declared his income and paid all taxes owed in Québec and Canada, says his lawyer. 
Revenu Québec contacted his client over a year ago, following the leak of data from HSBC. According to his lawyer, Kruger provided them "with full documentation establishing that all income was declared and all Canadian and Québec tax paid by him."

Secret accounts and tax havens 

Billionaires were not the only people in Canada to use the personalized and confidential services of HSBC’s Swiss private bank. An analysis of the 1,859 individuals and corporations linked to Canada shows a broad range of people chose to stash money in Switzerland too: engineers, lawyers, doctors, architects, housewives, even a pilot with Air Canada.
Greiche & Scaff
The leaked data show that Raouf Greiche had several numbered accounts and one account linked to an offshore entity registered in the British Virgin Islands, the Pantonhill Group. Greiche told CBC News that he "wasn’t aware of any of this." (Radio-Canada)
There are files on two Montreal opticians, Raouf Greiche and Nagib Scaff, who launched a popular chain of eyewear stores in Quebec. The leaked data show that Greiche had several numbered accounts and one account linked to an offshore entity registered in the British Virgin Islands, the Pantonhill Group.
Greiche told CBC News that he "wasn’t aware of any of this." The data show his business partner also had several numbered accounts and one account linked to a foundation registered in Lichtenstein.
"I don’t want to talk about this because it’s not a good idea," he said over the phone before hanging up.
The leaked data also reveal that a family doctor from Montreal, Irwin Rodier, insisted on a level of secrecy that seemed to surprise the Swiss bankers themselves. They were instructed to never contact him directly, by email or by phone, and that he was "somewhat paranoid," according to a banker cited in the leaked documents.
Whenever he was going to Zurich, the bankers wrote, he flew to Paris and rented a car to drive to Zurich in order not to leave any trace of his final destination. Rodier said that he has settled with tax authorities using the voluntary disclosure program – a program that allows taxpayers  to go back and disclose previously undeclared assets without any penalty.

Fighting in court

The Canada Revenue Agency says 264 Canadian account holders confessed using the voluntary disclosure program but others have decided to take the tax authorities to court. In April 2013, Montreal clothing manufacturer Maurice Azra tried to quash procedures from Revenu Québec, alleging his constitutional rights were being violated since the evidence came from stolen data.  Last December, a Quebec court sided with the provincial tax agency and ordered Azram to provide all the relevant documents.
Two other HSBC account holders, Tarek Sabra from Montreal and Sohrab Kadkhod from West Vancouver, contested in federal court CRA’s investigation of their Swiss bank accounts. They both eventually dropped their legal procedures against the tax agency.
Up to now, tax authorities in Canada and Quebec have recovered $63 million in unpaid taxes from Canadians who had hidden money at HSBC’s Swiss branch.
But there have been no charges of tax evasion or tax fraud.
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China joins global-easing wave with bank reserve ratio cut

China joins global-easing wave with bank reserve ratio cut


[BEIJING] China cut the amount of cash banks must set aside as reserves in a bid to boost the supply of loans, as capital outflows and weakness at the nation's factories suggest a slowdown in the world's second-largest economy is deepening.
The reserve ratio will fall 50 basis points on Thursday, the People's Bank of China said on its website Wednesday. The level will drop to 19.5 per cent, based on previous statements, while some lenders to rural and small business get bigger reductions.
The PBOC joins more than a dozen global counterparts in easing monetary policy this year as tumbling commodity prices provide scope to support growth.
While Premier Li Keqiang told global business leaders last month not to worry about weakening Chinese growth, the latest step signals policy makers are concerned the slowdown has yet to reach bottom.




"You have lot of the world easing monetary policy in a context in which inflation is going down, partly because of relatively slow growth and partly because of falling oil prices," said Edwin Truman, a former Federal Reserve and Us Treasury official who's now a senior fellow at the Peterson Institute for International Economics in Washington.
China's latest move is "part of that general pattern."
FUTURES SURGE
Futures on the FTSE China A50 Index traded in Singapore surged 5.1 per cent as of 12.33pm in New York, while contracts on Hong Kong's Hang Seng Index climbed 1.7 per cent.
The required reserve ratio, or RRR, reduction is the first across-the-board cut since May 2012. It will inject as much as 600 billion yuan (S$129.4 billion) into the banking system, Australia & New Zealand Banking Group Ltd. economists estimate.
"We expect at least four more reserve ratio cuts in 2015, in view of the prospect for further deceleration in economic fundamentals," said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong.
He said the rising risk of deflation, weak factory and services readings, and an effective clampdown on stock-market speculation had helped trigger the cut.
Mired by a property slump and overcapacity, China saw the biggest outflow of capital since at least 1998 last quarter.
To step up support for small companies, farmers and the agriculture industry and major water projects, the PBOC announced an additional RRR cut of 0.5 percentage point for city commercial banks and non-county-level rural commercial banks that achieve lending targets to small businesses. Agricultural Development Bank of China gets an extra cut of 4 percentage points.
The PBOC will continue to implement prudent monetary policy, pay more attention to the balance between loosening and tightening and guide stable and appropriate growth in lending and social financing while promoting healthy and stable operations in the economy, it said in the statement.
OFFENSIVE PLAY
The latest reserve-ratio cut "is a clear indication that China is on the offensive," said Peter Rosenstreich, head of market strategy at Swissquote Bank SA in Gland, Switzerland. "2015 will see a much more aggressive PBOC and government which should keep the yuan supported.
This proactive strategy should also be positive for regional Asia currencies and commodity prices." China's leaders gather next month at an annual meeting, where they are anticipated to unveil a growth target of around 7 per cent, down from "about 7.5 per cent" last year.
The RRR move suggests a shift toward pro-growth policies that may fuel even more debt. An unprecedented lending spree in China from 2009 to 2013 led to a surge in credit on a scale that's triggered banking crises in other economies, according to the International Monetary Fund.
FRESH STIMULUS
The PBOC cut benchmark interest rates in November for the first time since July 2012, joining the European Central Bank and Bank of Japan in deploying fresh stimulus. While that lowered the cost of credit, a reserve-ratio cut boosts liquidity by allowing banks to extend more credit.
China has room to cut interest rates because borrowing costs remain effectively high amid low inflation, according to a commentary published Thursday on the China Securities Journal's front page, written by reporter Zhang Qinfeng.
Price data has given scope for further monetary easing: the producer-price index dropped 3.3 per cent in December from a year earlier, a record 34th-straight monthly decline.
China has basically halted regular currency intervention, according to PBOC Deputy Governor Hu Xiaolian. That removes pressure to soak up liquidity, giving room for lower reserve requirements.
The cut "releases liquidity 'permanently' and also has a strong signaling effect, which should help improve market and business sentiment," Wang Tao, chief China economist at UBS Group AG in Hong Kong, wrote in a note.
[BLOOMBERG]











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