Twice before we wrote about Herve Falciani, a former computer specialist for HSBC bank in Switzerland. Falciani is a fugitive from Swiss authorities but welcomed in other European countries. Why? Because he allegedly stole the names of 130,000 clients from his former employer; names that are probably responsible for billions in unreported foreign accounts and hundreds of tax evasion cases across Europe and the world. (To see the original posts, check here and here.)
Since our last post, Falciani claims he is still hunted by Swiss authorities and that he was kidnapped by Israeli Mossad agents eager to learn the name of Israelis with unreported foreign accounts. The French government, which has long been aggressive in the hunt for tax evasion using offshore accounts, is reportedly providing him with armed bodyguards.
Spain claims Falciani’s information lead to the collection of $345 million US Dollars and identified 650 people guilty of tax evasion. That includes the head of banking giant Banco Santander.
Falciani already turned over his treasure trove of data to the Internal Revenue Service and Justice Department which used his information for a record $2 billion settlement with HSBC.
Falciani’s story reads like a Tom Clancy thriller, except the stakes are very real. As long as foreign governments are willing to purchase or use stolen records, no one with an unreported foreign account is safe. Opening an offshore account is legal if the account is properly reported annually on an FBAR form – Report of Foreign Bank and Financial Accounts. Failure to file an FBAR – or foreign income associated with the account – is a felony. Read more
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Yesterday we posted “More Foreign Account Leaks – Not Good For Those Without FBARs” about Herve Falciani, a French and Italian citizen wanted by Switzerland for allegedly stealing customer account information. Switzerland wants him to stand trial for theft. The Spanish government, however, says the information possessed by Falciani documents widespread money laundering and tax evasion by HSBC clients. Spain’s National Court denied Switzerland’s extradition request.
New information revealed by The Economic Times indicates that Falciani turned over records of 24,000 HSBC clients with unreported foreign accounts in HSBC’s Swiss banking unit. If that information isn’t bad enough for those who failed to report those accounts, we now have learned that France’s finance minister turned over those names to the IRS.
Willfully failing to report a foreign account is a crime in the United States punishable by up to 5 years in prison. In certain cases, taxpayers can also be prosecuted for tax evasion, particularly if the interest generated by those accounts wasn’t taxed or the account was used to hide unreported income. Unreported offshore brokerage accounts, hedge funds, CD’s and other financial products can also give rise to a tax evasion prosecution. Read more
In recent years, governments around the world have started a dangerous new trend; paying criminals for stolen foreign bank account data. Unreported offshore accounts are an important source of revenue for the Internal Revenue Service and other countries. While the IRS and United States Justice Department prefer to indict and arrest lawyers, accountants and foreign bankers in the hopes of forcing them to disclose clients with foreign accounts, some European countries simply steal the information.
Herve Falciani was a computer specialist working for HSBC Bank in Switzerland. Swiss authorities have accused him of leaking sensitive records to tax authorities; records that contained the names of HSBC customers. Stealing client data from a bank is a crime in most countries including Switzerland. They asked a Spanish court, where Falciani was found, to extradite him to face criminal charges. Spain’s National Court said no.
Officials in Spain rationalized their decision by claiming that since many of HSBC’s customers were “possibly” violating the law themselves, there were no grounds to send Falciani back to Switzerland to face criminal charges.
What does this case mean for U.S. taxpayers with accounts at HSBC or other foreign banks? Plenty! Read more