Offshore bank account probe nets Canadians

More than 1,700 private offshore bank accounts belonging to Canadians
turned up on a list of secret accounts in Switzerland, a joint CBC
News/Globe and Mail investigation into possible tax evasion has found.
More than 1,700 private offshore bank accounts belonging to Canadians
turned up on a list of secret accounts in Switzerland, a joint CBC
News/Globe and Mail investigation into possible tax evasion has found.

The Canadians on the list are part of a larger group that includes
about 80,000 accounts belonging to HSBC Private Bank clients held in
Geneva, according to whistleblower Herve Falciani.

Falciani, who obtained the list of accounts when he worked as head of
computer security at HSBC, told the CBC Investigative Unit's Diana
Swain in an exclusive interview that the offshore accounts are large,
with a hefty minimum deposit.

Just to open an account, "you need at least $500,000," Falciani said.

Falciani claimed he was worried that criminals and tax cheats were
using the bank to hide money, so he pleaded with his bosses to become
more transparent about their banking practices. When they refused, he
decided to start making copies of the accounts in an attempt to reveal
his concerns.

"I came to the point that something was very wrong and it should be
changed," said Falciani, who began copying information on private
accounts to his personal computer in 2006.

Canada Revenue Agency investigates The Canada Revenue Agency told CBC
News it has been in touch with French authorities, but would not
provide specific details.

A spokeswoman for the Ministry of National Revenue, which oversees the
CRA, told the CBC and the Globe and Mail that the CRA has received "a
list of names of individuals who may be exploiting offshore accounts."

The spokeswoman said the CRA is assessing the names "on a case-by-case
basis, and will take aggressive action to recover money owed to
Canadians."

It is not clear exactly how much money Canadians are holding in the
HSBC accounts, nor is it known precisely how many individual Canadians
hold the 1,785 Canadian accounts.

HSBC response "HSBC would like to make it clear that HSBC Private Bank
(Suisse) SA and its clients are the victims of a criminal act. The
theft was perpetrated by a former IT employee about three years ago
and involves approximately 15,000 existing clients around the world
who had accounts with the bank in Switzerland before April 2007. HSBC
in no way condones tax evasion and is co-operating with authorities
while protecting the rights of our clients to confidentiality."

Don Johnston, the former head of the Organization for Economic
Co-operation and Development, said he thinks the total amount of money
in Canadian accounts would be large.

"You're talking about this number of people, you're obviously talking
billions of dollars," said Johnston, who was president of the Treasury
Board under Liberal Prime Minister Pierre Trudeau.

When Johnston headed the OECD, it was largely focused on trying to
hold the Swiss banking system responsible for its practices. He said
he has found the offshore banking situation unsettling.

"Frankly, I'm outraged," he said. "Every Canadian who pays his or her
taxes here in Canada should be outraged."

Fired by HSBC After he copied the data, Falciani was fired by HSBC
after being accused of trying to sell the information for foreign
governments.

Swiss authorities confronted him about that allegation and brought him
in for a day of interrogation. They asked him to return the next day,
but he never did.

Revenue Canada response "Our government is taking aggressive action to
recover money owed to Canadians.

"We have been working with international bodies like the OECD and
Joint International Tax Shelter Information Centre.

"Some new information has come to light within the past day.

"Our office can now confirm that the CRA has been working with French
government on this matter. The CRA has received a list of names of
individuals who may be exploiting offshore accounts. Due to privacy
regulations and the sensitivity of this issue, we are not in a
position to comment further on the numbers or the names of
individuals.

"The CRA is in the process of assessing these individuals on a
case-by-case basis.

"The CRA is reassessing over $1 billion in international assets for
the 2009 fiscal year. Also in the 2009 fiscal year, the CRA received
almost 3,000 international voluntary disclosures, representing close
to $600 million in previously undisclosed assets.

"Just five months into this fiscal year, the number of last year's
disclosures has already been surpassed.

"We encourage any Canadian who has avoided taxes to come forward
through the CRA's VDP program."

Falciani fled to his parent's house in Nice, France, with the data.
French authorities searched the house at the request of the Swiss and
seized the list of accounts. French prosecutor Eric de Montgolfier
said Falciani explained the importance of the documents to French
authorities. There were 8,000 accounts on the list that belonged to
French citizens, and only two accounts had been declared for tax
purposes.

French officials ultimately gave their citizens an opportunity to pay
up without facing penalty. Half a billion euros were returned.

The French have also proceeded with tax fraud investigations, based on
the information Falciani provided, and they are looking into the
possibility that money in the HSBC accounts originated from criminal
activity.

"Let's be clear here, we would not have had access to the data without
his contribution," De Montgolfier said of Falciani.

Falciani said since he was the source of the information authorities
now have, he is aware he now could be at risk.

British tax authorities recently obtained the list of HSBC accounts
from French authorities, and they are investigating possible tax
evasion by their own citizens. The Italian government has also
received the data.

In a written statement to CBC News, HSBC said the bank "in no way
condones tax evasion and is co-operating with authorities while
protecting the rights of our clients to confidentiality."

'A wink and a nod' Don Coxe, a Canadian investment banker who works in
Chicago, said the Swiss have a history of recruiting clients for
offshore accounts.

"We know that the Swiss banks did do marketing to high-net-worth
people, wealthy people in North America, trying to entice them to take
their money away from banking with local financial institutions, to
bank in Switzerland," he said.

"And that with a wink and a nod, it was indicated, 'Well, this way you
get around your local taxes.'"

The Falciani case is one in a string of tax scandal stories in the
last few years that have shaken up offshore banking industry.

CBC News and the Globe and Mail reported last December that the CRA
probed Royal Bank of Canada Dominion Securities for information on
Canadians with alleged links to offshore accounts in Liechtenstein in
Western Europe for the purpose of hiding money.

In May, that investigation widened to include UBS Bank Canada,
Financi re Banque Nationale Inc. and BMO Nesbitt Burns Inc, which led
to audits of Canadian taxpayers.

The case was sparked by a former Liechtenstein bank employee who stole
four disks of confidential client information and then sold them to
German tax authorities for the equivalent of $7 million US.

HSBC response "HSBC would like to make it clear that HSBC Private Bank
(Suisse) SA and its clients are the victims of a criminal act. The
theft was perpetrated by a former IT employee about three years ago
and involves approximately 15,000 existing clients around the world
who had accounts with the bank in Switzerland before April 2007. HSBC
in no way condones tax evasion and is co-operating with authorities
while protecting the rights of our clients to confidentiality. "

Thanks to Joseph Loiero, CBC News, for this article.

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