Swiss Bank HSBC: World’s 2nd Largest Has Titanic Public Relations Problem.

Posted on February 9, 2015

by Jerry Alatalo

(Comment: The question to consider while reading the following information about recently revealed Swiss banking secrecy is this: “Why has it seemingly become the job of journalists from 45 countries around the world, instead of governments, to investigate the multi-billion dollar, decades-old global tax haven/evasion industry?” Perhaps if governments got serious by offering university law and accounting graduates student loan forgiveness, adequate pay and tools to end the world’s massive tax evasion industry – enabled by the world’s largest accounting and legal firms – the world would be a better place.)

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(Thank you to the International Consortium of Investigate Journalists for the following article. For more information on Swiss Leaks, visit: www.icij.org)

Swiss Leaks lifts the veil on a secretive banking system

Gerard Ryle, Marina Walker, Gérard Davet and Fabrice Lhomme.ICIJ’s Gerard Ryle, left, and Marina Walker Guevara with Le Monde reporters Gérard Davet and Fabrice Lhomme. Photo: Melissa Golden/Le Monde

Secret documents reveal that global banking giant HSBC profited from doing business with arms dealers who channeled mortar bombs to child soldiers in Africa, bag men for Third World dictators, traffickers in blood diamonds and other international outlaws, a new International Consortium of Investigative Journalists investigation has found.

The leaked files, based on the inner workings of HSBC’s Swiss private banking arm, relate to accounts holding more than $100 billion.

“We hope this will help the public understand the perils and the potential downside of so much secrecy,” said Gerard Ryle, the director of ICIJ. “What we are exposing is a world most people never get to see.”

The documents, obtained by ICIJ via the French newspaper Le Monde, show the bank’s dealings with clients engaged in a spectrum of illegal behavior, especially in hiding hundreds of millions of dollars from tax authorities. They also show bank records of famed soccer and tennis players, cyclists, rock stars, Hollywood actors, royalty, politicians, corporate executives and old-wealth families.

Find out how you can support collaborative cross-border journalism and help ICIJ continue its work.

The disclosures shine a light on the intersection of international crime and legitimate business, and they dramatically expand what’s known about potentially illegal or unethical behavior in recent years at HSBC, one of the world’s largest banks.

“The Consortium is at the forefront of exposing global tax avoidance, a problem world leaders recognize as a factor in growing inequality,” said Peter Bale, chief executive of the Center for Public Integrity. “The global reach of the Consortium’s network, the sophistication of its analytical tools and the rigor of its journalism allow it to tackle complex and far-reaching stories of this nature.”

HSBC, which is headquartered in London and has offices in 74 nations and territories on six continents, initially insisted that ICIJ destroy the data. Late last month, after being informed of the full extent of the reporting team’s findings, HSBC gave a final response: “We acknowledge that the compliance culture and standards of due diligence in HSBC’s Swiss private bank, as well as the industry in general, were significantly lower than they are today.”

How the offshore banking industry shelters money and hides secrets has enormous implications for societies across the globe. Academics conservatively estimate that $7.6 trillion is held in overseas tax havens, costing government treasuries at least $200 billion a year.

The secret files analyzed by ICIJ and its media partners — covering accounts up to 2007 associated with more than 100,000 individuals and legal entities from more than 200 nations — are a version of the ones the French government obtained and shared with other governments in 2010, leading to prosecutions or settlements with individuals for tax evasion in several countries.

ICIJ enlisted more than 140 journalists from 45 countries, including reporters from Le Monde, BBC, The Guardian, 60 Minutes, Süddeutsche Zeitung and more than 45 other media organizations.

The reporters found in the nearly 60,000 leaked files the names of current and former politicians from Britain, Russia, Ukraine, Georgia, Kenya, Romania, India, Liechtenstein, Mexico, Tunisia, the Democratic Republic of the Congo, Zimbabwe, Rwanda, Paraguay, Djibouti, Senegal, the Philippines and Algeria, among others.

“The world of offshore finance and secret bank accounts is deliberately complex, driven by an intricate network that crosses multiple jurisdictions. Large-scale cross-border investigations are the only way to investigate this world in depth, and uncover the layers of secrecy,” Ryle said.

“ICIJ’s model of collaborative journalism links reporters around the world to dig deeper and tell these stories in greater detail than ever before.”

ICIJ is a non-profit news organization that provides its services to newsrooms around the world. You can support ICIJ’s work in a number of ways:

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“Big Four” Accounting Firm Whistleblower Speaks Out.

(Cross-posted from The International Consortium of Investigative Journalists on January 16, 2015)

(For more information visit: icij.org)

‘I acted from conviction:’ PwC whistleblower speaks out

Whistleblower Antoine Deltour.

PwC whistleblower Antoine Deltour spoke with French newspaper Libération. Image: Libération   

A former PricewaterhouseCoopers employee has been charged by Luxembourg authorities following the leak of hundreds of confidential tax rulings that revealed large-scale tax avoidance by some of the world’s biggest multinational companies.

The whistleblower, 28-year-old French citizen Antoine Deltour, was indicted in the Grand Duchy on December 12 on multiple charges including theft, violation of trade secrecy, and fraudulent access to data.

On Monday he spoke out in an interview with French newspaper Libération, and revealed that he was motivated by his disillusionment with the tax system.

“Since the start, I have acted by conviction, for my ideas, not because I wanted to be in the media,” he said.

Deltour started as an intern at PwC, and then worked as an auditor from 2008 to 2010 – a job he thought meant “being on the side of the regulator.”

He quit after two years because, he said, he was feeling out of place.

“I progressively discovered the reality of the system is its radicalism: a massive practice of fiscal optimization. I didn’t want to contribute to that,” he told Libération.

“I can’t believe I could be convicted as an example,” he said. “My action is in the natural course of history, initiated by other whistleblowers and NGOs. I never asked for any compensation.”

He said he copied the documents before leaving the firm in 2010 but had no clear idea of what he might do with them.

“I copied training documents but, while I was looking into the PwC database, I found the famous tax rulings,” he said. “Without any particular project in mind, I copied those too because I was dismayed by their content.”

After unsuccessfully reaching out to NGOs, he says he was contacted by a French journalist, who was working on a documentary about tax avoidance for the France 2 TV program Cash Investigation.

The documentary, produced by journalist Edouard Perrin, aired in May 2012 and one month later, PwC submitted a complaint in the Luxembourg court.

In November and December this year the secret Luxembourg tax agreements were again brought to the world’s attention by a cross-border investigation coordinated by ICIJ in 26 countries, with more than 30 media partners. ICIJ’s Luxembourg Leaks project, based on leaked tax rulings, has since prompted widespread political debate and pressure for significant tax reform around the world.

Deltour said he has had no contact with ICIJ.

“In my mind, these documents didn’t have any other goal than being used for the preparation of that [Cash Investigation] program.”

He also pointed out that the ICIJ LuxLeaks investigation had revealed documents from dates after he had left PwC and in relation to the other Big 4 accounting firms, such as KPMG, Ernest & Young and Deloitte.

“I am just one element in a larger movement,” he said.

Deltour added that he regrets the focus on PwC or Luxembourg, since aggressive tax planning practices “on an industrial scale” are widespread and happen in several countries.

“Regulation will always be behind financial engineering, and the disappearance of those fiscal revenues becomes crucial in times of economic turmoil,” he said.

Yet he welcomed the results of the LuxLeaks revelations. “The political repercussions of LuxLeaks are beyond what I had hoped for: there will finally be talk of tax harmonization in Europe.”

ICIJ director Gerard Ryle says Luxembourg’s decision to indict the young man is a threat to transparency and accountability in the jurisdiction and elsewhere.

“ICIJ does not comment on sources. However, ICIJ does believe whistleblowers should be protected, not prosecuted,” he said in a statement.

“Protection of whistleblowers and sources is as important to society as the freedom of the press. Any prosecution against journalists or journalists’ sources has a dangerous chilling effect on the pivotal role these brave individuals play in ensuring the powerful are held accountable.”

Queen Elizabeth Demands ‘My Government’ Abolish Tax Haven Industry.

Posted on June 19, 2014

by Jerry Alatalo

ocean22It’s been around three years since the International Consortium of Investigative Journalists (icij.org) received, then released to the public, hundreds of thousands of bank records supplied by a whistleblower from the British Virgin Islands. The story quickly traveled around the world in the first large and important exposure of a decades old, massive tax evasion industry.  ICIJ has created the world’s first searchable tax haven database for any person interested in researching by person, company, or nation – on the internet at offshoreleaks.icij.org.

After three years no actions have been taken to stop tax evasion on a colossal scale by literally every large transnational corporation, as well as every super-rich family on the planet. A trillion dollars = one million millions, and estimates are that 25-30 trillion dollars have been deposited in offshore tax haven jurisdictions around the Earth. The world’s politicians have, in the approximately three years since ICIJ’s bombshell release, talked a good talk about “corporations and wealthy people must pay their fair share of taxes”, but have intentionally not “walked the walk.”

Nothing has occurred to slow down or stop the world’s tax haven, avoidance, and evasion industry

Queen Elizabeth spoke to the British Parliament in the Brit’s yearly monarchy charade where she gave “my government” suggestions on a variety of issues, but conveniently failed to mention anything about “her government” allowing the City of London financial center to continue being the world’s foremost tax haven hub. The City of London is the #1 financial capitol on Earth, the center of a wheel with spokes that travel to half the tax havens in the world, and in 2014 there has never been more money stashed in tax havens.

The British Crown jurisdiction of the Cayman Islands has more money in its banks than all the banks in New York City and Wall Street. The Cayman Islands is but one of over 70 tax haven jurisdictions in the world. In the U.S. Congress, proposals have come forward which allows repatriation of trillions of dollars – tax-free – to bring the tax-evasion funds of American corporations and wealthy families back in-country, but no effort is made to tackle the tax evasion industry.

According to documentary filmmaker Mark Donne, whose film about the UK’s tax evasion industry “The UK Gold” has received rave reviews, “tax havens have become hardwired into the economic models”, and new laws, written by the same businesses that use tax haven subsidiaries instead of independent accountants, lawyers, and economists, have made it easier to evade taxes. David Cameron is seen and heard “talking tough on tax evasion” but the reality has been the exact opposite.

The City of London, just as Wall Street in the United States Congress, has a tremendously powerful influence on Britain’s democratic structures.

Mr. Donne says that, “the primacy of the City of London and its policy wins and is supreme.”

Changes have been cosmetic and actually strengthened the City of London, the largest unregulated, tax evasion, financial center on Earth, and the actual tax haven jurisdictions which are part of the City of London’s operations represent a 2nd empire – a second branch of foreign policy. Between 40 and 50% of the world’s financial activity runs through the tax haven network, with, as mentioned, tens of trillions of dollars parked offshore.

In America, politicians are essentially silent on this issue, while vocal about government spending and accountability, with frequent calls for reductions in spending on healthcare, education, roads, food security, bridges, and other forms of social-uplift investment/expenditures.

Mark Donne believes that a “seismic change needs to come, but I’m not seeing it anywhere.”

The $multi-trillion tax evasion industry has been quietly facilitated for decades by the world’s largest accounting firms, banks, and legal corporations and continues to operate with impunity. At the same time, thousands die every day of starvation and easily curable disease, poverty afflicts a large percentage of humanity, homeless veterans sleep under bridges in America, wealth inequality has turned democracies into oligarchies, “austerity” measures deteriorate national economies, government tax agency budgets have been slashed, and wars are fought to increase the amount of money tax cheats can stash offshore.

When will politicians, academics, religious leaders, and all concerned citizens around the world finally act to stop the hypocritical white-collar criminals of the tax haven/evasion industry?

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Worldwide Tax Evasion Plunders Democracy Everywhere.

Posted March 12, 2014

by Jerry Alatalo

“Hell is empty, and all the devils are here.”

– William Shakespeare

368-1Considering one’s perceptions about tax evasion will increase readers’ sense of contrast when hearing what Finance and Accounting Professor Prem Sikka has to say. Professor Sikka, with over 45 years of lecturing, study and research on accounting, has the knowledge and shares it here in a powerful, focused, and direct way.

In effect, Mr. Sikka’s lecture is an advanced accounting explanation of how the worldwide tax evasion industry really operates. His description of the so-called Big Four accounting firms as the “pinstripe mafia” hits the proverbial “nail on the head”; he goes on to thoroughly explain a “very lucrative global industry” that is not as many perceive – an anomalous few island paradises having little consequence on the world’s economy and overall conditions – but an extremely consequential industry having locations in major first-world capitals including New York, London, Geneva, Frankfurt and Singapore.

Surrounded by complete secrecy.

The tax evasion industry is subverting democracy. Men and women run for political office, speaking about the need for better health care, education, security, and so on, people vote them into office, then the world’s largest transnational corporations, because of their tax evasion schemes, blow the promise of the elected politicians and citizen’s hopes for “real change this time” completely out of the water.

Professor Sikka points out that there are 2.5 million professionally qualified accountants in the world, of which 330 thousand reside in the United Kingdom; the UK is a nation of accountants. “Financial engineering” is not taught at universities anywhere, but is the first item on the agenda for newly hired, freshly pressed accounting graduates at the Big Four – Ernst and Young, KPMG, Deloitte, and Price Waterhouse Cooper. Financial engineering is the focus of new hires’ initial training workshops, and is all about creating, selling, and implementing off-the-shelf tax avoidance evasion schemes for, and to, high net worth clients.

It is important to note that there is absolutely no difference between tax “avoidance” and tax “evasion”. Perhaps the accounting, legal, and banking firms that facilitate non-payment of taxes have the idea that using the term “avoidance” instead of “evasion” will prevent ordinary citizens’ associating today’s tax cheats with Al Capone, the infamous mob boss who was nearly impossible to put behind bars until his conviction on tax “evasion”.

The Big Four accounting firms

Price Waterhouse Cooper: $31.5 billion income/sales, 169,000 employees, operations in 150 nations, 766 offices

Deloitte: $31.3 billion income/sales, 170,000 employees, operations in 150 nations, 670 offices

Ernst and Young: $24.4 billion income/sales, 152,000 employees, operations in 140 nations, 700 offices

KPMG: $22.7 billion income/sales, 138,000 employees, operations in 150 nations, 770 offices

In addition to tax evasion the Big Four accounting firms – colluding with the largest legal and banking corporations – enable bribery, corruption, drug cartels, and money laundering.

The Big Four has come to control a vast amount of political power and resources. They have a principal role in suggesting and approving international accounting standards of organizations such as the International Accounting Standards Board, as well as other accounting rules groups. Big Four accounting firms send former employees to run national taxing authorities like the Internal Revenue Service in America.

Very little is known about the Big Four as the same tax evasion schemes they sell to customers come to be implemented in their own corporate accounting frameworks. How much do they earn through tax avoidance evasion services? Nobody knows. How much do they earn from sales of tax avoidance evasion schemes? Nobody knows.

“Cost minimization”

Professor Sikka holds the idea that taxes, from the vantage point of everyone paying their fair share, are not a “cost” like raw materials used in the manufacturing process, wages paid to employees, office supplies, etc. He points out that “bending the rules at any cost to increase profits is now seen as an entrepreneurial skill”. He shares some statements by one of the Big Four, “our profitability rests on the ability of our employees to serve clients well”. There is no mention at all about the public interest. The professor recounts a debate he had with a manager from Price Waterhouse Cooper where his debate opponent finally says, “..we create tremendous revenues for the state, and we have very many satisfied clients. Professor, what is your problem?”

The professor responded with, “..that is the language of drug pushers and pimps.”

The United Kingdom could be losing 30-150 billion, the European Union one trillion, and the U.S. Treasury 345-500 billion, maybe more. Developing countries’ revenue losses from tax evasion could be in the range of 500 billion per year – while total foreign aid is around 120 billion dollars.

Some tools to reduce tax havens and tax evasion have been proposed. Among those are legal agreements/treaties with the world’s over 70 tax haven jurisdictions to allow automatic sharing of tax crime related client/account information, in essence ending secrecy and bringing forth total transparency. Tax haven jurisdictions have thus far stalled and dragged their heels by asserting they will not sign any such agreement(s) until all of their competitor tax havens sign on.

Some have suggested sanctions against those tax haven jurisdictions who do not want to play ball.

Other proposals include laws which prevent any entity which has sold tax evasion schemes from entering into public contracts, establishing licensing requirements for tax advisers/consultants (and license revocation if found implementing or selling tax evasion schemes), elimination of limited liability partnerships because partners are damaging society, and disclosure of income made from sales of tax schemes with file availability (as opposed to years and years of litigation).

Individuals and corporations convicted of tax evasion have thus far “evaded” any penalties for the public’s (taxpayers) very real (and very large) litigations costs. Convicted tax cheats should become required to pay full restitution for taxpayers’ legal costs to the last penny, as well as more in punitive fines.

As Professor Sikka points out, tax cheats’ accounting firms have gone so far as to create “cost-benefit analyses” comparing the amounts of tax “savings” to potential fines from getting caught.

Another proposal is for banking regulatory agencies to conduct audits in tax evasion cases instead of the same accounting firms which have “engineered” the tax evasion schemes in the first place. Professor Sikka considers auditing by the Big Four in tax crime cases, instead of by an independent public regulatory body, as one of the biggest frauds of all time.

If you are interested and upset by a still operational, hugely undemocratic, extremely consequential financial industry focused entirely on tax evasion, Professor Sikka delivers all you need to know to begin taking action. Mr. Sikka has over 45 years experience, study, and research in the field of finance/accounting. If you are not interested – even though every year trillions of dollars in revenues are criminally taken from nations and their citizens the world over – please take a few moments to think about family, friends, acquaintances, journalists, local, state, or national representatives, etc. who may want awareness of the explosive information in this lecture.

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(Thank you to Publish What You Pay Norway PWYP Norway @ YouTube)