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HSBC: a very different relocation, tax haven to muckier tax haven

February 17, 2016   Blog, Enablers and intermediaries

We’ve just written about HSBC’s extensive lobbying effort to water down UK banking reforms by pretending it was planning to throw its toys out of the pram relocate its head office from London to Hong Kong if it didn’t get what it wanted. But inside HSBC, a very real relocation is underway.

Via TJN contacts, this email has been sent out:

“We would like to inform you of a planned change in the place of incorporation and headquarters of HSBC Bank Middle East Limited (HBME).

. . . HBME intends to move its place of incorporation and head office to the Dubai International Financial Centre (DIFC), following which it will become lead regulated by the Dubai Financial Services Authority (the Migration).”

This has been flagged previously, but it seems things are now moving.

Anyone who thinks this relocation is going to contribute to the financial or ethical health of this scandal-happy global bank needs to consider this, about the “twisted Switzerland of the Middle East”. 

HSBC opts to stay in ‘competitive’ London. (It was never going to leave anyway)

HSBCFrom the Fools’ Gold blog, yesterday:

There’s been a lot of talk for a long time about a threat from globe-trotting HSBC to move its headquarters from London to Hong Kong. It seems there’s been a resolution of the question for now, of sorts. As Bloomberg puts it:

“HSBC Holdings Plc recommitted its future to London, ending 10 months of deliberations over whether to move its headquarters, after securing concessions from the U.K. government on regulation and taxes. The shares rose.”

That’s the Competitiveness Agenda at work, right there. Shower goodies on mobile capital and its owners for fear that they’ll flee elsewhere. More specifically, via Reuters:

Actor Greg Wise takes on the UK tax avoidance industry in Dispatches tonight


Actor Greg Wise was so disgusted by the evidence of how HSBC bank  helped its clients evade taxes through its Swiss subsidiary, he got angry, very angry indeed.  So he turned undercover investigator to expose the disgraceful lack of ethics of the tax dodging industry.  As one of the tax dodging adviser explains in the programme: “tax, as I say to all clients, is voluntary.  You can choose how much you want to pay.  Its pretty much down to your moral barometer.”

Greg brings some levity to a subject — and the video will boil your blood.  Watch the programme on Channel 4 at 8 p.m. on Monday 8th February – view the trailer here

Read this to share Greg’s anger about HSBC and the world’s favourite drug cartel.


Venezuela’s rampant corruption

oil curseThis guest blog from Alek Boyd explores what happens when oil, offshore financial secrecy and populist politics combine to corrupt the hopes of an entire nation.

When the International Consortium of Investigative Journalists published leaked HSBC data provided by Hervé Falciani in February this year, something rather odd became public: Venezuela had the third largest amount of money ($14.8B) held in HSBC accounts.

When Banca Privada D’Andorra (BPA) was singled out, in March this year, by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) as “a foreign financial institution of primary money laundering concern” Venezuela popped again: FinCEN claims “BPA processed approximately $2 billion in transactions in relation to a money laundering scheme in which Petróleos de Venezuela (PDVSA) participated.

When the FIFA corruption scandal broke in May, former president of Venezuelan Football Federation, Rafael Esquivel, was among the arrested.

Also in May, the Wall Street Journal reported that U.S. authorities were:

“investigating several high-ranking Venezuelan officials, including the president of the country’s congress (Diosdado Cabello), on suspicion that they have turned the country into a global hub for cocaine trafficking and money laundering.

More recently, the U.S. Drug Enforcement Administration arrested, during a sting operation in Haiti, Efrain Antonio Campo Flores and Franqui Francisco Flores de Freitas for “conspiring to import cocaine into the United States.” In case the names fail to ring bells, these are a nephew, and a godson, of Venezuela’s current First Lady, Cilia Flores.

Then, Reuters informed that U.S. authorities were “preparing to unveil drug trafficking charges against the head of Venezuela’s National Guard…” adding “Nestor Reverol, the former head of Venezuela’s anti-narcotics agency and a long-time ally of late socialist leader Hugo Chavez, is named in a sealed indictment pending in federal court in Brooklyn, New York”.

The above may come as a surprise to some. In the last few years, Venezuela increased media profile had been largely focused on Hugo Chavez’s charisma and his poverty alleviation programs. Alas the gargantuan corruption that his administration brought about, of an unprecedented scale even in a country as corrupt as ours, is hardly played in the world’s media.

While anti corruption advocates the world over seem incensed, for instance, by Sepp Blatter’s shenanigans, his actions and those of his associates are children’s play next to what has happened in Venezuela since Chavez came to power. Venezuela has become so corrupt that not even Russians are putting up with it.

It is not a coincidence that Venezuelans keep popping up in about every major scandal around the world. Locally, a totally subservient Supreme Court, whose judges have no qualms in publicly siding with the chavista revolution, has created an environment where impunity is the norm.

Given the phenomenal amount of income that this oil rich nation has gotten in the last 15 years, it is not a stretch to conclude that Venezuela sits, comfortably, as the undisputed leader in corruption in Latin America.

Most regrettably, Venezuelan black money is welcomed by the pinstripe brigade all around the world. No questions about origin are ever asked. For instance, a rather small investment firm in London was behind the acquisition of the largest newspaper conglomerate in Venezuela. Ultimate controlling parties involved were, almost certainly, politically exposed persons whose wealth lack any vestige of legitimacy. Yet, the illegal deal proceeded without glitch.

Another London-based agent involved in Venezuela-related scams made news not long ago, though when I informed and alerted authorities no action was taken.

Corruption illegally deprives countries of much needed resources to develop. It is about time anti corruption advocates started analyzing what goes on in Venezuela.

@alekboyd has been researching and exposing corruption in his native Venezuela since 2002.


Three Tax Whistleblowers Who Changed The Game

Spot the tax haven (source: Senate Permanent Sub-Committee on Investigations)

Spot the tax haven (source: Senate Permanent Sub-Committee on Investigations)

The following blog was first published as part of a longer article in the Whistleblower Edition of Tax Justice Focus (available here).  The article was authored by Professor William Byrnes, Associate Dean (Special Projects) Texas A&M University Law.

A lawsuit filed by Daniel Schlicksup, a lesser acclaimed whistleblower, may end up costing Caterpillar billions of dollars and a criminal investigation because of its alleged non tax compliant transfer pricing policy. Mr. Schlicksup served as a global tax strategy manager for Caterpillar from 2005 to 2008. During his time at Caterpillar, Daniel Schlicksup assisted Caterpillar establish its European tax department, managed the corporate human resources division, and in March 2005, began working as a Global Tax Strategy Manager.

Mr. Schlicksup grew concerned that the substance of Caterpillar’s operating structure did not coincide with Caterpillar’s reported structure for tax purposes. Mr. Schlicksup informed several Caterpillar executives of his concern, including its Director of Global Tax and Trade, and thereafter its Chief Financial Officer and Caterpillar’s General Counsel. Mr. Schlicksup even filed a complaint with Caterpillar’s Ethics Office, which closed the matter. Mr. Schlicksup’s received employee assessments that he considered prejudiced by his attempts to call attention to the potential tax risk.

Eventually, in July of 2010 Mr. Schlicksup filed a whistleblower retaliation suit under Illinois law against Caterpillar, which Caterpillar settled in 2012 for an undisclosed amount. The Illinois Whistleblower Act prohibits an employer from retaliating against an employee “for refusing to participate in an activity that would result in a violation of a State or federal law, rule, or regulation. . . .” 740 ILCS 174/20. Under the Illinois Whistleblower Act, an action can be retaliatory “if the act or omission would be materially adverse to a reasonable employee and is because of the employee disclosing or attempting to disclose public corruption or wrongdoing.” 740 ILCS 174/20.1.

Mr. Schlicksup’s whistleblower lawsuit led to the April 1, 2014 hearing of the Senate Permanent Subcommittee on Investigations “Caterpillar’s Offshore Tax Strategy”. In its February 17, 2015 10-K Annual Report, Caterpillar revealed that it is now the subject of a subpoena of a grand jury criminally investigating its transfer pricing practices, and an SEC investigation:

On January 8, 2015, the Company received a grand jury subpoena from the U.S. District Court for the Central District of Illinois. The subpoena requests documents and information from the Company relating to, among other things, financial information concerning U.S. and non-U.S. Caterpillar subsidiaries (including undistributed profits of non-U.S. subsidiaries and the movement of cash among U.S. and non-U.S. subsidiaries). …

On September 12, 2014, the SEC notified the Company that it was conducting an informal investigation relating to Caterpillar SARL and related structures. …

Hervé Falciani obtained super whistleblower status for downloading from HSBC’s Switzerland bank in 2008 substantial account details of 106,000 high net wealth customers with over $100 billion is assets from 203 countries, and then soliciting tax departments with an emailed that the Wall Street Journal states included the subject line: “Tax evasion: client list available”. The theft of the bank data, reported at over 100 Gigabytes, has led to Mr. Falciani’s arrest in several countries, including Switzerland, France and Spain. But he has been spared extradition to Switzerland because of the French and Spanish courts found a public benefit from exposing HSBC’s widespread conspiracy to commit or at least enable tax fraud. Mr. Falciani has stated that he did not become a whistle blower for reasons of potential compensation. He has established a foundation to promote the protection of whistleblowers.

The most famous tax whistleblower is ultimately UBS’ Bradley Birkenfeld because he specifically blew the lid off of UBS’ policy to assist U.S. taxpayers to evade tax in order to take advantage of the 2006 U.S. Whistleblower Law that allows compensation of:

“at least 15 percent but not more than 30 percent of the collected proceeds (including penalties, interest, additions to tax, and additional amounts) resulting from the action (including any related actions) or from any settlement in response to such action. The determination of the amount of such award by the Whistleblower Office shall depend upon the extent to which the individual substantially contributed to such action.”

Mr. Birkenfeld for a number of years willingly participated in the conspiracy of tax evasion with his clients, including most famously the California real estate billionaire Igor Olenicoff whom he brought into UBS from his previous employer. Regardless, because his cooperation indisputably led to the prosecution of UBS for conspiring to hide $20 billion of assets of 20,000 US taxable persons, in 2012 upon his release from prison (for his guilty plea to one count of tax evasion), the IRS awarded $104 million in whistleblower compensation to Mr. Birkenfeld.



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