It reads like a spy story involving secret Swiss bank accounts and a lone banker who lifts the lid on dubious practices – but Swiss Leaks is the real thing. Kurt Sansone explains the intricacies of this revelation about goings-on at the HSBC.

What is Swiss Leaks?

This is the name given to an investigation by an international group of investigative journalists who worked on a leaked list of bank clients who held accounts with HSBC’s private bank in Switzerland.

What is on the list?

The list contains the names of clients and the amounts they have deposited in HSBC Swiss accounts. The leaks also include conversations and e-mails between bank executives and clients. In these conversations clients are given advice on how to avoid tax in their country.

How did this list become public?

The entire list is not public yet. Only selected names have been released by the Washington-based International Consortium of Investigative Journalists and leading newspapers in the UK and France that have collaborated with the organisation.

Who leaked the list?

It was stolen by Hervé Falciani, a former HSBC employee, in 2008. Falciani is a fugitive from Switzerland where he is wanted for data theft. The Swiss accuse him of wanting to sell the information to banks in Lebanon, an accusation Falciani denies. Falciani insists he is a whistleblower intent on uncovering illegitimate banking practices. He has been shielded by the French authorities.

What did Falciani do with the list?

He first passed on the HSBC list to the French authorities in 2008, which then indicted London-based HSBC for illegal direct marketing to French nationals, money laundering and facilitating tax fraud. The French authorities later shared the data with other countries, including the US.

What interest do countries have in the list?

Tax authorities in different countries have used the list to initiate tax probes on nationals in an attempt to recover evaded taxes.

How did journalists get their hands on the list?

The French newspaper Le Monde obtained the data as well and shared it with the ICIJ. With the help of 45 journalists from different countries, ICIJ has trawled through the list, discovering that the Swiss HSBC Private Bank served a colourful range of worldwide clients, including some involved in arms trafficking, blood diamonds and bribery. Other clients include high profile politicians, leaders, rock stars, and sporting personalities.

There were five amnesties in Malta since 2002

Does this mean all clients on the list did illegal things?

No. ICIJ has explained that holding a foreign account does not necessarily equate to suspicious dealings. There are two issues at stake here: where the money came from – which could be perfectly legitimate – and whether it was declared for tax purposes.

Are Maltese on the list?

Yes. According to the ICIJ there are 71 Malta-based clients. These could be individuals, companies or trust funds based in Malta but not necessarily Maltese. In fact, only 24 hold a Maltese passport. The only Maltese named client by ICIJ is former Enemalta chairman Tancred Tabone, who is charged with corruption in the oil scandal uncovered in 2013. Mr Tabone’s lawyers have said the account was above-board and the Swiss authorities have been instructed to provide all details.

Have these 71 clients benefited from illegal proceeds and avoided taxes?

This is always a possibility. Switzerland’s long-held no-questions-asked banking policy provided a very safe haven for suspect money as did other smaller jurisdictions. However, it is also likely that the money is legitimate and declared for tax purposes. Clients could have declared their money voluntarily or by benefiting from the various amnesties granted by the Maltese authorities over the years.

How many amnesties were granted?

There have been five amnesties since 2002 during which €1.9 billion of previously undeclared assets were regularised. Not all of the money held abroad was brought to Malta. The last scheme closed in November last year and €456 million of undeclared assets were registered.

Why is HSBC in hot water?

The bank has admitted that its Swiss private banking arm adopted dubious practices before 2008. Swiss Leaks revealed how bank officials met clients and advised them to form companies and deposit money in Switzerland to go round the European Savings Directive. HSBC has already faced court action in the US and is under fire in France over practices that helped clients avoid taxes.

What is the European Savings Directive?

These are EU-wide rules that oblige banking and tax authorities to cooperate and share information to prevent tax evasion. The directive was introduced in 2004 but at the time the obligation to share information only applied to individuals not companies. A country could have sought information on ‘Mr X’ but not on ‘X Co. Ltd.’ Banks like HSBC used this loophole to advise clients to set up shell companies with complex multi-layered shareholding structures that made it increasingly difficult for the ultimate beneficiary of the account to be identified. This loophole was effectively closed last year.

Is HSBC the only one to blame?

The Swiss Leaks file concerns HSBC but this does not mean that other banks in Switzerland did not adopt similar methods given the culture of secrecy of the banking sector.

Was Switzerland party to the directive?

Yes, but along with other jurisdictions like Monaco and San Marino, Switzerland was granted a transition period. During this time banks in Switzerland offered clients the option to remain unknown to their home country as long as they paid a gradually increasing withholding tax. The Swiss authorities would then transfer the tax amounts to the respective countries without revealing the clients’ identities.

Did it make sense to leave the money in Switzerland?

Not at first glance. The withholding tax in Switzerland ran up to 35 per cent while registering the assets in Malta would have incurred only a 15 per cent flat tax. However, sources in the financial services sector told this newspaper the reason anybody would have still wanted the money to remain in Switzerland despite the amnesties was probably linked to the dubious provenance of the cash. But they also noted that some clients would have also wanted to keep a diversified investment portfolio that included money held in overseas jurisdictions.

What are the Maltese tax authorities doing?

The Commissioner for Revenue will be writing to the French and Swiss tax authorities, the ICIJ and HSBC to obtain information on the Maltese clients and the $687 million attested to their names. It is only after the names are known that it could be determined whether the money stashed away in HSBC Switzerland was legitimately obtained and declared for tax purposes.