From SwissInfo

Germany interested in buying stolen data

swissinfo.ch and agencies
Feb 1, 2010 - 15:02


Germany has indicated that it is likely to buy stolen data on 1,500 possible tax evaders with money hidden in Swiss bank accounts.

A spokesman for the German finance ministry said on Monday that the government would “do everything it can to stop tax evasion”.

He said the authorities were currently seeking to clarify legal issues surrounding the case.

German Chancellor Angela Merkel also said that Germany should do everything possible to obtain data on tax cheats.

The German finance minister, Wolfgang Schäuble, telephoned his Swiss counterpart, Hans-Rudolf Merz on Monday to inform him officially that authorities in one of the German states had been offered the chance to buy bank client data – news that had been carried widely in the media on Sunday.

He told Merz that the government was deciding whether to take up the offer, a press release from the Swiss finance ministry reported.

The two ministers noted that Germany and Switzerland had different legal positions in such cases. Merz said the use of stolen data “constitutes a breach of the privacy of the clients concerned”, and that purchase of such data is forbidden under Swiss law.

He added that Switzerland would not provide any administrative assistance on the basis of stolen data, but was ready to increase tax cooperation with Germany based on a revised double taxation agreement.

In another twist to the tale, Hervé Falciani, the former employee of the HSBC bank in Geneva who passed stolen data to the French tax authorities at the end of last year, denied a report in Monday’s edition of the Financial Times Deutschland implicating him in this latest tax data affair.

Here the newest twist concerning the hunt for hidden Swiss bank accounts.

Someone (it is not known yet, who) offered a CD with stolen bank data to the German government. The CD supposedly contains information about 1500 bank accounts of Germans who are said to have deposited money in a Swiss bank without declaring it to the German tax authorities. The thief, presumably someone who worked in that Swiss bank (we don't know yet, which bank it is) as an employee in the past, wants EUR 2.5M for his CD containing the stolen bank data. As a proof of the quality of his data, he offered five records to the German government for free, and each of these five records indeed seems to have pointed to undeclared money.

The issue is that the German government is committing a crime (both according to Swiss and to German law) when they cooperate with and financially reward a thief. Yet, the seduction seems to be too great, and as of this evening, it seems that the German government decided to go along with the proposed deal.

They did the same two years ago, when they paid EUR 5M for another CD containing records of a bank located in Liechtenstein. As a result, they meanwhile recuperated EUR 180M in taxes. Thus, it was a good (albeit illegal) deal ... but seemingly, issues of legality only apply to individuals and to smaller amounts of money, not to governments and bigger fortunes.

The German government expects to recuperate another EUR 100M using the data from the new CD.

The Swiss government tried unsuccessfully to dissuade the Germans from buying the data. They claimed that they are willing to cooperate with the Germans in accordance with the new bilateral tax treaty.

Yet, they also informed the Germans that they will not cooperate on information that the Germans obtained through the stolen data, and it will be up to the Germans to prove in every case that the information they have is not coming from illegal sources. If they cannot prove this, Switzerland won't be cooperating.

From SwissInfo

Germany tempted by stolen bank data

Julia Slater, swissinfo.ch with input from Paola Carega, Berlin
Feb 1, 2010 - 18:02


To buy or not to buy? The German authorities appear tempted by the offer by an unknown informant to sell them stolen bank client data on possible tax evaders.

Chancellor Angela Merkel said on Monday Germany should do everything in its power to obtain data to fight tax evasion, adding that every reasonable person knows that tax evasion needs to be investigated. “If the data is relevant, we must get possession of it.”

However, she said that the first thing to do was to conduct talks with the countries involved, in order to smooth the way.

The informant has offered to sell data on some 1,500 bank clients. He – or she – is asking for 2.5 million euros (SFr 3.7 million) for the information.

On the basis of information on five clients already supplied as proof of the informant’s claims, investigators estimate that if they purchase all the data, the authorities could net about 100 million euros.

Since the report by the Frankfurter Allgemeine Zeitung appeared late on Friday, the issue has been hotly debated in both Germany and Switzerland.

A spokesman for the German finance ministry said the authorities were currently seeking to clarify legal issues surrounding the case.

He said the government would follow the same guidelines as in a similar case two years ago, when the German authorities paid for data on taxpayers who had hidden money in Lichtenstein.


Phone call

The German finance minister, Wolfgang Schäuble, telephoned his Swiss counterpart, Hans-Rudolf Merz on Monday to inform him officially that authorities the German state of North Rhine-Westphalia had been offered the chance to buy bank client data.

He told Merz that the government was deciding whether to take up the offer, a press release from the Swiss finance ministry reported.

The two ministers noted that Germany and Switzerland had different legal positions in such cases. Merz said the use of stolen data “constitutes a breach of the privacy of the clients concerned”, and that purchase of such data is forbidden under Swiss law.

He added that Switzerland would not provide any administrative assistance on the basis of stolen data, but was ready to increase tax cooperation with Germany based on a revised double taxation agreement.


Chasing up tax cheats

Two German opposition parties, the Social Democrats and the Greens, have come out clearly in favour of buying the data.

Sigmar Gabriel, chairman of the centre left Social Democrats, described it as "scandalous" that people should be prosecuted for the least parking violation, while those who have hidden up to 200 million euros in taxes are allowed to get away with it.

Green party leader Renate Künast said that chasing up tax cheats is to the benefit of everyone.

Both parties interpret the hesitations of the two parties of the government coalition, the so-called Union and the Free Democratic Party (FDP), as being based on concern for their own voters, since they are parties which tend to attract the wealthy.


"Theft is theft"

The liberal FDP is divided over the issue. The party's Volker Wissing, chairman of the parliamentary finance commission, has spoken in favour of buying the data, although he wants to be sure that there is no legal obstacle.

However, Otto Fricke, the party’s parliamentary affairs manager took the opposite line: "The old rule holds true: no deals with criminals”.

So far Merkel's own grouping, the Union, (made up of the Christian Democratic Union and the Christian Social Union of Bavaria) has come out largely against the purchase. Even so, the finance minister of Lower Saxony, Hartmut Möllring of the CDU, told German radio that the state was bound to follow up information about tax evaders.

But the leader of the Union’s parliamentary faction, Volker Kauder, told the Süddeutsche Zeitung newspaper that “theft is theft”, and the state should not demean itself to do business with thieves.

For his part, Hans Michelbach of the CSU said the state should try to obtain the data legally, with the aid of the Swiss authorities.


Swiss reaction

Swiss President Doris Leuthard, who is also the country’s economics minister, said on Sunday that she found it hard to think that a “state based on the rule of law should use illegal data”.

Both the Swiss Bankers Association (SBA) and the Swiss Private Bankers’ Association (SPBA) have come out strongly against any German decision to buy the data, describing such a move as “handling stolen goods”.

Both organisations want the banks to deduct tax at source. This would preserve bank secrecy while removing the incentive to steal bank data.

The SBA has warned that if the German authorities decide to buy the data, this could be counter-productive in view of upcoming negotiations about a revised double-taxation agreement.

In the final resort it is up to the finance minister of North Rhine-Westphalia to decide what to do, in discussion with the German federal finance ministry.

IIRC, in a similar situation, the US tax authorities offered some sort of amnesty with less draconian consequences to Americans with secret Swiss bank accounts on which tax should have been paid, but wasn't.

Using existence of illegal data to encourage villains to confess is perhaps less of an attack on civil liberties than actually producing the evidence in court. It skirts unethical conduct rather than plunging right into it.

The people who secrete this money in Switzerland can presumably afford the best tax and criminal lawyers. Prosecutions would probably drag on for decades.

The real objective is to discourage people from avoiding tax that they should have paid by showing them that the system has risks, not putting millions of dollars into lawyers' pockets.

Besides these considerations, there is a fundamental problem because most countries consider tax evasion a crime but Switzerland (if i am informed correctly) doesn't consider it as such as long as it is committed elsewhere. At least until recently. The US were always a bit of an exception inasmuch as the Swiss seemed suitably scared of them.

Thus, all the Germans have to do is declare it legal for them to buy such data in Germany and be done with it.

__________________
Unless otherwise specified, I am posting as a regular poster. When I will act as a mod, I'll make sure you're in no doubt.

Originally Posted by Gilles de Rais

Thus, all the Germans have to do is declare it legal for them to buy such data in Germany and be done with it.

That is precisely what the German government did yesterday. There are two problems with this:

1. Many Germans don't buy that argument either, i.e., there are many critical voices also in the German press, and the government is losing credibility with a sizable segment of their own population by assuming this position.
2. The data themselves are frequently not sufficient to successfully prosecute a tax evader. In the case of Liechtenstein, Germany was able to subsequently put so much pressure on Liechtenstein that the Prince of Liechtenstein eventually gave in and promised to cooperate with the German authorities. Switzerland on the other hand said clearly that it won't cooperate in cases where the German government obtained information in a way that Switzerland considers illegal, i.e., the burden of proof will be on the Germans that the cases they want Switzerland to help them prosecute were not based on data obtained illegally. Evidently, the Germans will then apply pressure to convince Switzerland that they have no choice but to cooperate. Whether or not that strategy is successful remains to be seen.

Applying political/economic pressure is a rather delicate game of chess that can backfire.

A little pressure may be useful, because if the advantages of cooperation can be retained by making little compromises, Switzerland will consider it to their advantage to make these compromises for the benefit of ensuring continued cooperation.

On the other hand, if the Swiss recognize at some point in time that little compromises won't get them anywhere, and in fact, will only cause more pressure from more trading partners to be applied to squeeze out yet more concessions, they may decide that the price of cooperation has become too high and that it is in their best interest to stop cooperating altogether.

This is what happened at the onset of WWII. Hitler sent an emissary to Berne, telling the Swiss government that they had two choices. They could join the Reich now, in which case, Germany would treat them as friends, and they would have a bright and prosperous future with lots of trade advantages. The only (small) price they would have to pay is to give up their sovereignty. Alternatively, Switzerland would be isolated; they would be poor; and Germany would invade them anyway, making them lose their sovereignty, but in that case, Germany would treat them as enemies, and they would be miserable.

Germany was too sure of itself; it applied too much pressure; and so, the Swiss said NO. No German soldier would set foot on Swiss soil. The price of cooperation was set too high, and the Swiss decided that it was in their best interest to stop cooperating altogether.

In due course, the Germans found out that they could get small concessions from the Swiss in return for small favors, and some level of cooperation resumed albeit on a small scale. The Swiss allowed German weapons and even soldiers to cross through Switzerland between Germany and Italy by rail in locked and sealed compartments in return for the delivery of coal for heating Swiss houses.

From SwissInfo

Germany "to buy stolen bank data"

swissinfo.ch and agencies
Feb 2, 2010 - 13:02


German Finance Minister Wolfgang Schäuble reportedly said on Tuesday the country would buy customer data stolen from Swiss banks.

“In principle, the decision has been made,” Schäuble is quoted as telling Germany’s Augsburger Allgemeine newspaper.

A German newspaper last Friday reported that an informant offered to sell data on 1,500 possible tax evaders to the German government for €2.5 million (SFr3.68 million).

In his comments, Schäuble said the case was similar to data on customers of Liechtenstein banks Germany bought two years ago.

“We therefore could not decide otherwise,” he said.

Schäuble pointed out that no German court had so far prohibited the country’s tax authorities from using the Liechtenstein data to pursue tax evaders.

Switzerland has in recent months come under pressure by its neighbours, including France and Italy, as well as the United States to crack down on tax dodgers and abolish its traditional banking secrecy.

From SwissInfo

Berlin bank data attack threatens Switzerland

Matthew Allen
swissinfo.ch
Feb 2, 2010 - 16:02



Swiss Finance Minister Hans-Rudolf Merz points out his views to Merkel (Keystone)


Germany has confirmed that it intends to defy protests from Bern by paying for stolen Swiss bank data to help track down domestic tax evaders.

he latest diplomatic spat with another country places Swiss banking secrecy under even greater pressure and has left observers wondering if Switzerland will flinch first under the latest assault.

Just when Switzerland thought they had seen the back of one troublesome German finance minister (Peer Steinbrück), his successor on Tuesday confirmed Chancellor Angela Merkel’s earlier comments that a price may be paid to obtain stolen Swiss bank data.

“In principle, the decision has already been taken,” Wolfgang Schäuble told the Augsburger Allgemeine newspaper.

The revelation comes as another blow to Switzerland, which appears to be fighting a one-sided battle, lined up against the might of the G20 group of the most powerful nations in the world and the Organisation for Co-operation and Development (OECD).

France is already in possession of data stolen from HSBC’s private banking arm in Geneva that they will use to track down tax evaders despite Swiss protests. And Germany has a track record of seeing its threats through to the end.


Shot in foot

Two years ago, Germany paid a substantial sum for illegally obtained information from a Liechtenstein bank. The move netted some high profile tax evaders and forced a concession from Liechtenstein to amend its ways in future.

But Switzerland should not back down quite so easily, according to Arturo Bris, a professor of finance, law and economics at Lausanne’s IMD international business school.

Bris believes that Germany has “shot itself in the foot” after arguing for so long that Switzerland’s banking system encouraged criminal activity. By conspiring with criminals itself, Germany has now lost the validity of its argument and could be successfully challenged by Switzerland in its own courts, according to Bris.

“Thanks to the comments by Chancellor Merkel [and now Schäuble], the situation looks brighter in Switzerland than it did two weeks ago,” he told swissinfo.ch. “ I do not see any advantage in this illegal act which will surely backfire on Germany.”

“Switzerland should remain strong and put more effort into explaining that the problem lies not with its secrecy laws, but with criminals in other countries. The failure lies with other countries failing to prosecute criminals inside their own borders,” he added.


Red-handed and red-faced

Putting the latest German incident into isolation, Bris may have a valid argument. But Switzerland is fighting attacks against its system of banking secrecy from all sides.

Last year, Switzerland was forced to renegotiate a host of double taxation treaties with other countries to remove itself from an OECD “grey list” of uncooperative tax havens.

The Swiss government then had to strike a deal with the United States to hand over information on thousands of UBS clients after the bank was caught red-handed in a tax evasion probe. A Swiss court ruling that at least part of the deal was illegal may leave a red-faced government having to go back to the US authorities asking to re-negotiate.

If Germany goes ahead with its threat to use the stolen Swiss data to hunt down its own tax evaders, it could create a lucrative market for other disaffected bank staff to follow suit in the hope of legal protection and a windfall pay day.

Swiss banks already operate very tight levels of security to protect client data, according to John Ederer, Deputy Head of Forensic - a unit that advises companies on white collar crime risks - at KPMG Switzerland.


Security strategy

“Undoubtedly the rules of the game have changed in the last few years and people are becoming more aggressive. Technology is constantly updating, but it is very often the most basic controls that prove the most effective,” he told swissinfo.ch.

For example, banks routinely segregate different aspects of client information into separate servers and carefully restrict access while monitoring staff activities. Staff are also restricted on what they can print and the use of USB memory sticks is routinely forbidden.

However, any security system is only as strong as its weakest link, according to Ederer.

“The principle weakness of any environment is the human element. If you have one rotten apple in a barrel full of perfect apples, that could compromise the whole system,” he said.

“The strongest human element controls are a positive ethical environment, effective training, codes of conduct, good direction from senior management and leading by example.”

Originally Posted by Francois Cellier

Mr. Merz: Don't you know that it is considered impolite to point your naked finger at a dressed lady?