Falciani files

Tax-fraud whistleblower tells Spanish court of Swiss bank’s “scandalous” acts

Former IT expert at HSBC collaborated with authorities without asking for compensation Spanish prosecutor against his extradition to Switzerland

Hervé Falcianiappears before a High Court judge for extradition proceedings in San Fernando de Henares, near Madrid.
Hervé Falcianiappears before a High Court judge for extradition proceedings in San Fernando de Henares, near Madrid.POOL (REUTERS)

Former HSBC Private Bank computer expert Hervé Falciani, who in December 2008 stole information on the accounts of 130,000 clients of the Swiss bank and then passed them to the French tax and judicial authorities, said Monday his motivation for doing so was because of the “scandalous actions” they performed in avoiding taxes.

Falciani was speaking at an extradition hearing held at the Spanish High Court in Madrid. The Swiss authorities want to prosecute Falciani for breaching the country’s bank secrecy law, which is not a criminal offense in Spain, where Falciani has been held since July of last year. The Spanish prosecutor’s office is opposed to extradition.

Falciani was detained by Spanish immigration authorities when he arrived in Barcelona by boat at the start of July of last year after they were notified of an international order for his arrest issued by the authorities in Bern. He was subsequently freed on bail but ordered to remain in Spanish territory.

Falciani presented himself through the three-and-a-half hours the hearing lasted as someone who had collaborated with the justice system, both that of France and other countries such as Spain, which also had access to the database he stole.

He said he obtained the record of clients from other employees at HSBC Private and swore that “absolutely no one else" had seen the information, other than judicial authorities. Falciani said that when he found out how the bank managed the information to facilitate tax fraud, he proposed a new system to the bank’s management, which was rejected.

After sending the information to the French authorities, Falciani travelled to Beirut. Bank Audi, a Lebanese unit of HSBC, warned of breaches to HSBC’s information protection system

HSBC is a tax haven in its own right, without the need for offshore facilities"

Falciani said he initially offered to hand over the information to the Swiss authorities, who rejected the offer as the former HSBC employee wanted to testify as an anonymous witness. After visiting Lebanon, Falciani stopped working for HSBC on December 20, 2008 and was subsequently arrested by the Swiss authorities.

After being released, he left for France, where he was detained in January 2009. Falciani offered to pass on the information he had obtained to the prosecutor in Nice, Éric de Montgolfier. After a legal battle with the Swiss authorities, France sent a copy of the files Falciani had handed over to Switzerland and began examining them. The former HSBC employee helped the French authorities decipher the files.

In representation of the French public prosecutor’s office, Montgolfier described the motives behind Falciani’s decision to take such a huge amount of information. “I tried to understand why someone responsible for the security of a bank would take such a risk,” he said. “He told me that he had proposed procedures to the bank that were rejected because these procedures involved a great deal of transparency. He added that he had the sensation that certain banks’ acceptance of tax fraud was one of the causes of the global economic crisis.”

Montgolfier said at no point did Falciani ask for any form of economic compensation for collaborating with the French authorities.

Spanish prosecutor, Dolores Delgado, rejected the extradition of Falciani to Switzerland, because of the absence of a dual criminality principle, that is, when something is a crime in two countries. “We cannot punish those, who on seeing criminal behavior where they work, expose and bring it to the attention of the authorities,” she said.

Delgado said she had garnered from the press that the extent of the tax fraud exposed by Falciani amounted to 2.5 percent of the GDP of the euro zone, some 300 billion euros. “This represents a systematic violation of the fundamental rights of the public; making off with funds that should have been devoted to the public good. When someone collaborates they should not be prosecuted.”

The Spanish prosecutor also noted that HSBC did not initially take action against Falciani, even when alerted to security breaches by its Beirut operations, and only decided to do so in March 2009 when their former employee began to collaborate with the French authorities. “HSBC is a bank that is a tax haven in its own right, without the need for offshore facilities,” Delgado said.

During the hearing, Falciani also made a call for greater banking transparency and said he remained willing to collaborate with all of the European judicial authorities, particularly those of Switzerland and Luxembourg.

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