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Sunday, November 29, 2015

HSBC whistleblower given five years’ jail over biggestleak in banking history



Hervé Falciani sentenced in his absence for financial espionage by federal court for exposing wrongdoing at HSBC’s private Swiss bank

 Hervé Falciani


Hervé Falciani has sought refuge in France. Photograph: Denis Balibouse/Reuters



The whistleblower who exposed wrongdoing at HSBC’s Swiss private bank has been sentenced to five years in prison by a Swiss court.

Hervé Falciani, a former IT worker, was convicted in his absence for the biggest leak in banking history. He is currently living in France, where he sought refuge from Swiss justice, and did not attend the trial.

The leak of secret bank account details formed the basis of revelations – by the Guardian, the BBC, Le Monde and other media outlets – which showed that HSBC’s Swiss banking arm turned a blind eye to illegal activities of arms dealers and helped wealthy people evade taxes.

The Guardian view on the HSBC files: a damning dossier

Editorial: The use of Swiss accounts to dodge tax was systematic. The flaky response from the bank and the politicians is anything but

While working on the database of HSBC’s Swiss private bank, Falciani downloaded the details of about 130,000 holders of secret Swiss accounts. The information was handed to French investigators in December 2008 and then circulated to other European governments.

It was used to prosecute tax evaders including Arlette Ricci, the heir to France’s Nina Ricci perfume empire, and to pursue Emilio Botín, the late chairman of Spain’s Santander bank.

Switzerland’s federal prosecutor had requested a record six-year term for Falciani for aggravated industrial espionage, data theft and violation of commercial and banking secrecy. 

It was the longest sentence ever demanded by the confederation’s public ministry in a case of banking data theft. The trial was also the first conducted by the country’s federal criminal court in which the accused had not been present.

The defendant’s lawyers had demanded a reduced sentence, of between two and three years, “compatible with the granting of a reprieve”.

Falciani himself refused to appear in the dock, on the grounds that he would not be allowed a fair trial. He described the process as a “parody of justice”.
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Hired in 2004 to create a client management database for the Swiss private bank, Falciani was given wide-ranging access to sensitive data. One witness said he had brought his own laptop with him, which the company had no control over. He was able to install his own software on it. The laptop’s USB ports, into which memory sticks are inserted, were not blocked.

From October 2006 until he was questioned by police on 22 December 2008, Falciani used his privileged access to download data including bank account numbers, client names, addresses and dates of birth, and sums held in accounts.

Carlo Bulletti, for the prosecution, rejected the notion of Falciani as a whistleblower, saying his actions, including approaches to banks in Lebanon, suggested he had wanted to sell the stolen data.

“The whole construct of the white knight is just a web of lies,” claimed Bulletti.
HSBC’s lawyer, Laurent Moreillon, said that when copying the data, Falciani had given a series of different reasons: that he wanted to “conduct a simple test”, that he was using fictitious data, and that he wanted to test the bank’s security. But Falciani had never alerted anyone inside the bank to security failings.

“Greedy – he was and continues to be,” claimed Moreillon.

Falciani’s lawyer, Marc Henzelin, pointed out that his client was on trial at a time when Switzerland was in the process of dismantling its banking secrecy practices with proposals for new laws that would pave the way for automatic information exchange about offshore accounts held in Switzerland

In fact, Switzerland announced on 4 November that the country’s finance ministry temporarily shelved the plans for reform.
“It is not Falciani who is being judged. It is the court. It is Switzerland,” said Henzelin.

His client had never denied stealing the data, and had worked openly with the French, German, British, Spanish, Indian and Argentinian authorities. 

A French parliamentary report had found that of 2,325 French taxpayers with accounts at HSBC in Switzerland, just three had their affairs in order. Turning to HSBC’s lawyer, Henzelin said: “What damage are you claiming? The fact that your clients should have paid their taxes?”

As a holder of both Italian and French nationality, Falciani cannot be extradited to Switzerland by either of those countries and is therefore unlikely to ever serve his sentence.

HSBC welcomed the ruling, saying: “HSBC has always maintained that Falciani systematically stole clients’ information in order to sell it for his own personal financial gain. The court heard that he was not motivated by whistleblowing intentions and that this was not a victimless crime.”

The investigation showed that HSBC had routinely allowed clients to withdraw bricks of cash, often in foreign currencies of little use in Switzerland; that it aggressively marketed schemes likely to enable wealthy clients to avoid European taxes; that it colluded with some clients to conceal undeclared “black” accounts from their domestic tax authorities; and that it provided accounts to international criminals, corrupt businessmen and other high-risk individuals.

HSBC was fined £28m by the Geneva authorities this year, after investigators concluded that “organisational deficiencies” had allowed money laundering to take place at its Swiss subsidiary.

French magistrates are conducting a criminal investigation into the bank, alleging “complicity in aggravated money laundering and financial fraud”. HSBC has been ordered to post bail of €100m (£70m).




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