WORLD’S MOST WANTED PRIVATE BANKING TAX EVASION + MONEY LAUNDERING WHISTLEBLOWER HERVE FALCIANI WAS JUST ARRESTED IN SPAIN – If he is extradited to Switzerland he could face up to 5 years in prison
ABOVE + BELOW Hervé Falciani
Hervé Falciani, the French-Italian former HSBC employee who blew the whistle on HSBC and 130,000 global tax evaders in 2008, has been arrestedin Madrid on Tuesday in response to an arrest warrant issued by Switzerland for breaking the country’s bank secrecy laws.
He lives in France, which rarely extradites its own citizens. But when Spanish authorities learned that he was in town to speak at a conference ominously titled, “When Telling the Truth is Heroic,” they made their move. If he is extradited to Switzerland he could face up to five years in prison.
Falciani worked as a computer technician for HSBC’s Swiss subsidiary. One day in 2008, he left the office with five computer disks containing what would eventually become one of the largest leaks of banking data in history.
According to Swiss authorities, Falciani stole and then attempted to sell a trove of confidential data. Falciani says he was a whistleblower who wanted to expose a “broken” banking system, “which encouraged tax evasion.”
When much of the stolen data was leaked to the press in 2015, it revealed, among other sordid things, that HSBC’s Swiss subsidiary routinely allowed clients to withdraw “bricks of cash,” often in foreign currencies of little use in Switzerland. It also colluded with clients to conceal undeclared “black” accounts from their domestic tax authorities and provided services to international criminals, corrupt businessmen, shady dictators and murky arms dealers.
As Falciani would soon find out, snitching on one of the world’s biggest banks and 130,000 of its richest clients does not make you a popular person in a country famed for its banking secrecy. In 2014 he was indicted in absentia by the Swiss federal government for violating the country’s bank secrecy lawsand for industrial espionage. A year later he was sentenced by Switzerland’s federal court to five years in prison – the “longest sentence ever demanded by the confederation’s public ministry in a case of banking data theft.”
France, Spain, Austria, Belgium, and Argentina began investigations based on the data. But when France reached out to Switzerland for help in a tax evasion case, the Swiss supreme court rejected the request on the grounds that the data was stolen and therefore inadmissible.
Over the last nine years, Falciani has helped Spain’s Ministry of Finance identify Spanish tax evaders on the so-called Falciani List, which enabled the government to recoup some €300 million in unpaid taxes. The tax evaders included members of the Botín family, Spain’s most powerful banking dynasty which allegedly had at least €2 billion stashed in HSBC’s Swiss bank accounts.
In a 2013, hearing Spain’s National High Court rejected a request from the Swiss authorities for Falciani’s extradition arguing that the data Falciana has provided to authorities in France, Spain, Germany, Italy and the United States had uncovered “activities of dubious legality, even constituting criminal offences, which are in no way deserving of legitimate protection.”
Whatever reasons Spanish authorities might have this time around, they had one big one, or rather two: Two pro-independence mid-ranked politicians from Catalonia, Marta Rovira and Anna Gabriel, recently fled to Switzerland to seek refuge from political persecution in Spain. When Spain requested their extradition, Swiss authorities politely declined on grounds that extraditing people for political crimes was against national and international law.
By arresting Falciani, Spain hopes to offer up the biggest bank whistleblower in history in a two-for-one prisoner exchange. It’s a high-stakes gambit where, once again, the Spanish government risks drawing international attention — and opprobrium — for its willingness to do whatever it takes to crush the separatist movement in Catalonia.
Taking hostage a man who is regarded in many quarters as a hero is unlikely to curry favor in other European capitals or bolster the Spanish government’s already tarnished image in the international press. The Rajoy government’s timing could also have been better, coming just months after the European Parliament called for greater protection for whistleblowers like Falciani in its conclusions on the Panama Papers scandal:
EU rules are needed to better protect and support whistle-blowers and their role in revealing serious breaches of the public interest, such as corruption, miscarriages of justice, tax avoidance, lack of protection for food safety or the environment and attacks on social, human or workers’ rights.
In the United States, regulators even pay financial whistleblowers for the compromising information they leak. In March the SEC announced that it had awarded $83 million to three whistleblowers – the largest payout to date under provisions authorized under the 2010 Dodd-Frank legislation. According to the lawyer for the whistleblowers, cited by the Financial Times, the information provided by these whistleblowers had helped the SEC achieve a $415 million settlement with Bank of America.
BACKGROUND: Spain arrests whistleblower in HSBC tax evasion scandal
Spanish authorities temporarily released a whistleblower in a major tax evasion scandal while a judge decides whether to extradite him to Switzerland, where he faces a 5-year prison sentence for economic espionage.
The release on Thursday comes a day after Spanish police arrested Herve Falciani, a French citizen and former HSBC technology employee, as part of a years-long Swiss effort to win his arrest. Falciani was tried in absentia in Switzerland and has not made himself available to Swiss authorities.
A Swiss court convicted Falciani in 2015 on charges of economic espionage for leaking a massive amount of account information that led to a global wave of tax evasion probes. Falciani was also convicted for illegally obtaining data, breach of business confidentiality and of bank secrecy.
In Madrid on Thursday, a National Court judge released Falciani from custody, but confiscated his passport, limited his freedom of movement within Spain and ordered police surveillance on the IT specialist.
For anti-corruption activists Falciani is a crucial whistleblower whose more than 100,000 records on prominent clients of HSBC Private Bank (Suisse) SA led to probes in several countries into the dodging of taxes by wealthy people around the world.
The data, allegedly detailing accounts worth $100 billion, first emerged in press reports in 2008. The former Swiss bank unit employee then released the information to French tax authorities, who later shared it with Spain and other governments.
Falciani moved to Spain and cooperated with prosecutors there in some of the probes. He was arrested in Barcelona in 2012, but at the time Spain’s National Court denied a Swiss request to extradite him on the grounds that breaking secrecy laws was not subject to prosecution in Spain.
Wednesday’s arrest in Madrid came nearly two years after Falciani’s conviction was made final by Swiss courts.
It also coincided with Spain’s efforts to seek extradition from Switzerland of Marta Rovira, a prominent Catalan separatist politician considered key in the Spanish region’s illegal independence bid. Swiss authorities have not ruled yet on whether she should be extradited.
Spain’s Minister of Justice Rafael Catala said the government had no involvement in Falciani’s arrest and that no connection should be made between the two cases.
“These are judicial cases sought in the realm of international cooperation,” Catala told reporters on Thursday. “We shouldn’t see into it more than that.”
Confusion surrounded the origins of the new effort to bring Falciani into custody.
Lawyer Marc Henzelin, who represents Falciani in Switzerland, said that Swiss authorities had sent a letter in mid-March to Spanish counterparts seeking the arrest of Falciani.
But Folco Galli, a spokesman for Switzerland’s Federal Office of Justice, said it was “completely wrong” to suggest that Swiss authorities have been seeking Falciani’s arrest only since March.
He said Falciani has been listed since 2009 as a wanted person for extradition under the Schengen zone’s notification system — first on the basis of an arrest warrant issued by a Swiss prosecutor that year, then based on the 2015 court conviction.
“On March 19, Spanish authorities told us (Swiss authorities) that the search for Mr. Falciani was valid for Spanish territory,” said Galli, adding that he wanted to rectify erroneous media reports on the matter. He declined to say whether such a step was unusual, because cooperation on such cases between states is confidential.
He said that following word of Falciani’s arrest, Swiss authorities have been preparing to make a formal extradition request on Thursday.
Henzelin, the lawyer, noted a “hypothesis” among some, which he could not confirm, that the arrest could be connected to a “sort of deal” between Spain and Switzerland over a transfer of Catalan separatists on Swiss soil who are wanted by Spanish authorities.
“I’m not able to verify that, but frankly if it were the case, I would consider that rather odious,” said Henzelin. “It’s not in the tradition of Swiss justice to do such a kind of bargaining. It seems to me it’s more the habit of Russia and countries like that.”
X.net, a platform of internet activists that cooperated with Falciani in some investigations into corruption and tax evasion, criticized the arrest.
“Whistleblowers of corruption used as exchange currency. What justice is this?” the platform wondered in a tweet.
Spanish defense lawyer Manuel Olle said the country’s National Court had already ruled out Falciani’s extradition in 2013.
“He can’t be tried twice,” Olle said, adding that he believed that the case was politically motivated.
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