World's mega-rich tax dodge exposed: Meet the HSBC IT bloke at the heart of damning leak

In 2008, HSBC IT exec Hervé Falciani blew the whistle on the huge tax-avoidance maneuvers used by some of the planet's wealthiest people. This week, sensitive documents obtained by the 43-year-old have been published online for the world to see.

Falciani has fled across Europe, swerved extradition requests, and, fearing for his life, hired bodyguards – after he grabbed the financial records of the super-rich, which eventually found their way into the hands of the taxman.

Armed with the leaked files, watchdogs in France, UK, Italy, Belgium, Greece and Spain have spent the past three years tracking down those who squirreled away mountains of cash under the mountains of Switzerland to avoid paying tax at home.

According to the International Consortium of Investigative Journalism, the leaked documents appear to show:

• HSBC Private Bank (Suisse) customers have been accused by the United Nations, in court documents and in the media of having connections to arms trafficking, blood diamonds and bribery.
• The bank reassured its clients that it would not disclose details of accounts to national authorities, even if evidence suggested that the accounts were undeclared to tax authorities in the client’s home country. HSBC employees also discussed with clients a range of measures that would allow them to avoid paying millions in taxes in their home countries. This included holding accounts in the name of offshore companies to avoid European anti-evasion laws.

These allegations all stem from the actions of one pissed-off IT bloke.

Meet Hervé Falciani

Falciani was a systems manager at HSBC Monaco until 2006 when he was transferred to the bank's Geneva office. In Monaco he had installed computers and software designed to detect fraudulent transactions, but he claims he met resistance when he tried to do the same thing at the Swiss subsidiary.

The tech exec dug around in the systems HSBC was running, found evidence of wrongdoing, downloaded 100GB of data proving it, and stashed it in a remote server, he alleges. He took the files to Swiss police in 2006, but says he refused to work with them as they would not guarantee anonymity for him and his family.

"Banks such as HSBC have created a system for making themselves rich at the expense of society, by assisting in tax evasion and money laundering," the Franco-Italian national alleged in a July 2013 interview with German mag Der Spiegel.

"For example, a bank might bring in intermediary companies, sometimes at multiple levels, and make sure business isn't conducted through the bank's own accounts."

In February 2008, Falciani and a fellow employee travelled to Lebanon. Falciani says he was trying to launch a startup that would find moneybags individuals for banks to turn into customers.

In April that year, Swiss police believed he was attempting to illegally sell sensitive financial information to the Lebanese, and by May, Switzerland's Attorney General had started criminal proceedings against Falciani.

Falciani wrote in a deposition in 2013 that he touted the banking records for cash to "create an alert that would get back to the Swiss authorities," to get them to take notice of his protest against tax avoidance.

"HSBC has no record of [Falciani] ever escalating any concerns to his line management, or using the whistleblowing hotline that was in place at the time of the [data] theft," the European banking giant said in a statement, adding that it had measures in place "to ensure that HSBC has a robust anti-money laundering and sanctions compliance programme."

'There were no grounds that could have justified taking the man into custody'

Later in 2008, when the IT bod returned to Switzerland from the Middle East, he claims he contacted European taxmen about the allegedly damning financial records he had obtained.

On December 22 that year, he was questioned by Swiss investigators who also searched his house in Geneva.

That cold December night, after he was quizzed by the cops and allowed to return home for the evening, Falciani packed his family into a rented car and fled for the French border. Once in France, he stayed at his father's house.

"There were no grounds that could have justified taking the man into custody," Switzerland's Office of the Attorney General (OAG) said in a statement explaining how Falciani was allowed to escape.

"His interrogation by the OAG was supposed to have continued on the next day."

On January 20, prosecutors in Nice, under pressure from the Swiss, obtained a search warrant and raided the home of Falciani's parents in France. There, they laid their hands on the trove of data snatched by Falciani from his former employer's servers.

(After looking over the files, HSBC in London was indicted in 2014 by the French authorities on allegations of money laundering and facilitating tax fraud.)

The Swiss demanded the French send back Falciani and all the data they had found at the home, but Nice's chief prosecutor, Eric de Montgolfier, said no.

"We could resist giving the material back to the Swiss because it contained things that seemed to be against France's national interest," said de Montgolfier.

French investigators assembled the leaked records into a country-by-country breakdown of who was allegedly hiding what. By 2010, they claim they had identified $120bn in hidden funds, spread over thousands of account holders, and passed the details to financial watchdogs around the world.

Falciani also helped the French taxmen decode the numbers in the files, appearing disguised and with bodyguards to fend off attempts by the Swiss to extradite him, it's reported.

The Swiss authorities continued to request the extradition of Falciani; meanwhile, he had to live with his personal guards for fear of kidnapping or assassination. In 2012, on the advice of the US government, he sailed from France into Spain, where he thought he would be safer.

On arrival, he was cuffed by the Spanish plod, and held for five and a half months under an arrest warrant. He was released when the Spanish courts granted him conditional freedom, and eventually ruled he should not be extradited to Switzerland because Spain had no Swiss-style bank secrecy laws.

Falciani also agreed to help the Spanish tax authorities, and hopes to have a new identity provided soon.

"I'm not a white knight, but there is something beautiful and exhilarating about establishing the truth. It carries you through the bad times," he told journalists last year.

"I don't have to worry about a retirement that I won't have. I don't have the risk of tomorrow. I can concern myself with something more: we are useful."

That new identity may well come in handy if a guilty verdict is stamped all over his surname: Switzerland has vowed to prosecute him in his absence.

“Sometimes hailed as a hero abroad, the Franco-Italian national is now to answer for his alleged crimes before a Swiss court,” the Swiss OAG declared in December 2014 after charging Falciani with breaking Switzerland's banking secrecy laws. He denies any wrongdoing.

“The Swiss Criminal Procedure Code does not exclude the possibility of holding a court trial of the accused person in absentia,” the OAG added.

HSBC responds to latest leaks

In a statement, the banking giant admitted to The Register that people had been using its secretive accounts for tax avoidance:

In the past, the Swiss private banking industry operated very differently to the way it does today.

Private banks, including HSBC’s Swiss private bank, assumed that responsibility for payment of taxes rested with individual clients, rather than the institutions that banked them. Swiss private banks were typically used by wealthy individuals to manage their wealth in a discreet manner.

Although there are numerous legitimate reasons to have a Swiss bank account, in some cases individuals took advantage of bank secrecy to hold undeclared accounts. This resulted in private banks, including HSBC’s Swiss private bank, having a number of clients that may not have fully met their applicable tax obligations.

We have taken significant steps over the past several years to implement reforms and exit clients who did not meet strict new HSBC standards, including those where we had concerns in relation to tax compliance.

The bank is, as you'd expect, not happy with Falciani. "French authorities originally seized the stolen data from Falciani's parents’ house in France," HSBC added.

"The data was not relinquished by Falciani voluntarily. Since that time, the French authorities have subsequently shared the data with numerous governments around the world.

"HSBC has cooperated and continues to cooperate to the extent that it can with requests for information from governments regarding account holders. However, providing client data to foreign authorities would itself constitute a criminal offence under Swiss law." ®

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