Who is Hervé Falciani?
A former employee of Swiss bank HSBC (HBC), the 41-year-old Falciani has been compared to NSA leaker Edward Snowden; in 2008 Falciani walked out of the bank’s Geneva offices with five CD-ROMs worth of data containing account details for some 24,000 clients. He eventually turned the information over to authorities and the resulting investigations turned up hundreds of cases of tax evasion across Europe, upending the shadowy Swiss private banking system. Falciani found himself a fugitive from justice in Switzerland for violating that country’s securities laws, and the Monaco native is currently living in France under the protection of the government.
In banking circles, Falciani is generally considered to be one of the most dangerous industry whistleblowers in history. Many bankers were initially worried the data he released in 2008 would spell doom for the Swiss banking system.
“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,” Falciani told German news magazine Der Spiegel in July.
But, five years on, have his actions really had a major impact? The answer is decidedly mixed.
European tax investigations? Yes, some European tax scofflaws have been brought to justice. Authorities in France, Spain and the U.K. have used the data Falciani released to collect some $1.34 billion in back taxes from individuals with hidden HSBC accounts, according to Bloomberg. In particular, Emilio Botin, the chairman of Spain’s Banco Santander, was served with a $273 million bill for back taxes in his home country, and British developer Michael Shanly had to pay $751 million in back taxes and penalties for his offshore holdings. Just last week, Belgian authorities raided the homes of about 20 clients of HSBC Private Bank in Brussels and Antwerp on tax charges related to the HSBC scandal.
U.S. fines? Yes, a U.S. Senate investigation in 2012 found that errors by HSBC allowed known terrorists and drug cartel agents to access the U.S. financial system illegally. The bank was forced to pay a $1.92 billion settlement on the charges, but most of the case was in fact focused on the bank’s errors in Mexico and the U.S., not Europe. Falciani’s data played only a small part in the prosecution.
Crippling of the private banking industry? Not really. Many bankers were initially worried that Falciani’s revelations would cause wealthy Swiss banking clients to take their business elsewhere – and to some extent they have – but the Swiss banks are still up and running and many doubt the Falciani files contain any more damaging evidence. “Maybe the list has information that’s too old or not reliable,” Olivier Longchamp, an analyst at Berne Declaration, a Swiss nonprofit that monitors banking secrecy and tax avoidance, told Bloomberg Businessweek, “or maybe it’s mostly ordinary small accounts.” Longchamp says the list “has been used mainly as a scarecrow” to deter potential tax cheats from trying to hide money in Switzerland.
Altruism rules? It’s easy to view Falciani’s actions as one man’s noble attempt to bring justice to a banking system run amok, but his real motivations may have been more practical: cash. Although he still denies it, the German government has admitted to paying Falciani more than $5 million for data that it later used to track down some 10,000 Germans that had collectively hid some $650 million in Swiss bank accounts.
Life on the run? No. Unlike Snowden, Falciani landed in a pretty comfortable place after his whistleblowing actions. After a Spanish judge overturned his initial extradition order, he settled down in France, where he works as a development engineer with research institute INRIA. And his expertise in the ways of international tax evasion are, not surprisingly, still in high demand. After all, cash-strapped European governments are rarely opposed to tracking down missing tax revenue.
And Falciani claims that there are still more revelations to come.
"So far not even 1 percent of the information I supplied has been analyzed, because the authorities are only interested in client names," he told Der Spiegel. "But this information can also be used to expose the system banks have installed to make tax evasion and money laundering possible. For me, it has always been about calling attention to the banks' behavior, after I failed to change it from inside."
- Financials Industry