Who is the real culprit?
Hervé Falciani, 43, is facing triple charges at the Bellinzona Federal Criminal court in Switzerland, for data theft, industrial espionage and violation of banking secrecy. He made the biggest data leak in the history of banking secrecy in 2008 from HSBC Private Suisse bank, Geneva. This data laid bare, for the first time, the monstrous scale of the global offshore industry and triggered worldwide probes.
India recently got additional information from France on its HSBC probe after Falciani pointed out in this interview that there was more information to be had. (The original probe was based on part of his data French authorities had shared with India in 2011.) Elsewhere, France, Belgium and Argentina recovered sums ranging from several millions to more than a billion euros from HSBC. They have also indicted the bank for large-scale fraud and money laundering.
Yet in Switzerland, where the branch operates, HSBC got away with a fine (albeit a record-breaking one at $43 million) but never had to face criminal proceedings. Swiss Leaks investigated a part of Falciani’s data and revealed that the information on $100 billion in accounts from 203 countries showed “global banking giant HSBC profited from doing business with arms dealers who channelled mortar bombs to child soldiers in Africa, bag men for Third World dictators, traffickers in blood diamonds and other international outlaws”.
HSBC even admitted guilt and issued a public apology. But the Swiss still feel compelled to hound Falciani rather than the bank. “Am I more dangerous than HSBC? Who are they trying to pacify by coming after me?” Falciani said, over an internet call from an undisclosed location. “The verdict has already been written.” A state appointed lawyer will defend Falciani who will not be present in court.
While bankers running the racket on an industrial scale got away unscathed, it was Falciani who had to do go to prison in 2012 for five months. He was arrested in Spain on an Interpol warrant issued by Switzerland. But Spanish judges refused to extradite him on grounds that his evidence showed the bank was acting like “a tax haven in itself”. It was a clear message: Falciani wasn’t the criminal on the run. The bank was.
The Interpol warrant severely restricts Falciani’s movements. He was also driven underground because of the threat to his life from his many rich and powerful enemies. His public appearances are limited and he has to live away from his family. He only gets to "see" his 9-year old autistic daughter over internet video chats.
But recognition is pouring in for Falciani from new political parties that put inequality and anti-corruption on top of their agendas. Podemos in Madrid, Mayor Ada Colau’s administration in Barcelona, Syriza in Greece and Beppe Grillo’s Five Start Movement in Italy, all consider Falciani an ally and are working with him on anti-corruption projects. Argentina is officially collaborating with him to train their investigators. Even Croatians are looking to join hands with him.
Falciani’s detractors, on the other hand, are still fixated on his motives to discredit him. They say he wanted to sell the data. He denies it. It is this part of his story that is likely to get much attention during the trial coming up in Bellinzona. The whistle-blower says it’s a “clever ploy” to shift the focus away from the bank’s activities that have been recognised as illicit around the world.
Trial or witch-hunt?
Falciani’s request to the court to summon the Geneva prosecutor (who recently blamed Switzerland’s “weak laws” for his failure to criminally prosecute HSBC) and French custom officials (who worked with him) were turned down. These witnesses would have worked in Falciani's favour. In refusing to admit them, the outcome of the trial is being manipulated.
And Falciani is not the only one to be lynched this way. Another prominent whistle-blower, Rudolf Elmer, 59, a Swiss citizen, has already been battling with Swiss authorities for nearly a decade and says many of his witnesses were not allowed in court either. Elmer’s data from Julius Baer bank based in Cayman Islands (which is beyond Swiss legislation) shows how thousands of wealthy individuals including arms brokers, Mexican officials in drug dealers, Saudi companies linked to Bin Laden and corrupt politicians used the bank. Elmer’s press conference with Julian Assange drew the world’s attention in 2008 to the then little known Wikileaks.
Swiss authorities never used Elmer’s data to investigate the bank but the fact that Elmer leaked it has landed him in jail on two occasions, rendered him jobless (he was Chief Operating Officer at Julius Baer) and led to his family being harassed and stalked. Elmer told me the Swiss justice system has been “corrupted” by banks and its banking secrecy laws are being applied “extra-territorially”. He says "mafia-like methods” are being used to persecute him so that no one dares to emulate him. "The crucifixion of whistle-blowers is crucial for the Swiss banking industry," Elmer said. "Otherwise criminals won't trust them."
Who’s afraid of whistle-blowers?
Both Falciani and Elmer could have disappeared or found an easy escape from this persecution. Yet both say they wanted to stay on and “fight”. It’s absurd that their behaviour should be considered more deviant than the banks’. Whistle-blowers are increasingly being hailed as heroes in the media but lawmakers are still dragging their feet in most G20 countries when it comes to enacting a simple legislation to protect them. It’s obvious that such a law would encourage more to report corruption.
After the financial crisis, public opinion in the developed world gave a big thrust to the global crackdown on secrecy jurisdictions (mostly led by the U.S.). But the opacity around both the offshore industry itself and the investigations carried out by authorities against it, make public scrutiny difficult. Whistle-blowers like Falciani and Elmer served public interest by making a huge dent in Switzerland’s credibility but they still continue to lead broken lives.
Why single out Switzerland?
Apart from being the cradle of banking secrecy since 1934, Switzerland also hosts the best offshore experts in the world. Little surprise that it is also the world’s leading international wealth management centre. At the end of 2014, Switzerland managed a whopping $2 trillion. In fact private banking giants, mainly from rich countries of the Organisation for Economic Co-operation and Development, are draining the developing world of vast amounts of wealth and Swiss banks are leading the pack with astounding impunity.
Powerful lobbies are still holding sway. At the OECD, the Swiss are keen to show that theirs isn’t an uncooperative secrecy jurisdiction. But their duplicity became obvious earlier this year, in July, when they tightened their laws against banking secrecy by making whistleblowing punishable with five years of prison.
In Switzerland, whistle-blowers seem to inspire the kind of fear and revulsion reserved for terrorists. Most believe there are other “proper” ways to report wrongdoing. But in reality, the system is tailored to save banks rather than enable truth telling. In India, where whistle-blowers are routinely killed, the Modi administration (otherwise going hoarse over bringing back black money), has passed amendments that will render India’s whistle-blower protection laws useless.
Governments using Falciani and his data, will be watching his upcoming trial closely. They should consider offering him amnesty. Falciani says there is more he can help India with. He should be considered an ally. India has successfully pressured Switzerland to provide more information from banks and has played an important role in pushing it to change its laws that blocked information requests based on “stolen data”. Logically, India should not encourage tantrums secrecy jurisdictions throw about discouraging the practice of whistleblowing.
The OECD says whistle-blowers won’t be needed anymore because its new global standard of automatic exchange of tax information heralds “the end of banking secrecy”. This is a highly dubious claim because the new standard is ridden with gaping loopholes. Besides, a simple clause for whistle-blower protection could hardly harm this new global treaty. Unless it is serving the wrong party.
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