By Claire Kokoska
The recent leak of London-based HSBC’s clientele data is among the largest leaks in banking history.
The Swiss subsidiary of HSBC lost control of the data from 127,311 accounts, of both individuals and other entities, between 2005 and 2007. The information about the leak, however, was publicly released just this month, in 2015.
Former computer engineer at the HSBC Private Bank of Geneva Hervé Falciani noticed a troubling amount of tax evasion within his company’s Swiss account holders. Since Switzerland passed the Swiss Banking Act of 1934, the country has maintained the strictest banking secrecy laws in the world.
The passing of the act followed a scandal in which many prominent French figures, namely industrialists, politicians, heads of media outlets and public personalities, were exposed as tax evaders for hiding their wealth in Swiss banks.
Ever since, the Swiss have kept banking information strictly private. Therefore, tax evasion, the non-disclosure of one’s full wealth to avoid the taxes of one’s government, is not classified as illegal in Switzerland.
Mere tax fraud is illegal, which is simply tax evasion by way of falsified documents. The legal distinction between tax evasion and tax fraud for foreign clients has been removed since 2009 due to pressure on Switzerland from the OECD and the G20.
Yet, Falciani collected data from over 100,000 of HSBC’s Swiss accounts between 2005 and 2007 before the distinction was formally eliminated. The assets from all the accounts totaled $120 billion.
The account holders represented every profession and over 200 nations. Among them were athletes, war lords, drug lords, arms traffickers, politicians, entrepreneurs, media moguls, members of royalty, spiritual leaders, models, actors and countless others.
After Falciani had finished collecting the data, he and colleague Georgina Mikhael began contacting various European governments and secret service agencies, hoping to pique their interest and allow them to communicate about the boundless tax evasion within HSBC’s Swiss bank arm.
Before France was able to contact Falciani and Mikhael further, a Lebanese bank noted their suspicious activity and alerted Switzerland.
In late December 2008, Falciani was detained by the Swiss police, questioned and then released for the night on the condition he would return the next morning for further questioning.
Instead, he fled to France with his wife and daughter. Immediately after arriving in France, Falciani met with an official from the French National Directorate of Tax Investigation, giving him all the data he had amassed.
In 2010, French Finance Minister Christine Lagarde, currently the Managing Director of the IMF, sent out the “Lagarde List”: a list of the account holders to the governments of Belguim, Spain, Greece, Argentina and the U.S., allowing them to pursue tax evaders domestically.
Information about Falciani’s whistleblowing at HSBC and his release of account data was not made public until two weeks ago by Le Monde, The Guardian and the International Consortium of Investigative Journalists.
In 2014, the Attorney General of Switzerland charged Falciani with data theft in violation of bank secrecy laws that date back to 1934.
To this day, Falciani remains in France under the protection of the French.
While Falciani broke the law and HSBC policy by taking banking account data, he helped expose one of the largest scandals in banking history.
Before now, it was incredibly difficult to know the sort of tactics that individuals and others used to dodge taxes and preserve their wealth for themselves and their heirs.
These leaks represent a huge threat to Switzerland’s $2 trillion banking industry, as well as other off-shore tax haven economies around the globe.
With this leak, the privacy of banking data is no longer guaranteed, and those who hope to avoid taxes through companies like HSBC will feel compelled to look elsewhere for ways to avoid or evade tax payments to their own governments.
Considering that it took seven years for the public to know about this disclosure of over 100,000 offshore Swiss tax havens, which have collectively evaded payment on millions upon millions of taxes, there is clearly far more to uncover.
Some hold Falciani to be a criminal, but others call him the European Ed Snowden.
I am inclined to side with the latter. It is crucial that individuals continue to reveal corruption when they see the opportunity, for otherwise, we would be left with dwindling power against injustice.