A major scandal brews after Spain arrests HSBC whistleblower Falciani

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The Swiss authorities on Tuesday confirmed Mediapart’s exclusive report that a former HSBC employee who exposed tens of thousands of tax-evading accounts held with the bank has been arrested in Spain pending extradition to Switzerland, where he is wanted for breaching banking secrecy.  But the extradition for trial of Hervé Falciani, 40, a former Geneva-based IT engineer for HSBC who holds dual French and Italian nationality, could lead to a far larger, wide-ranging scandal of major repercussions. For it is unknown whether he has kept hidden copies of his files of 127,000 accounts held with HSBC, which the French authorities are accused of having previously suppressed. The multi-billion-dollar question is whether the Swiss would finally allow his evidence to emerge in public.Valentine Oberti and Karl Laske report on the web of intrigue surrounding Falciani and the British bank which was last week slammed by a US Senate investigation for having served as a money-laundering conduit for "drug kingpins and rogue nations". 

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The Swiss authorities on Tuesday confirmed Mediapart’s exclusive report that a former HSBC employee who exposed the existence of tens of thousands of tax evading accounts held at the bank in Geneva has been arrested in Spain pending extradition to Switzerland, where he is wanted for breaching banking secrecy.

Mediapart first revealed the arrest of Hervé Falciani, 40, a former IT engineer for HSBC, who in 2008 wrote to tax authorities in France, Britain and Germany offering details of the accounts held with the Swiss arm of HSBC’s private banking operations, in a report published late Monday.

The Swiss federal justice office (OFJ) on Tuesday confirmed the information, saying Falciani, who holds dual French and Italian nationality, was arrested by Spanish police on July 1st. "The Swiss representation in Madrid deposited a formal extradition request with Spanish justice authorities on July 5th," an OFJ spokeswoman added. "It's now up to Spanish authorities to decide."

The exact details of his arrest are still unclear. Sources close to the case told Mediapart he was arrested after an identity check carried out on a Barcelona-bound boat he was travelling on.  

Falciani is wanted in Switzerland for alleged ‘violation of banking and commercial secrecy’, ‘unlawful extraction of data’, and ‘economic intelligence’.

Falciani, who fled Switzerland for France in 2008, has admitted passing on confidential data of HSBC clients to the French authorities, who have since opened investigations into alleged tax dodging by individuals. But the investigations have been undermined by Swiss police findings that the data files were deliberately tampered with after they were seized as evidence, amid suspicions that the French authorities were involved in protecting a number of account holders from exposure. Meanwhile, the actions of the bank itself in the alleged tax-avoidance scam have not been the object of any judicial scrutiny in France.

HSBC claim Falciani had leaked the details of 24,000 of its wealthy clients. However, acting upon a request from the Swiss authorities, in January 2009 French police searched Falciani’s home in southern France, to where he had directly fled from Switzerland, and found data concerning 127,000 HSBC accounts, including those of 8,231 French tax exiles.

Falciani claimed he acted out of duty as a citizen. "If you discover that [...]  offshore structures have no other aim than to avoid taxation and that the sole legitimacy of these structures is that purpose, what would you do?" said Falciani  in an interview in 2009 with French TV channel France 2 . "You either play ostrich or you try to find out."

Contacted by Mediapart, a Swiss justice office spokeswoman said the four year-old  investigation into Falciani “is only concerned with the existence, the provenance and the nature of the data [concerned] and not their contents”.

Falciani joined HSBC’s private banking operations in 2000, and was based in Geneva from 2006 where he served as an engineer for the bank's computerized data systems. He claims that from that same year, he alerted the Swiss authorities about HSBC’s alleged involvement in a sophisticated system of tax fraud by its clients. “I worked on the Hexagon system that allowed for internal transfers from one account to another without leaving any traces,” Falciani said in an interview in July 2010 with Italian business daily Il Sole 24 Ore. “If one cancels out an order [of transfer], no-one can find whether the order ever existed,” he continued. “If one erases the data on a server ‘X’ and duplicates them on a server ‘Y’, there is no trace of the data on the first server. And one server could be in Switzerland and the other in Hong Kong, a proper labyrinth. If no-one inside the bank is ready to help with [enquiries by] the justice services, the investigations are bound to fail.”     

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