Officials searched HSBC's Swiss offices on Wednesday as part of a criminal investigation into claims of "aggravated money laundering." On Monday, France ended its own probe into the bank's alleged tax-dodging scheme for wealthy customers, with charges expected to be forthcoming.
The man behind HSBC's legal headache is Hervé Falciani, a former employee-turned-whistleblower, who in 2008 leaked stolen data suggesting that HSBC had helped thousands of its wealthiest customers avoid domestic tax laws and squirrel away millions each in assets.
The leaked data was obtained this year by the International Consortium of Investigative Journalists (ICIJ) via the French daily Le Monde, and was analyzed by a consortium of 154 journalists affiliated with 47 different media outlets — including Le Monde, The Guardian, CBS and The Indian Express, among others. The Guardian dubbed the resulting inquiry "the biggest banking leak in history."
The so-called SwissLeaks revelations have sent shockwaves through the international community, not least because the documents show HSBC's Swiss subsidiary helped customers withhold over $204.5 billion in assets from international tax authorities — assets that were traced back to 20,000 offshore companies.
According to the leaked data, UK customers were second only to Swiss account holders in squirreling away the most assets, prompting the UK to launch its own inquiry into the allegations.
On Sunday, HSBC took out a full page advert in two British newspapers — The Mail On Sunday and The Sun — to apologize to its customers over the recent scandal.
Falciani claims he tried to warn the British tax authorities about HSBC's secret tax-avoidance scheme. An email uncovered by Le Monde shows that Falciani did indeed write to Her Majesty's Revenue and Customs (HMRC) back in 2008, but that his offer to provide the organization with a client database went unanswered.
In the UK, the disclosure has been complicated by the fact that a former minister for trade, Stephen Green — who was appointed by UK Prime Minister David Cameron in 2011 — was a chairman for HSBC at the time of the alleged scam. He left the post at the end of 2013, but not before serious questions were raised over his conflict of interest at a time when HSBC was under investigation in the US. Since the SwissLeaks revelations, he has resigned as head of the UK banking industry's advisory council.
In an interview with journalist Thomas Sotto on French radio station Europe 1, Falciani said the public should brace for more revelations, telling his host, "You're going to be surprised." Falciani added that it would now be up to authorities to "determine the extent" of the fraud.
And the whistleblower now says he is willing to cooperate with Swiss justice in the money-laundering probe as long as he gets a "safe-conduct."
"I wish to be able to get a safe-conduct to attend my trial. I do not plan to avoid my obligations. I want to take this opportunity that would be given to me to share all the elements," he told Swiss television station RTS.
There have been conflicting reports over Falciani's motives in hacking into the system and stealing the information in the first place. French daily Le Monde has described him as "an opportunist," while others have painted him as the "French Snowden." Some reports have suggested Falciani tried to sell the stolen files, before collaborating with the French tax authorities in 2008.
Speaking to VICE News on Skype from an undisclosed address in Rome, Falciani denied ever trying to sell the data, and gave us his version of the SwissLeaks scandal.
VICE News : Let's start with the recent twist — the email sent to HMRC (the British tax authorities) on March 18, 2008. Can you confirm that you sent that email?
Hervé Falciani: Yes, yes. After that email, I was expecting they'd at least get back to me. After I sent the email, I started phoning them, I spoke to people, [called] hotlines that are set up for that very purpose in England. And I was passed around on the phone, from one person to the next, [to people who] didn't understand, didn't seem interested in the issue. If the media fuss doesn't die down, then (HMRC) will probably come back to me. They'll reopen inquiries, and we can dig deeper. Investigators in England should collaborate with the French, the Spanish, the Belgians — they should share their data with each other. If they do that, good things will come of it.
In the long term, what'll come out is that I contacted many foreign entities, and collaborated with a number of them. But the obstructions kept coming. In the beginning, it was a real obstacle course — particularly for me. What is most surprising — but that's the way it's set up — is that the main stakeholders often face the biggest obstacles [when working on tax fraud]. I observed failings within a bank; since then, I've had ample time to observe failings within governments. I think at some point [someone] should write a book about these failings, should give a factual testimony, and document these shortcomings.
A few days ago, HSBC issued an apology over the allegations that are at the center of today's media storm. How does that make you feel?
I know that I will be condemned, but I will never have to apologize. I will never… you know, I've never hurt society, I've never hurt anyone who didn't voluntarily put themselves in a situation. In a way, I'm happy that, yes, there are still people out there with self-respect. It shows that, despite everything, you can't generalize. In a bank, in the banking world, there's no uniformity. It's not all good, it's not all bad. Within the bank, some people — and I'm sure it wasn't easy — managed to convince others that at some point, they had to accept that people had lied, and that it was time to reach out and to perhaps move on, in the public interest. The opposing side made a u-turn. Before, they were saying "No, Mr Falciani doesn't have anything on us. Everything this person says is lies, he's deluded." They're not acting so smug now that things have changed.
What about the accusations against you — that you tried to sell the documents?
Once again, we're going to show — in great detail — who lied. And as you'll see, the first and the last to lie was the bank. And hopefully this will also reveal — and I hope this happens in my lifetime — what a bunch of jerks they are.
Let's go back to the very beginning, when you first started working for HSBC. Before SwissLeaks. You started working at HSBC in 2001. What was your job at the time?
When I joined [the bank] in Monaco, [my job] was to help set up a research and development department. They had major issues with their computer systems… That's the nice way of putting it. When I started working for them, reports of fraud surfaced. At the time, there was a major embezzlement scandal involving celebrities. That was in 2001. Our job was to make sure that this type of fraud wouldn't happen again. And what's interesting is that the system, a big part of the computer system used by bankers, is, well… it's more than archaic. To say it's problematic is putting it lightly. It makes it so that with the simplest of banking transactions — like a transfer from one account to another — well, in making this transaction, a manager can swindle his customers. Which is pretty unfortunate.
What solution did you propose?
My first assignment was to find an solution to this problem. We did this over the course of several months. We developed what we call "a workflow." A system that allows you to monitor more or less everything that goes on in the bank, pretty much instantly. It logs all the operations undertaken by managers, for example. It also keeps a log of everyone involved in a transaction. This project got us noticed — myself and my collaborators, the director of operations, the financial director — by Geneva, by the management of (HSBC) Private Bank. That's how as early as the end of 2001 to early 2002, I became a stakeholder in a number of projects. The bank's most sensitive projects. Not on a local level, in Monaco, but on a global level, in Geneva.
What is this "Private Bank," this HSBC subsidiary?
It's quite unusual. It's not your standard neighborhood bank. The Private Bank is a pretty unusual offshore bank. It's dedicated to clients who have an international profile, who aren't based in one location. It's a bank that's built on communication, on a network of other banks. It's a bank that is formed around a network of subsidiaries and banking partners around the world. That's how I found myself working more and more in Geneva. And I worked on various issues, various "strategic" projects. I learned the ropes. My work over there was not that different from what I was doing in Monaco, it was more or less the same thing: I was developing the computer system, which is at the heart of any modern bank.
How did you end up with these famous "listings"?
So. The listings were pretty straightforward. They're not really listings. In fact, it's not what you might imagine; it looks nothing like an Excel spreadsheet. I should say that when I was working in Monaco, I was working on the core of the [operating] system. I was trying to fix a proven scam. We worked on it, we set up a system. When we arrived in Geneva… Naturally, we hoped that what had led to wrongdoing in Monaco could also be fixed in Geneva. So others and myself — there were three of us — when we showed up in Geneva, we hoped to continue, or at least to replicate what we had started in Monaco. And that's exactly what didn't happen.
We soon realized, along with the other software architects and experts, that there was a major issue. We started to suspect that operations management, i.e., the managers, didn't really want the system to be reliable, or subject to controls. Today we know why. We have a better understanding of why people didn't want the system to be efficient. What we tried to do was to find and record the kind of information that is usually required in an internal audit. I myself had no privileged access to the system. The amount of data we needed was enormous, so each time, we would take down the references of the computer systems we deemed were the most important, me and the others. And for months we extracted data from the bank, which was then stored in a cloud — on a secure network. As we began to amass this data, I made sure it was all there: accounts, addresses, offshore companies, account history… In short, everything that could and would help explain the bank's activities. "Listings" is when you extract only a specific category of data. It's for when you want an overview.
What you're saying is that your primary motivation was to prevent fraud? Is that right?
You have to understand… I explained what the private bank was: the offshore bank, the network bank. If you go back a bit… I grew up with private banks, but at the local level. The kind of bank you're familiar with: a neighborhood bank, with people coming in and out of it. People who withdraw money, and deposit money. A pretty conventional bank, even though it was a bank for the wealthy, because we lived in Monaco. There were a lot of retired people. That's the kind of bank I got to know when I was growing up, through my father, who worked in that environment. But in Monaco (with HSBC), and then in Geneva, I moved into a different world. The network bank, the offshore bank. I came to realize that the risks there were bigger than those associated with a neighborhood bank. Everything is magnified.
What did you think when you ended up with these documents?
We were going to try and keep them safe for the [international] legal authorities. We were faced with a dilemma. We had some extremely sensitive data on our hands. If we reached out to one person, and it was the wrong person, this person could easily get rid of us. So from the very beginning, we explored several channels. That's what I did for months. I got in touch with lawyers, various intelligence services, and anti-fraud agencies in France. At the same time, enough people needed to have access to the information to prevent the data from being blocked, and to make it hard for anyone to get rid of us. Over the course of a week, we developed contacts, which we then cultivated for months, in Lebanon [in 2008]. That's the first place we left a trail. I also made sure the documents couldn't be forged, and guaranteed their integrity by duplicating everything that was saved.
You often say "we" when you talk about what you did with this data. Who is "we"?
I've always been part of a team. There have been many teams. We often face our choices and our responsibilities alone, but whatever I did, I always did it as part of a team. We did some good things as a team. They are people like you and me. Civil servants, police officers, legal experts, researchers, academics, anonymous people…
At the end of 2008, you traveled to France to collaborate with the French tax authorities and to hand over the data.
When I got started in Lebanon, I made sure I had other contacts within other agencies. I was considering two possibilities. I had to decide between going to Germany or France. If I'd gone to Germany, I would have lost control of the case, I would have had to just hand it over. So I went to France, where I already had established contacts — advanced contacts — and where I knew I could be useful. I still had some unanswered questions, but in the end, it proved to be a wise choice.
The collaboration with France ended in 2009. Since then, you've gone to Spain, where you're helping (left-wing political party) Podemos develop its election program. What's your job today?
I've been unemployed for several months. Most of the people I work with and have worked with are part of civil society. NGOs, politicians… Let's just say that, whenever they become interested in fraud or taxation issues, of course, then they get in touch with me. It's important to point out that very few politicians are interested in financial mismanagement. Even the most aggressive people I work with, in Spain or elsewhere, know that we're treading on eggshells. The thing about financial mismanagement is that you have to make people believe that it's the only way of doing things, that they have have to live with it, otherwise they'll lose everything. The tricky thing is to not scare off [those who are associated with] good practice, good financial management, or the civilians, who are often also scared. A lot of people are afraid to tackle this issue because, first of all, it's pretty complex, and secondly, because they're scared people won't support them.
What we're doing with Podemos is reaching out and saying, "Guys, look, there's lots we can do, we really do have solutions." We're currently developing a program with European partners. On a personal level, I would like to go back to working in applied mathematics. I've never been able to bring myself to drop the fight against HSBC, but, you know, I've experienced work-related difficulty, I'm more than used to it now. I'm not afraid, I'm suffering. I suffer because of those who are close to me, but I'm completely unafraid. If I was [scared], I wouldn't have been able to do this, I wouldn't have been able to even contemplate going through this.
Last week you told the media to brace themselves for further revelations.
I know exactly which documents have been outed, and which documents remain to be shared with you and with citizens — not just with the media. HSBC does not work in isolation, even though it's a giant with the world's biggest intranet. It doesn't work alone. It collaborates with several other banks. If you look at the information that's currently in the hands of the law, the recorded transactions — i.e. the transfers between banks — on the one hand, you have HSBC, and on the other, you have banks that collaborated with HSBC. What this means is that, in time, as we come to realize the extent of what happened, well, obviously, you'll get to know other banks…
Additional reporting by Mélodie Bouchaud.