GENEVA, SWITZERLAND – A 71-year-old former manager at HSBC bank in Geneva is suing the bank’s current management for giving his name to the US Justice Department, reports Swiss news agency ats, confirming information published Sunday by Le Matin. The ex-banker has taken his former employer to the Swiss Attorney General’s office for violating banking secrecy, crimes against the State and supplying information of an economic nature to a foreign government, ats quotes his lawyer in Geneva, Douglas Hornung, as saying.
The lawsuit brings into the limelight a complex aspect of the ongoing legal tussles between some Swiss banks and the US Justice Department. When bank client data is provided under the terms of the US-Swiss tax treaty because tax fraud is suspected, information such as lists of phone calls theoretically make it relatively easy to track down other clients of the bank who are not implicated, particularly if bank employees are questioned. It thus puts at risk of being chased by US officials bank employees who have not aided or abetted any crimes under Swiss or US law.
Swiss resist fishing expeditions, but nets are thrown wide when banks are investigated
HSBC Private Banking in Geneva is one of 11 Swiss banks currently under investigation by the US Justice Department for suspicion of helping wealthy US clients evade American taxes. The bank reported in March that losses are expected to be “significant” for fines and penalties related to the investigation, in addition to client money outflows.
Switzerland and the US have been negotiating for months to reach an agreement covering the group of banks, which would pay US fines. Switzerland argues that a deal must draw on past behaviour to stop continual investigations of the other 300 or so Swiss banks by the US. Switzerland has eased its stance on providing judicial assistance to the US over tax matters, in a treaty negotiated and initialed by the two countries that has been held up in the US Senate.
The Swiss government has remained firm that it will not allow “fishing expeditions” to look for Americans clients without adequate signs of wrongdoing, and the new treaty includes this, but as the case of the 11 banks appears to show, once the IRS tax office throws its net over a Swiss bank, the reach is wide.
The IRS has recently begun to extend its investigations into possible tax fraud by wealthy Americans to other countries. HSBC was targeted in India in April.
US investigations but also internal theft putting pressure on banking privacy tradition
Swiss banking privacy is coming under pressure from several areas, including data theft. HSBC was famously the victim of a theft by a former employee in 2010, Frenchman Herve Falciano, who took what turned out to be old data and tried to sell it to the French government.
Another IT employee at Bank Sarasin in Basel handed over personal data on Philipp Hildebrand, chairman of the Swiss National Bank, to a lawyer and political opponent of Hildebrand’s at the end of 2011. The SNB head was cleared of any wrongdoing after an investigation showed that currency movements the employee suspected of being illegal were not, but the damage was done and Hildebrand had resigned to avoid tarnishing the bank with any suspicion.
The latest in the string of IT staff thefts comes this week, with the Banque Cantonal Vaudoise suing a former head of security for theft and breaking privacy laws, according to the Tribune de Geneve and Le Matin, Tamedia sister newspapers,