Zurich, home to banking thrillers

Zurich, Switzerland (GenevaLunch) – Call them whistleblowers if you believe their consciences have overcome them, or thieves if you think they’ve broken the law. Whatever the label, people who take client data from Swiss banks that employ them, then offer the information to another government, are suddenly back in the headlines.

French officials told Swiss news agency ATS Thursday evening 21 January that France has handed back to Switzerland data stolen by a French citizen. It made the announcement a day after the Swiss Finance Department said it would not provide administrative assistance to countries in cases where stolen information was used. France told ATS it has kept copies of some of the information, for its own investigations.

The data was stolen from British bank HSBC in Geneva, by Frenchman Hervé Falciani. The case came into the public spotlight late in 2009.

Switzerland is reviewing its legislation with an eye to setting clearer limits for handing over data to a treaty partner when it demands assistance in suspected tax fraud cases.

US newspaper says whistleblowers “chipping away” at bank secrecy

Falciani was not the first bank employee to pocket data. American Bradley Birkenfeld stole UBS client data in 2008 and gave it to the US tax authority, the IRS in a case that has had a major impact on the bank’s reputation and which badly strained US-Swiss relations.

To believe the New York Times 19 January, Swiss Rudolf M Elmer has just become the first whistleblower of 2010, a man who “is chipping away at the centuries-old traditions of Swiss banking secrecy,” in line with Falciani and Birkenfeld.

Swiss German media have been oddly quiet about this story in their own backyard, but the reason is easy to understand: Elmer, who cultivates publicity, is an old story, and the New York Times article has several holes.

Elmer, according to the lengthy feature in the New York newspaper, has been living outside Zurich. He was reportedly flown to Germany Tuesday where he is staying in a five-star hotel while the German government discusses the details of client accounts he is offering them. The newspaper quotes Elmer’s lawyer as saying that the data comes from his former employer, Bank Julius Baer in Zurich.

Elmer not sought for breaking Swiss banking secrecy laws

The bank says it is unlikely Elmer has been in Switzerland, rather than Mauritius, where he has lived since being fired by the bank in 2002. He would be liable to arrest for simple theft in Switzerland, if not more. The Swiss Justice and Police Office in Bern told GenevaLunch it was unaware he was in the country, although cantonal rather than federal police would be after him for theft, it noted. He is not suspected of breaking Swiss banking secrecy laws, as reported by the Guardian in early 2009 when it interviewed him. The New York Times also implies he is linked to banking secrecy being weakened, and it quotes a Washington DC lawyer to this effect: “His actions are ‘symptomatic of a generalized breakdown of bank secrecy.’”

He has published confidential data and made it clear he stole it, most famously on a site called Wikileaks, which was closed by a California court in February 2008. The bank earlier attempted to sue him for publishing client data, but dropped the charges. Within days, Elmer opened a web site called Swiss Whistleblower, devoted to his  efforts to expose his former employer.

A Julius Baer spokesperson who reviewed the case with GenevaLunch this week provided a reminder that bank accounts in the Caribbean are not covered by Swiss bank secrecy laws, although like bank data in many countries they are covered by corporate confidentiality.

Is fiction truer than life?

The spokesperson suggests that Elmer may be looking for publicity for his book, an e-book novel that costs €12.90 on his web site (Ed. note: the zipped files are .exe files, which we don’t recommend that you open).

The New York Times does not mention that Elmer is trying to sell a book. The journalist does write that “elements of the dispute between Mr Elmer and Julius Baer resemble a spy thriller. He said that Julius Baer had him followed by private investigators in Zurich and that superiors told him ‘it might be a good idea to go for a deep dive in the sea’ — assertions that the bank denies.”

“Elmer’s credibility” as a whistleblower “has suffered over the years,” the bank’s spokesperson says. “His data is all older than 2002 [Ed. note: 1997-2002] and he’s been trying to interest everyone in it since then, not very successfully.” The bank has said at least some of Elmer’s documents are forged, which he denies.

Elmer has been crying wolf since he was fired by the bank in 2002. Both parties agree he was fired but they disagree about why. He says he was upset to discover systematic fraud. The Times reports that “‘as far as his own role in helping clients evade taxes [goes] he said, “I didn’t realize what was going on.’ Mr Elmer said he discovered the tax evasion in 2002 and decided to expose Julius Baer’s operations.”

Elmer surprised at finding fraud after 20 years as senior manager

Elmer was employed by Julius Baer for nearly 20 years. He headed Bank Julius Baer’s Caribbean wealth management services for eight years. It is difficult to see how he could have remained in his post as a senior manager at what is widely considered one of the world’s most reputed private banks if he was blissfully unaware of what was happening around him, fraud or no fraud. The New York Times rightly points out that “Nothing indicates that Julius Baer, a 120-year-old private bank, is under IRS investigation.”

The bank maintains its explanation of why he was fired, that Elmer stole client data and documents, a discovery made shortly before he was let go.

Swiss banking secrecy: closely linked to data protection and privacy of the individual, ideas that go beyond banking

Banking secrecy is not governed by one law, but “arises from civil law, especially the contractual obligation of the banker to keep the personal information of his or her client confidential. The privacy of the client is also protected by the general provisions of the Swiss Civil Code concerning personal privacy and by the law on data protection,” according to the Swiss Finance Department. Client data belongs to the client and not the bank, under Swiss law.

Links to other sites: BBC on wikileaks being closed, Guardian, UK, interview with Elmer in 2009, New York Times on Elmer, Reuters, Swiss Finance Department explanation of Swiss banking secrecy, Swissinfo on French data return

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