Whistleblowers are of vital importance to regulators, helping them put the pieces of the jigsaw together, says Reuben Guttman.
Back in 2013, HSBC whistleblower, Herve Falciani, told the German publication Der Spiegel: “Banks such as HSBC have created a system for making themselves rich at the expense of society, by assisting in tax evasion and money laundering.” Conclosury statements like this are levied all the time by public interest groups, legislators, opinion writers and pundits. When they are made, they are often a matter of speculation or at most, an argument of inferences from loose facts. Of course, Herve Falciani is different. When he left HSBC in 2008, he reportedly took data from 130,000 customers. He took the facts to allow authorities to make solid claims of tax evasion; claims that can only be effectively levied with inside information.
In a global economy with complex transactions, communications occurring in multiple languages and transactions and communications made with the jargon of the industry, it is extraordinarily complicated for outside regulators to investigate and gather the facts to prove complex fraud cases. To some degree, it is analogous to a large ship attempting to navigate a harbor without a local captain available to explain where the rocks are or where the water is shallow. Or, perhaps it is like a blind person walking into a room for the first time without having any sense of where the furniture is located.
Of course regulators have the ability to access documents through a subpoena or civil and investigative demands, and they might even have the ability to ask questions under oath. But which documents do the regulators ask for? And when the questions are asked, how should the questions be worded so that regulators target the facts with the precision of a laser guided missile? Imagine an investigator questioning an HSBC official: Question:“Have you aided and abetted foreign citizens in ways that allow them to avoid paying taxes?” Answer: “No, that is not our mission … we are a bank.”
The problem is that most sophisticated lawbreakers understand the concept of a smoking gun. Never create a document that summarizes the wrongdoing for regulators. Never create a document that lays out the facts leading regulators to pinpoint the wrongdoing. And of course, in a large corporation, never create documents, rules, policies or plans that will cause the average employee to question the propriety of a corporation’s efforts. We live in an age where complex wrongdoing is orchestrated through communications and programmes which, if analysed independently, would seem harmless.
Yet, it is the whistleblower – the person inside the box – who can explain how patterns of innocent conduct, when linked together, amount to wrongful schemes involving fraud, money laundering, racketeering and tax evasion. Whistleblowers like Falciani are so critically important to regulators and without their help, regulators face a daunting task of fully understanding the schemes and pinpointing and gathering the evidence to convince a trier effect that wrongful conduct has occurred. Hence, “the importance of the whistleblower.”
