BERN (Reuters) - Switzerland’s Federal Intelligence Service (FIS) on Tuesday defended its efforts to combat theft of business secrets after a Swiss man was arrested in Germany on suspicion of working for the spy agency.

Switzerland's Defence Minister Guy Parmelin attends a news conference in Bern, Switzerland May 2, 2017. REUTERS/Arnd Wiegmann

The 54-year-old man, identified only as Daniel M., was arrested on Friday. His lawyer told a Swiss newspaper he was suspected of trying to find out how German states have obtained CDs containing details of secret Swiss bank accounts set up by Germans to evade tax.

The man was detained in Frankfurt, and officers from Germany’s federal criminal police carried out searches at several addresses in the region.

While Swiss authorities declined to comment directly on the case, they defended domestic efforts to uphold Swiss laws.

“When someone in Switzerland uses illegal methods in Switzerland to steal state or business secrets, that is espionage, and we have the task to fight that,” FIS director Markus Seiler told reporters at a briefing in Bern.

“The FIS is active at home and abroad,” he said. Asked if this included Germany, he said: “I say simply nothing.”

In Berlin, German Foreign Minister Sigmar Gabriel asked the Swiss ambassador to explain the latest developments “in the interest of German-Swiss friendship”, a German government source said.

The source said Deputy Foreign Minister Walter Lindner received Ambassador Christine Schraner Burgener for a conversation on Tuesday afternoon and sought information on the spy case. No details were given.

The case is potentially embarrassing for Switzerland, which has worked hard to increase the transparency of its financial system in order to prevent international tax dodgers from abusing its bank secrecy rules.

TAX CDs

The man arrested in Germany is suspected of operating since the start of 2012, though no further details were given by German authorities. Swiss media reported at the weekend that he was a former policeman who now worked for the FIS.

Authorities in the German state of North Rhine-Westphalia (NRW) have since 2010 purchased 11 CDs containing data about Germans with bank accounts in Switzerland, and paid a total of 17.9 million euros ($19.5 million) to informants.

In return, NRW has secured nearly 7 billion euros in revenue which would have otherwise been lost, officials there said.

“The NRW financial administration acquires tax CDs, because they otherwise could not detect tax evasion,” said Norbert Walter-Borjans, an official in the NRW finance department.

“Anyone who now hunts the investigators protects the perpetrators,” Walter-Borjans said.

Speaking at Tuesday’s news conference in Bern where the spy agency released its 2017 situation report, Swiss Defence Minister Guy Parmelin said the intelligence agency “must protect its methods and sources”.

“Switzerland, and not only the banks, but also small and medium-sized companies, research institutes, and international organizations which have their headquarters here, are regularly suffering cyber attacks, spy attempts and efforts to recruit their staff,” said Parmelin, who oversees the FIS.

The situation report outlined by Parmelin and Seiler said Switzerland was facing a “heightened” risk of Islamist militant attacks, with 90 individuals currently described as “risky” being monitored by the authorities.

“With all the attacks we have seen, like in Sweden and France, we see from time to time there are links to Switzerland,” Seiler said.

“Switzerland is not an island. Without being too alarmist, we cannot rule out that our country, being part of the West which jihadists consider as hostile to Islam, may one day be the target of a terror attack.”