Switzerland Allows Bankers To Reveal Secret Clients
For hundreds of years, Switzerland has offered a safe haven for clients around the globe who had a reason to hide their money. But the era of strict Swiss bank secrecy may soon be coming to a finale. Today the Swiss government announced its decision to allow its banks to sidestep the nation’s secrecy laws and disclose the names of clients. The decision follows a longtime conflict with the United States over tax evasion.
Eveline Wider-Schlumpf, Switzerland’s finance minister, hopes the decision will allow Swiss banks to hand over client information and, in return, avoid future legal repercussions. Although she didn’t reveal details of the program, Wider-Schlumpf explained individual banks will have one year to decide whether or not to accept America’s offer.
“It is important for us to be able to let the past be the past,” she said in a Bern news briefing.
The dispute between the US and Switzerland over Swiss banks’ allowing tens of thousands of Americans to shelter money via offshore private banking accounts has continued for years. Although American prosecutors have targeted many banks, the Swiss government has been uncooperative until now, instead protecting its tradition of bank secrecy—the cornerstone of its prosperous economy. In 2009, however, UBS, Switzerland’s largest bank, entered into a deferred-prosecution agreement with US authorities. After dozens Swiss bankers were indicted, UBS turned over 4,450 client names and paid a $780 million fine while also admitting that in selling tax-evasion services to wealthy Americans it committed crimes. The US has also since targeted Credit Suisse, Julius Bar, the Swiss division of HSBC Holdings and several smaller banks. Switzerland’s oldest bank, Wegelin & Company, went out of business early this year after the US Justice Department indicted it. According to prosecutors, more indictments may occur in the future
“We expect this to create the base for banks to again gain some room for maneuver so that calm can return to the sector,” Welder-Schlumpf said. “We are convinced that this is a good, a pragmatic solution for the banks to emerge from their past.“
Why is Switzerland so hell bent on protecting criminals? Actually, there are plenty of good reasons to want to hide money beyond tax evasion. The country’s banking reputation allowed noblemen fleeing the French Revolution to protect their assets. Doctors might hide money in a Swiss bank account to protect themselves from being completely wiped out by a malpractice suit. And of course criminals have been known to hide money in Swiss banks in order to continue covert operations. All unethical reasons, but Switzerland allows it except in cases involving drug trafficking, insider trading and organized crime. Anything else isn’t the tiny nation’s problem, and it has prospered as a result.
Until now. Many scholars and left-leaning bankers have moved to cooperate with other nation’s tax laws in order to resolve the increasing controversy that has haunted Switzerland. Martin Landolt, head of Switzerland’s centrist BDP party, recently compared the situation to a natural disaster.
“There are conservative forces in Switzerland who think they are doing something good when they defend the status quo, when they defend bank secrecy … and don’t understand that this is an upheaval that we cannot evade,” Landolt said.
“When a tsunami is coming, we can’t just say tsunamis are banned and think it won’t happen anyway.“
Credit Suisse chairman Urs Rohner would have agreed.
“It’s in the best interest of the financial sector and each individual bank to resolve the US issue quickly and completely,” Rohner told the Neue Zurcher Zeitung newspaper May 28. A solution that seems painful at first sight is better than no solution,” he added. “To believe that one can push this issue to the back burner and that it will dissolve over time is unrealistic. That will not happen.”