Will Swiss banks really lift the veil of secrecy?

JON VAN HOUSEN and MARIELLA RADAELLI

Switzerland’s legendary bank secrecy is supposed to come to an end in a couple of months. Long the haven of choice for looted WWII funds, suspected corruption money and wealthy tax dodgers, Swiss banks have been protected by a confidentiality clause actually enshrined in the country’s constitution in 1934.

But the notorious banking system is scheduled go transparent by Jan. 1, 2018 as Switzerland shares information with tax authorities from some 50 other countries as well as the European Union.
English news: Swiss banks
Long the stuff of spy thrillers, shadowy Swiss banks are supposed to go transparent at the turn of the year.

Using the global automatic exchange of information (AEOI) system put in place by the Organization for Economic Cooperation and Development to fight tax evasion worldwide, Swiss banks are now supposed to provide information they systematically collected this year on account holders including individuals and companies.

Once home to an estimated one-third of the world’s hidden money, Swiss banks have agreed to disclosure after decades of powerful pressure from a range of governments. But as the system takes effect, some experts have a wait-and-see attitude.

Stuart Gibson, a former criminal investigator for the US Internal Revenue Service and attorney at the Department of Justice, wonders “how a country goes from being the world leader in bank secrecy to a leader in openness and transparency”.

The answer, he says, could be that it doesn’t.

“Instead, you make it look like you’re cooperating, while your internal institutions – which few people outside Switzerland fully understand – do everything in their power to maintain their country’s role in keeping secure the financial secrets of others,” Gibson wrote in a recent op-ed piece.

Others, however, point to progress. Paolo Bernasconi, an attorney and partner in the law firm Bernasconi, Martinelli, Alippi and Partners in Lugano, Switzerland, says “any kind of violation (of the AEOI) by banks will be punished with a severe fine by the Swiss fiscal authorities”.

Also president of Ethics and Compliance Switzerland based in Berne and a member of the board Swiss Experts on Economic Crime, Bernasconi says that while “following the banks as they prepare execution of their AEOI duties, I have the impression that they will comply”.

Shoah historian Michele Sarfatti, former director of the CDEC Foundation in Milan and member of the Anselmi Commission that investigated assets confiscated by fascist authorities under Mussolini-era racial laws, says he has seen that Swiss banks are capable of full disclosure.

“Twenty years ago under mounting international pressure, Swiss banks published a list of dormant WWII-era accounts that included the assets of Holocaust victims. The list was in newspapers around the world and on the Internet as well,” says Sarfatti. “I believe all the loose ends are tied up. There are no outstanding matters as far as I know, at least in Italy.”

Yet the secrecy saga continued this year when Dutch tax authorities led a five-nation coalition effort on about 55,000 suspect accounts and the seizure of millions of euros in cash, gold, jewelry, real estate and paintings. Raids on homes and offices across the Netherlands and France were the result of an investigation into taxpayers and high ranking bank employees in Britain, Germany and Australia.

Dutch prosecutors said they received a tip-off on assets hidden in “offshore accounts and policies” estimated in the millions of euros. They say the information concerned a single Swiss bank they declined to name.

For its part, France announced that 25 customs agents carried out raids across the country as part of an investigation into “aggravated money laundering and financial fraud” that began last year. Investigators said they found “several thousand” bank accounts opened in Switzerland by French taxpayers who are suspected of having failed to declare them to the authorities.

In response Swiss officials protested the “deliberate decision to keep them in the dark”.

“The Swiss public ministry is stupefied by the manner in which this operation has been organized so as to keep Switzerland deliberately excluded,” a government spokesperson said. “The public ministry awaits a written explanation from the Dutch authorities.”

Yet others wonder if some in Switzerland are even now working to deliberately exclude information. A proposed a referendum to change the Swiss constitution would further protect banking information on Swiss citizens.

“The parliament’s decisions concerning the popular initiative still remain completely open, even the issue of the popular vote is still entirely open,” says Bernasconi says. “Even if the initiative is successful it will not impede Swiss fiscal authorities from using information gathered in (the AEOI process) from prosecuting Swiss taxpayers who violate their fiscal duties.”

So far the impending disclosure system does not appear to have had a chilling effect on Swiss bank deposits, says Bernasconi.

“The execution of the AEOI will have no detrimental effect on the global volume of assets deposited at Swiss banks,” he says. “Withdrawal is not so easy due to the fact that it is quite difficult to find safe countries outside of Switzerland.”

Often depicted as the gray characters in spy thrillers, it remains to be seen if the denizens of Switzerland’s murky banking world can thrive in the sunlight. If they can adapt, Jason Bourne will need to find a new drop box.

A version of this story appeared in the Khaleej Times of Dubai.