Pressure Mounts on Vaunted Secrecy of Switzerland’s Banks
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Version 0 of 1. GENEVA — Now that Luxembourg and Austria have given ground on bank secrecy rules, the spotlight has turned to Switzerland, a country famous for the anonymity it provides in equal measure to the rich, the famous and those who want to hide their money. More than four years ago, the Swiss made painful concessions to American authorities. But as impatience with tax avoiders spreads to a region where governments are desperate for revenue, the Swiss are bracing for a new onslaught on their cherished bank secrecy rules — this time from nations in the European Union. The pledges to share more bank account data — offered up first by Luxembourg, then by Austria at a European summit meeting on Wednesday — were made on the condition that countries outside the European Union, notably Switzerland, do so, too. As more traditional havens fall into line with demands for greater transparency, the Swiss have become more isolated than ever. Some analysts say that new concessions by the Swiss may now be unavoidable, though few expect those changes to happen overnight. The pressures on the Swiss and others have built as governments and the public, weary of austerity, force tax fairness to the front of European policy debates, casting a critical light on who pays and who does not. In that landscape, Switzerland still stands out. Swiss banks have been linked to political scandals in France, Greece and Spain recently. Secret Swiss accounts were said to have been used by politicians and the politically connected to operate slush funds, skirt taxes and stash away millions, stoking popular anger as citizens are asked to pay more taxes while accepting cuts to a full range of social services, including pensions and education. The recent gestures by Luxembourg and Austria further risk Switzerland’s position as the world’s largest private wealth management center, built up over decades by banks that have relied on the country’s studied political neutrality and legal stability to attract wealthy clients. “The decision by Luxembourg and Austria is probably the death knell for Swiss banking secrecy, because it really leaves Switzerland without any key ally in the European Union,” said Urs Ziswiler, who was Switzerland’s ambassador in Washington. “The E.U. might soon be in a position to demand as much as the U.S. got from Switzerland.” The consequences could be devastating if the Swiss do not step carefully, others warned. “Switzerland is now in a very bad position, because it failed to negotiate properly the transition to a new world in which you can’t keep secrecy toward the tax authorities,” said Carlo Lombardini, a Geneva-based lawyer who specializes in banking litigation. Without any banking secrecy rules, funds under management in Switzerland “could easily shrink 20 to 40 percent,” Mr. Lombardini predicted, reducing Switzerland’s financial industry to “what you would expect for a country of its size.” Still, some Swiss politicians and bankers see a silver lining. Other offshore centers and havens have faced the same pressures, as government crackdowns and data leaks have exposed tax evasion at the highest levels. Last month, the International Consortium of Investigative Journalists, based in Washington, released 2.5 million files detailing offshore bank accounts and shell companies belonging to wealthy individuals and companies, mainly in the British Virgin Islands, the Cook Islands and Singapore. “If the tax evasion problem no longer becomes about Switzerland but is instead really seen as a worldwide issue, that could be a blessing in disguise, because Switzerland would no longer stand out as the ugly little duckling that it has been portrayed to be,” said Christian Lüscher, a lawyer and member of the Swiss Parliament. Until now, Switzerland offered cooperation with judicial investigations into money laundering, while also negotiating some tax deals bilaterally with the European Union’s member states. But as consensus builds within the bloc for greater transparency, that piecemeal approach may be difficult. For the Swiss, “the main aim has always been not to give up anything before others,” said Luc Thévenoz, director of the Center for Banking and Finance Law at the University of Geneva. Now, he added, “The Swiss banks and politicians must somehow negotiate the removal of banking secrecy in return for greater market access — and that is a real challenge for a small country dealing with an entity as large as the E.U.” Even though the tax transparency debate has now shifted to Europe, it was largely set off by Washington’s determination to stop Americans from evading taxes and to force Switzerland and other European nations to share banking data relating to American clients. In the case of Switzerland, the issue reached a tipping point in 2009, when UBS, Switzerland’s largest bank, agreed to hand over the names of 4,450 of its clients to American judicial authorities, as well as pay a fine of $780 million for facilitating their tax evasion. The disclosure by UBS of its American account holders was seen by many in the Swiss financial sector as a stunning breach of client confidentiality. “What UBS did in the U.S. was the beginning of the end for our secrecy,” said Mr. Ziswiler, who was Switzerland’s ambassador in Washington at the time of the UBS scandal. “The irony of history is that the biggest defenders of banking secrecy then offered on a silver plate the abolition of that secrecy through their own mistakes.” After UBS, the United States turned its attention to other Swiss banks believed to have helped American tax cheats. In January, Wegelin, Switzerland’s oldest bank, announced its closure after pleading guilty to helping American clients evade tax payments on at least $1.2 billion of assets. Swiss secrecy has also suffered as a result of some bank employeesselling stolen client data to foreign tax authorities. Among them is Hervé Falciani, a former employee of HSBC in Geneva, whose stolen database allowed tax inspectors in countries like France and Spain to pursue hundreds of wealthy tax evaders. This month, Spain’s national court rejected a demand to extradite Mr. Falciani to Switzerland to face trial for data theft. But the damage was already done for many depositors. For instance, the family of Emilio Botín, the chairman of Banco Santander and Spain’s most influential banker, agreed to pay about 200 million euros in back taxes to Spain after being named on Mr. Falciani’s list, in relation to money it kept hidden in Switzerland since the 1930s. Even if banking secrecy rules change, some Swiss say they feel their banks will retain some advantages. The country’s financial sector has remained relatively unscathed amid a deepening downturn and debt crisis in the surrounding euro zone. The convoluted European bailout in March of Cyprus, whose banks faced collapse after attracting vast amounts of Russian money, also shows Switzerland’s ability to attract money stretches well beyond maintaining secrecy, local bankers say. “People will not leave Switzerland to go to places with poor jurisdiction,” said Edouard Cuendet, secretary general of the Geneva Private Bankers’ Association. “The competition for us is much more Anglo-Saxon,” he added. “The U.S. has become very attractive for nondeclared clients, and New York has been developing as an offshore center, as has London.” For the Swiss, that development has prompted complaints. Bankers here bristle that even as American authorities have focused on the Swiss, they have not shown the same zeal when it comes to opening up their own banks and states to scrutiny. “Some of the countries that have been targeting our system have offshore centers that are far less transparent than Switzerland,” Mr. Cuendet said. ‘’Just look at a place like Delaware.” |