Switzerland has succumbed to US pressure and agreed to let its banks release information about their American clients who are suspected of tax evasion.
A Swiss government bill was put to parliament that allows its banks to hand over internal information to the US authorities. The move, which was outlawed previously, was approved to cooperate with US investigators and to help what they said was a prevention of continuing criminal activity.
I think everybody thought, and even the Swiss banks themselves thought, the US government enforcement authorities would go after the citizens themselves .... The fact is that it is clear that the citizen of the US, or the citizen of any country, has responsibility to adhere to the laws of his country. And what's happened here is that the US has put a responsibility in US courts on Swiss banks to enforce US law, which is kind of extraterritorial.
The Swiss government, hoping to save its banks from heavier punishment in the US for helping wealthy tax cheats, is sidestepping its own famed secrecy laws to let bankers disclose data to US prosecutors.
The Swiss decision has two key points: over the course of 12 months banks will be allowed to turn over general statistical information to American authorities; and more importantly, the US can seek concrete account details.
In 2009, the US brought a historic case against Switzerland's largest bank UBS. The Swiss banking giant was accused of conspiring to help 52,000 American clients evade taxes. UBS avoided prosecution - but at the cost of disclosing the names of around 5,000 US clients and paying a $780m fine. The case left Swiss banking secrecy intact, but pierced it for the first time and changed the way the US pursues offshore tax evaders.
Swiss banks have had a code of secrecy regarding their account holders for over 300 years. The code was enshrined in law in the Banking Act of 1934, when it became a criminal offence for bankers to divulge client information. The only expections are if accounts are used for things like drug trafficking, organised crime or insider trading, and if there is strong evidence of a crime, then a government agency (particularly a foreign one) can access account information.
Credit Suisse and Julius Baer are among the banks that have so far agreed to cooperate.
Eveline Widmer-Schlumpf, the Swiss finance minister, says the decision was taken to restore stabilty to Swiss banking. "We are convinced it’s a good, pragmatic solution that really helps the banks resolve this issue. What we’re really aiming for is that stability and calm finally returns, so our banks can go after their core business, which is providing good services."
So, is this a means of crime-fighting, or is it a breach of privacy? What does this mean for Switzerland’s famous banking secrecy laws? And what will happen to the billions of dollars outsiders invest in Swiss banks?
To discuss this, Inside Story, with presenter Mike Hanna, is joined by guests: Jean-Pierre Diserens, an economist and the general secretary of the Convention of Independent Financial Advisors (CIFA); and Kevin Hassett, director of Economic Policy Studies at the American Enterprise.
"We don't know the finer details of the legislation yet. What we have to be aware of it that there is an agreement somewhere and the US authorities or the IRS are requesting Switzerland to sign this agreement and then they will work out the details later. This for Switzerland would, or should, be unacceptable.
"When we look at all this pressure from the United States on Switzerland, to change its bank secrecy rules and to open
its books to the IRS, immediately the question is: 'Where is the reciprocity for this?' And we have to be aware that
the United States is the first competitor of Switzerland for global wealth management .... And when we look at the situation in which the US is right now, of course it is in their interest to agress their first competitors and to try to get that business back to the United States."
- Jean-Pierre Diserens, general secretary of the Convention of Independent Financial Advisors (CIFA)
Source: Al Jazeera