Financial Transparency Coalition

Swiss authorities are investigating allegations that a Swiss official accepted a bribe from an American UBS client. From Reuters:

Swiss prosecutors are investigating allegations that an unamed Swiss official took a bribe from a U.S. client of UBS, they said on Wednesday.

Federal prosecutors said in a statement the tax authority had filed charges against unknown persons which it was now investigating without giving further details.

Word of the investigation came just one day after a former UBS client plead guilty in US court to filing false tax returns and evading taxes on roughly $8 million.  The client, Jeffrey Chernick, also admitted that he had been convinced by his Swiss banker to bribe Swiss government officials in order to keep them from disclosing his accounts.

What’s even more interesting, however, is the fact that Swiss authorities have announced that they cannot currently pursue the case because the allegations are not specific enough.  From the Wall Street Journal:

Switzerland’s justice department said Wednesday that allegations a high-ranking Swiss official was bribed by a Swiss bank client aren’t specific enough to pursue a case.

The Justice Ministry said it is closely following the allegations, which emerged as a result of a legal case between Swiss bank UBS AG (UBS) and the U.S. Internal Revenue Service, and will carefully evaluate any further information which becomes available, but that allegations aren’t enough to action.

The veracity of these allegations and the outcome of the US case against UBS may be still be uncertain, but one thing is clear – this is a bad development for Switzerland on two levels:

1. The simple fact that a Swiss government official may have accepted bribes to keep an American citizen’s fraudulent accounts concealed from American authorities really hurts the image and moral standing of Swiss banking.  This is just one more blow to the reputation of a country that until now has traditionally ranked low on Transparency International’s corruption index.
2. The fact that Swiss authorities seem either unwilling or unable to pursue these allegations is damning for the image of Swiss justice – particularly as it follows closely behind the news that Swiss authorities were unable to stop the ill-gotten assets of the late Zairean dictator Mobutu Sese Seko from being repatriated to the government of the Democratic Republic of Congo.

The reputation of Swiss banking has been permanently tarred over the past couple of years – and for good reason. Banking secrecy enables terrorists, tax evaders, and reckless AIG executives. Slowly, the true colors of banking secrecy are beginning to show.