Financial Transparency Coalition

Could we be seeing a return to the bad old days of Swiss Banking?

A right wing party in Switzerland, the Swiss People’s Party, has launched an assault on the automatic exchange of banking information, according to Swiss Daily Newspaper Tages Anzeiger.

Starting next year, Swiss Banks will need to inform tax authorities in 38 countries if one of their citizens opens up an account with the bank. The 38 are mostly members of the EU with a few other developed countries.

The SVP, which is the largest single political party in the Swiss Parliament, and a member of the governing coalition, is seeking to stop Automatic Information Exchange being extended to a further 41 countries.

Their argument is that many of these countries are corrupt and say that corrupt tax officials could leak information about their citizens’ wealth to criminal gangs, who could engage in violence or intimidation to extort money from Swiss bank account holders.

In particular the SVP objects to automatic information exchange being extended to Argentina, Brazil, China, India, Indonesia, Colombia, Mexico, Russia, Saudi Arabia, South Africa and the United Arab Emirates.The SVP want countries to obtain a minimum score on Transparency International’s Corruption Perceptions Index before the country will exchange information with it.

The issue is coming to a head on Tuesday 15 August when it will be considered by the country’s Economic Commission. Whether the SVP, with their allies the CVP, will be able to block the extension is not yet known.

The attack on the further extension of automatic information exchange is being led by Thomas Matter, a national councilor for the SVP, and himself a private banker. In 2006 Thomas resigned as CEO of the bank Swissfirst after it came under investigation for insider dealing involving a merger he engineered. Mr Matter claimed all the transactions made were above board.

A history of frustration

If the SVP are successful, it would not be the first time that the Swiss government has tried to frustrate developing countries from accessing Swiss banking data.

To protect their banking industry, the Swiss lobbied the OECD to impose restrictions on the exchange of information, such as requiring that developing countries share information on their banks with Switzerland before they can access Swiss data. Although ‘reciprocity’ sounds fine in principle, this was always nothing more than a thinly veiled delaying tactic. We can’t imagine many Swiss citizens hide their money in Ghanaian banks. Yet the whole world puts money into Switzerland.

The Swiss were also successful in lobbying to limit the use of banking data for tax purposes only, prohibiting its use to tackle money laundering and corruption.

Finally, Switzerland delayed the implementation of automatic information exchange by a year to 2018 for European countries, and to 2019 for others – which is why the country is having this debate about excluding countries now in the first place. Most other countries are already exchanging information starting this year.

Facilitating corruption

That automatic information exchange with Switzerland may be blocked to anyone other than a small group of mainly European countries is of course a great concern. Automatic Information Exchange is an important means of detecting tax evasion. A crime that countries the SVP would argue are “corrupt” are most often the victims of. Victims of crimes facilitated by Swiss banks and other havens of financial secrecy.

But rather than help governments to solve these problems by stopping criminal elements from using Switzerland, the SVP cast doubt on the integrity of these governments themselves, and use that argument to try to keep Switzerland’s door open to the corrupt.

The end result, is that rather than taking a stand against corruption, it is almost as if the SVP are openly seeking to make Switzerland a haven once again for corrupt money from around the world.