Financial Transparency Coalition

The Prince of Liechtenstein, Hans-Adam II, has enraged German Jews (and rightfully so) by reiterating the misnomer that banking secrecy was created to protect the Jews from the Nazis during the Holocaust. However that’s only half of his problem; unlike most other disseminators of this untruth, he then pointed his finger back at Germany (who is currently pursuing tax-evaders into Liechtenstein) and outrageously suggested that they should consider their own past. From the AP:

The prince took aim particularly at Germany, which has been pressuring Liechtenstein to clamp down on confidential banking practices that it claims allow wealthy Germans to evade taxes.

“We and Switzerland saved many people, especially Jews, with banking secrecy,” Hans-Adam II told the Liechtensteiner Volksblatt. “Germany should clean up its own act, and think about its past.”

The prince noted how some Jews were able to buy their safety during the Holocaust by using money they had safely deposited in Switzerland or Liechtenstein. Secrecy rules also helped people persecuted by communist governments and “continues to save life … in Third-World countries run by bloodthirsty dictators,” he said.

This is a reckless argument. Aside from the fact that it’s almost never a good idea to invoke the Holocaust in support of your argument, banking secrecy was actually NOT created to protect Jews and other minorities from the Nazis. As Bruno Gurtner, Chair of the Global Board for Tax Justice Network, notes in his March letter to the Financial Times:

This is a big myth. The argument about [banking secrecy] being set up to protect Jewish money first appeared in the November 1966 Bulletin of the Schweizerische Kreditanstalt (today Credit Suisse). The main reason bank secrecy was strengthened in 1934 was a scandal two years earlier, when the Basler Handelsbank was caught in flagrante facilitating tax evasion by members of French high society, among them two bishops, several generals, and the owners of Le Figaro and Le Matin newspapers. Before that, there was professional secrecy (such as exists between doctors and their patients), and violation was a civil offence, not a criminal one as it is today. Swiss bank secrecy has always been an effective way to attract foreign money. (Bold emphasis is my own, italic emphasis is Gurtner’s)

Don’t believe Mr. Gurtner?  Many other news sources support this fact.  Take this Reuters article as an example:

But [Switzerland’s] code of secrecy — which local myth inaccurately claims was introduced to protect fleeing Jews — is as controversial as it is protective.

The notion that banking secrecy was invented to protect the Jews from the Nazis is a myth, and to perpetuate this misconception is truly vile.  While banking secrecy was not, in fact, invented to protect the Jewish people, it is a fact that many Jews were able to hide their money in secret Swiss bank accounts.  But even this argument is a double-edged sword, as Swiss banking secrecy also acted as a conduit for Nazis to conceal their money from the outside world.  Moreover, many banks that did take money from Jews who were trying to hide from the Nazis later refused to give it back after the war.  I’m sorry, Prince Hans-Adam, but the moral high-ground belongs with those who wish to end banking secrecy.

But the Prince doesn’t just insult the Jewish people by stoking the memories of the Holocaust.  He then puts on his hypocrite hat and blames Germany for the financial crisis:

“Beyond that, Germany and many other countries have an unbelievable mess with their state finances,” Hans-Adam II said, referring to a traditional argument here that poor governance and high taxes lead to tax evasion, not banking secrecy. “These must first be put in order. They have been unsuccessful until now in doing this. The financial crash basically goes back to this alarming disability.”

It is impossible to deny that financial powerhouses like Germany, France, the UK, and the US made some poor decisions and share some responsibility for the financial crisis.  However, low-regulation, secrecy jurisdictions like Liechtenstein, the Isle of Man, Switzerland, the Cayman Islands, and many others played an incredibly significant — if not the most significant — role in the financial collapse.

The statements made by the Prince of Liechtenstein are those of a panicked person who sees the illicit financial system which brought him much personal wealth begin to slip away: they are the verbiage of desperation.  We’re making real progress.