LONDON: When Switzerland pushes the button to send data on offshore bank accounts to foreign tax agencies this fall, it will be doing what was once virtually unthinkable: abandoning the absolute secrecy once afforded to anyone parking their cash in Zurich or Geneva.
The automatic exchange of account information due to take place with other European countries is the last chapter in a saga that began with the arrest of former UBS Group banker Bradley Birkenfeld in 2008, cost Swiss banks more than $6 billion in fines, and prompted criminal probes and travel bans for bankers, report agencies.Of the more than 80 institutions to wind up in the crosshairs of US authorities — among them UBS, Credit Suisse Group, and Julius Baer Group — Basler Kantonalbank and Zuercher Kantonalbank, are the latest to settle with the Department of Justice. Basler will pay $60.4 million, while Zuercher agreed to pay $98.5 million and both publicly owned banks admitted to helping clients conceal income and assets from the US government. Pictet and HSBC Holdings’s Swiss unit are still waiting to settle.
While banks have stopped accepting untaxed assets, the “economic war,” as UBS CEO Sergio Ermotti referred to the crackdown, ultimately didn’t end Switzerland’s appeal as a place for the world’s wealthy to park their money. It also didn’t sink the economy into recession, as a 2012 KOF Economic Institute report warned might happen.
“Supposedly” the end of banking secrecy was going to be “the death knell for Swiss banks — they would’ve lost their competitive advantage and gone out of business,” said Mark T. Williams of Boston University. “Ten years later, that is clearly not what happened,” he added. “I think Switzerland continues to be very strong in regards to asset management. As a tax haven, not so much.”
The secrecy statute, enacted in 1934, clearly helped the financial industry attract foreign money. The law stipulates that any banker found to intentionally disclose “secrets” obtained as part of their role could be jailed for up to three years or fined.