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Bloomberg
Two events this month may have finally brought the curtain down on secrecy rules that were the key to Geneva and Zurich’s private banking heyday, when foreign clients could come armed with suitcases of cash and their bankers would look other way.
Swiss tax authorities announced they’d shared details on 2 million accounts with other countries for first time as part of rules on information exchanges introduced last year. Then last week Switzerland’s Supreme Court said a former Julius Baer Group Ltd. executive didn’t break secrecy rules, ruling Swiss law didn’t apply at the Cayman Islands unit where he worked.
“Bank secrecy used to be sacrosanct even in Switzerland, but now with automatic exchange of information agreements kicking in and then this decision, we see that’s being steadily eroded,†said Kern Alexander, chair of finance and law at the University of Zurich.
It’s been a rough few years for Switzerland’s banks and confidentiality. US prosecutors in 2013 opened a program allowing Swiss banks to come clean on American clients evading taxes in exchange for leniency.
Credit Suisse Group AG paid a $2.6 billion fine and more than 80 other Swiss banks coughed up over $1.3 billion in penalties. The 272-year old Wegelin & Co. was forced to close after striking its deal with the US.
Vontobel Holding AG, a Swiss bank founded 94 years ago, has taken a different approach. It’s registered an entity with the US Securities and Exchange Commission that focuses on wealthy clients liable for US taxes, Bloomberg reported. It took over $1.2 billion in US client assets from a Swiss rival.
While the bad October started with government’s data transfers, the Baer ruling raises difficult questions about how Swiss banks can in future control the flow of information out of tax havens around the globe. Len- ders had been able to safeguard foreign clients’ anonymity thro-ugh the nation’s legendary bank secrecy laws. According to Article 47 of the Swiss Banking Act first crafted in 1934, anyone who divulges clients’ secrets can be sentenced to five years in prison.