No longer hush-hush

Switzerland has now dealt the final blow to bank secrecy for foreign clients.

The shroud of secrecy that has long surrounded Swiss banking will soon be lifted, reports French daily Le Monde. As of 2017-’18, Switzerland has agreed to introduce an automatic exchange of data that will serve as the coup de grâce to a system inaugurated more than 80 years ago.

Le Monde gives an account of the tug of war that brought down the infamous veil. In 1934, Switzerland introduced its banking act, which made it illegal to divulge information on customers and any assets they might have in the country to unauthorized third parties. The inviolability of this principle was enshrined in article 47 of the act. Illicit money flooded toward Switzerland.

In 2010, in the wake of the financial crisis, the US dealt the first blow to Swiss banks’ principle of secrecy. Barack Obama’s Foreign Account Tax Compliance Act (FATCA) required foreign banks to identify past or present clients who were US citizens.

UBS, then the largest private wealth management bank in the world, was the first target. It was accused of helping 17,000 rich Americans hide nearly US$20 billion from the Internal Revenue Service between 2002 and 2007.

In March 2009, following a G20 and Organisation for Economic Cooperation and Development (OECD) injunction, Switzerland agreed to do away with all distinction between tax evasion and tax fraud. The following month, pressure increased a notch when the G20 countries declared that the era of bank secrecy was over and the OECD put Switzerland on its grey list of tax havens.

With the December 2009 Rubik deal, Swiss banks hoped to save their special status by proposing to maintain their clients’ anonymity while withholding the taxes they owed and sending those amounts to their respective countries. Austria alone bought the deal.

In 2012, scandals erupted in Germany when stolen lists revealed that tens of thousands of Germans had hidden money in Swiss banks.  

Finally, in 2014, Switzerland signed the agreement whereby agrees to the automatic exchange of information, to be implemented in phases in 2017 and 2018. From that point onward, financial information about bank customers will be dispatched at regular intervals to their home countries.