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Tax probe thickens Bank staff data handover grates in Switzerland

The Swiss government’s authorisation to hand over bank employee details to the United States as part of a large tax probe has riled banking circles and divided politicians back home.

In an unprecedented move this year, 11 Swiss banks were given the go-ahead by Switzerland to pass the names thousands of bank staff and consultants employees active in the American market onto the US Justice Department.

The French satirical weekly Le Canard Enchainé called it “a typically Swiss tragicomedy”, scoffing: “To escape the long arm of the American taxman, the kings of banking secrecy are handing over the names of their employees, who are now condemned to remain holed up in their cantons.”

In Switzerland, the tragicomedy is raising few laughs. Opponents believe the price for defending the principle of banking secrecy has become too high, saying it is yet another unacceptable concession by the Swiss government to the American authorities, and one which compromises national sovereignty and weakens the Swiss financial sector.

The concessions started in 2009, when the government had to come to the aid of Switzerland’s biggest bank, UBS, after US prosecutors targeted it for helping thousands of customers dodge tax in the US.

For the first time in the history of Swiss banking secrecy, authorities handed over the data of thousands of customers of a Swiss bank to a foreign state. Until then, information had only been released in very small doses, after a long-drawn-out procedure of “administrative assistance”, and only in cases of outright tax fraud.

In 2011, 11 banks active in Switzerland found themselves being investigated in the US for breaking tax law. They had, among other things, picked up a large number of customers dropped by UBS in 2009.

In December of that year, the Justice Department demanded banks hand over all documents about their operations in the US, including the names of staff members who were active in the American market. Then in April 2012, the government authorised the release of data in order to safeguard the interests of the banks.

No protection offered

Five banks have now delivered the names of thousands of their staff and consultants, who in many cases were not even informed in advance and could take no recourse. The event raised indignation not only in the banking sector, but among Swiss politicians of all stripes.

“Staff members have been betrayed in an abominable fashion by their employers, who could not or would not draw the lesson that had to be learned from the UBS situation,” said Social Democrat parliamentarian Jean Christophe Schwaab, who is also president of the French-language division of the Swiss Bank Employees Association.

In June and September, about ten parliamentarians presented a series of urgent requests for information from the government. In particular, they wanted to find out if it had got any guarantees from the American side, so that the data handed over would not be used to prosecute individual bank employees. There was no guarantee, was the government’s reply.

“Perhaps naively, I had the idea that, if it was exposing these people to danger, the government would at the same time take steps to protect them. My question was about this - precisely what action had been taken? And the government’s answer was: none,” says Yves Nidegger, of the Swiss People’s Party, who says that panic is now spreading in the banking sector.

“A number of bank employees are afraid to venture outside Switzerland. Some have even been warned by the management of their bank not to travel abroad,” claims Schwaab. “No-one can assure these employees that they won’t be arrested. This is the worst part: they may have to live with this uncertainty for years to come.”

No choice

Legal experts have been quoted as saying the handing over of names probably flouted legal tenets regarding administrative assistance, protection of data and privacy. The government’s authorisation, they say, may also violate article 273 of the Criminal Code (revealing a business or trade secret to a foreign organisation, either official or private).

For Finance Minister Eveline Widmer-Schlumpf, “the government had no choice”: by not allowing the banks to collaborate with American prosecutors it would have endangered many jobs and risked the closure of other banks. In January, the Wegelin private bank had to shut down its activities following an investigation in the US.

The government’s reasons have not convinced parliamentarians, who have asked their house committees to try to shed some light on the matter.

For the rightwing, national sovereignty is at stake. Nidegger noted: “the state cannot choose not to respect its own laws. Law is the only weapon a small country like ours has in dealing with others. If we fail to observe our own laws on our own territory, tomorrow not just the Americans, but neighbouring countries will want to impose their laws on us.”.

According to the People’s Party spokesman, Switzerland needs to resist international pressure so as to safeguard banking secrecy and defend its financial industry.

This view is not shared by the left, for whom Switzerland can keep a strong financial industry only if it rapidly adopts a strategy based on transparency and clean money.

“If today we are being attacked on all sides, it is because Swiss banks used tax evasion as a business model for too long, breaking the laws of other countries”, says Schwaab.

Commission supports government

A key parliamentary commission on Tuesday commented on the delivery of data, saying the government’s decisions were “understandable given the circumstances and difficult negotiations with the US authorities”.

It added that there were no indications that the government had acted unlawfully or had authorised the banks to break labour laws or data protection laws.

However, the commission said it would re-examine the files in greater detail to ascertain “whether further action was necessary”.

Also on Tuesday, federal data protection commissioner Hanspeter Thür called on the banks to grant employees access to the material that had been handed over, citing Article 8 of the data protection law.

Thur also said banks should inform employees in future of further data transactions and of the type of document and period to which they relate. If the employee objected to his or her name being given, he or she should be able to ask a court to perform a “balance of interests”.

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The story so far

In 2009 UBS had to pay a fine of $780 million for having helped thousands of customers dodge tax in the US.

In 2011 American prosecutors opened an investigation into 11 banks active in Switzerland also suspected of breaking tax laws in the US.

On December 9 the Justice Department called on the banks to provide all documents regarding their operations in the US by the end of the year, including the names of staff.

The Swiss government first refused to approve the request, because the American authorities were unwilling to guarantee immunity to the banks’ employees.

In April 2012, following American pressure and appeals from the banks themselves, the government authorised the handing over of the data to the US so as to safeguard the interests of the banks.

Staff members did not get a chance to challenge the handing over of their names, or even to get a copy. The banks have allowed them to see the information handed over.

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(Translated from Italian by Terence MacNamee), swissinfo.ch


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