Roth firm on banking secrecy in face of EU pressure

Urs Roth is prepared to try to find solutions with EU over tax concerns swissinfo.ch

The Chief Executive of the Swiss Bankers Association, Urs Roth, says the most important issue facing the Swiss banking sector is the European Union's plan to harmonise its tax system.

In an exclusive interview with swissinfo, Roth said that another priority was to make the non-banking sector comply with the anti-money laundering law, which Switzerland introduced in 1998.

Roth said Switzerland would cooperate with the EU in taxing its citizens. However, like Swiss finance minister Kaspar Villiger, he emphasised that participating in any exchange of bank customer information was out of the question since it would violate Swiss banking secrecy laws.

The EU has been concerned for some time about how best to tax the interest paid on cross-border savings accounts held by its citizens in its member states.

At their meeting in Feira, Portugal, in June 2000, EU finance ministers decided on a system of information exchange, rather than allowing EU member countries to choose between such a system or the alternative of a withholding tax.

Roth said the EU’s system would only work with the cooperation of financial centres both inside and outside the EU. Brussels has been putting pressure on such centres, including Switzerland, to introduce “equivalent measures” to prevent a massive outflow of private funds from its member countries.

“Switzerland and the Swiss banks are well aware and understand that European Union member countries want to safeguard their tax income,” he said.

“We are quite prepared to try to find solutions which on the one hand safeguard our interests in maintaining privacy and on the other help the EU collect taxes,” he added.

Earlier this year, the Swiss government published the results of a feasibility study into a paying agents tax system under which Switzerland would collect taxes on behalf of the EU and deliver the proceeds to Brussels.

“I believe this is a very good proposal combining the interests of Switzerland and those of the EU,” he said.

As is the case with the Swiss withholding tax, the state would receive its money but without bank customer information being passed on to the authorities.

The Bankers Association has also made it clear that Switzerland’s willingness to search for solutions pre-supposes that the system introduced by the EU applies not only to EU countries and their dependent or associated territories, but also to the main financial centres outside the EU.

“As our government has said on many occasions, any system involving the automatic sharing of bank customer information is simply not acceptable for Switzerland. Financial privacy in Switzerland is not up for discussion,” Roth said.

Commenting on the current debate in Switzerland surrounding the enforcement of the 1998 anti-money laundering law, Roth said that problems in implementing the law could have a negative effect on the financial sector as a whole.

The Money Laundering Reporting Office revealed last week that the authorities had so far failed to secure one conviction out of the hundreds of cases it has reported. It added that while the banks were doing a good job of reporting suspicious transactions there were still weaknesses in the non-banking sector.

“It must be absolutely clear that implementing and enforcing the law and sorting out the issues at the control authority is a major priority,” Roth told swissinfo.

“The banks have a long tradition of fighting money laundering and have gained quite a large degree of experience since 1977 when the first due diligence convention was implemented here.”

He added that last year’s case involving the freezing of assets in Switzerland of the late Nigerian dictator, Sani Abacha, was a good example of the effectiveness of Swiss anti-money laundering measures.

“We are of course pleased when our efforts are praised but I must admit that we get a bit puzzled when we are singled out for criticism when many other countries are far behind us in their anti-money laundering efforts,” he said.

Referring to the non-banking sector, he commented: “It is not a surprise that it takes some time to fully enforce and implement the law because completely new sectors such as hotel owners are subject to it. People have to learn to apply it and gain experience. Switzerland is carrying out pioneer work here, and all pioneer work is difficult.”

As the professional body representing the entire banking industry, the Swiss Bankers Association still had a key role to play, Roth told swissinfo.

“I believe that the debate about Switzerland and the Second World War clearly showed that the Bankers Association is absolutely vital as a trade association, as a marketing tool for the Swiss banking sector and as a lobbying organisation,” he said.

He added that the most important lesson learned by the Association from the Holocaust debate was that issue management was “absolutely crucial”.

“We have implemented new issue management tools, including the creation of the Executive Committee ‘International Financial Centre Switzerland’. Its tasks are to identify issues that might come up in the future, discuss strategies, take position, and communicate with all parties concerned, including the political authorities in Switzerland,” he said.

Roth told swissinfo that the banking industry was “fit” to face the challenges of the future, with a highly motivated, well-trained and competent workforce.

“Through its training work, the Swiss Bankers Association promotes the highest banking standards possible to ensure that the high level of confidence Swiss banks enjoy amongst their Swiss and foreign customers remains more than justified,” he said.

by Robert Brookes