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TAX JUSTICE NETWORK -- PRESS RELEASE -- FOR IMMEDIATE RELEASE
FEBRUARY 14, 2013
For further info please contact: James S. Henry (+1 516 721 1452,) Jorge Gaggero (+54 11 4 7818754)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Putin’s Special Guest: Switzerland Attends Its First G20But we need Answers, and serious action- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -I. SUMMARY
This weekend Switzerland -- still one of the world’s biggest havens for tax evasion, dirty money, and the stashing of hundreds of billions of public wealth looted by “politically exposed persons (“PEPs”) and others from all over the world -- has been invited to attend its first G20 ever, courtesy of Russia’s President, Vladimir Putin.[1]
TJN wishes to condemn President Putin’s de facto endorsement of Switzerland’s key role in global financial chicanery.
We also respectfully request that the G20 seize this opportunity to demand fundamental Swiss reforms far beyond the modest reforms it has enacted so far[2], including (1) specific improvements in financial transparency; (2) tighter regulation of global private banking; and (3) much more effective international collaboration with respect to the repatriation of stolen assets, and (4) full repeal of its banking secrecy secrecy law, originally enacted in 1934.
II. BACKGROUND
A. Russia’s Swiss Relationship. It is perhaps not too surprising that President Putin, the current G20 Chairman, has extended this invitation to Switzerland. After all, Russia’s political elites, key exporters, and mafia kingpins have long availed themselves of the full menu of Swiss financial services, secrecy, and moral malleability. To this day Russia still trades much of its oil, gas, gold, and arms by way of the Alpine haven, where its elites also stash tens of billions in bank deposits, other financial assets, gold, and other precious assets. Since the late 1980s, senior Russian political officials and business leaders have also frequently been featured at the annual World Economic Forum in Davos.
B. Other G20 Members. It is more surprising is that the G20’s other 19 members have apparently acquiesced in President Putin’s apparent effort to whitewash Switzerland’s haven role.
This is especially true, given that every single G20 member—notably Argentina, Brazil, China, France, Germany, India, Indonesia, Italy, Japan, Korea, the UK, the US, Saudi Arabia, South Africa, Turkey, and Russia itself – not to mention the EU as a whole -- have for decades been direct victims of Switzerland’s banking secrecy and other forms of financial secrecy.
This includes tax dodging abetted by Switzerland’s largest banks, transfer mis-pricing and profit shifting to tax havens by several of the largest Swiss transnational corporations, and outright money laundering by Swiss agents on behalf of leading global criminal enterprises and PEPs.
In the case of G20 members:
¶ The US reportedly now has at least a dozen Swiss banks and scores of Swiss private bankers under investigation for abetting tax evasion, money laundering, and other financial crimes. Several of the largest, most prominent Swiss banks have recently been prosecuted and heavily fined for money laundering, LIBOR rigging, and facilitating tax evasion.
¶ Germanyand France have recently sent prosecutors into the offices and homes of the executives of UBS and Credit Suisse in both countries. Some Swiss bankers now fear to cross Switzerland’s EU borders for fear of arrest. One prominent leader of the German opposition recently described Swiss banks as “criminal organizations.”
¶ A recent whistleblower at the Swiss branch of a leading UK bank disclosed the existence of several thousand undeclared Swiss accounts owned by wealthy residents of a number of G20 countries – include several PEPs.
¶ French President Francois Hollande recently declared that France will not accept the Swiss “Rubik” plan, which is so riddled with loopholes as to be functionally useless, and which was designed to help criminals to continue to hide behind Swiss financial secrecy. Germany’s Bundestag also formally rejected the deal recently, for similar reasons.
¶ Brazilrecently told the Swiss bank UBS that it had to pay more than $1.2 billion dollars in back taxes and penalties. Another leading Brazilian entrepreneurs is now under investigation for evading millions in taxes with the help of Swiss-linked trusts.
¶ Indiahas had numerous public scandals related to undeclared Swiss bank accounts and gold deposits by its elite, which is among Switzerland’s top client groups. Indian media report that Swiss bankers have helped wealthy Indians stash huge amounts of undeclared gold wealth in offshore safe deposit boxes.
¶ There have also been numerous reports of Mexican, Turkish, and Argentine “PEPs” using Switzerland to hide corruption proceeds.
¶ South Africa also has a long history with respect to using Switzerland as a secret piggy bank for capital flight. During the apartheid era, for example, wealthy South Africans secretly exported hundreds of tons of gold to Switzerland in violation of sanctions. Most of this has never returned or been accounted for.
C. Other Developing Countries.Furthermore, to the extent that the G20 is concerned about economic development in poorer countries, Switzerland’s recent track record with respect to developing countries also continues to be scandalous. For decades Swiss banks have been leading players in the dubious business of gathering, secreting, and managing trillions of dollars of offshore financial wealth, much of it derived from the wealthy residents of the world’s poorest countries. As documented in TJN’s recent path-breaking report “The Price of Offshore Revisited” (July 2012), wealthy citizens in developing countries as a whole have accumulated more than $9 trillion of offshore financial wealth, most of it untaxed. From Thailand and the Philippines to Nigeria and Kenya, to Guatemala and Ecuador, Swiss bankers have played an important role in this decapitalization. Indeed, just last week, Credit Suisse bragged openly in its quarterly report about how it had increased its deposits from new clients in Latin America and Asia.
III. WHAT IS TO BE DONE?
Given Switzerland’s persistently sordid track record, notwithstanding some incremental improvements in recent years under international pressure, one might argue that there is a strong case for simply ejecting the Swiss delegation from the Moscow G20 meeting, full stop. After all, Switzerland clearly has a very long way to go before it can be considered to be a responsible member of the global financial community[i].
But we’d prefer to see the G20 seize the opportunity to make it absolutely clear to Switzerland—and to President Putin—that the world has had it with “funny business as usual.” In short, the G20 should seize this opportunity to help Switzerland clean up its act.
In particular, rather than just continuing to treat Switzerland as a respectable colleague, the G20 should insist on much stronger, enforceable Swiss commitments with respect to the key elements of financial transparency.
These elements include (1) participation in automatic information exchange, with developing countries as well as OECD members; (2) the adoption of strong country-by-country reporting requirements for Swiss companies; (3) much more efficient, timely processes for repatriating stolen assets; (4) greater cooperation with international tax enforcement; (5) much tighter regulation of private banking and corporate tax dodging practices; and (6) regular public audits of gold deposits, gems, bearer bonds, and other wealth that is owned by PEPs, and is under the control of non-bank asset manager or stashed in Switzerland’s ample private vaults, beyond the reach of tax authorities, bank auditors, and law enforcement.
In short, Switzerland’s participation in this G20 is somewhat ironic, given its track record. But it might also be a terrific opportunity for G20 members to demand that the Swiss government, its banks, companies, and asset managers turn over a new leaf.
In any case, there is no excuse for permitting Swiss officials to participate in this crucial global economic forum without being accountable for policies that have made a strong contribution to poverty, inequality, slow growth, and tax injustice.
If the President Putin and the G20 are really serious about “growth through trust and transparency,” as they claim to be, then Switzerland surely has some work to do before it can be trusted.
[1] Indeed, the invited Swiss delegate is the very same Finance Minister who has recently been roving the world, seeking to sign loophole-ridden "Rubik" agreements that essentially whitewash Switzerland's lynchpin role in global tax evasion and money laundering. While the UK and Austria have been seduced into signing such agreements, France, Germany, and the US have rightly all said no.
[2]Switzerland has recently made some very limited recent concessions on financial secrecy, under severe international pressure: notably in agreeing some bilateral information exchange with the United States, and to accept very weak OECD standards on information exchange (which make it so hard to obtain information as to be almost useless.) Switzerland’s famed banking secrecy, however, remains broadly intact, particularly with respect to developing countries.
[i] This is not to say that existing G20 members such as Britain and the United States are not also major players in the global system of offshore financial secrecy. They absolutely are. But that does not let Swiss bankers off the hook.
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