Swiss banks: private or secret?
Geneva — It seems that whenever an international scandal involves hidden financial treasures, otherwise-quiet little Switzerland finds itself in the news - to its chagrin. Fugitive Marc Rich, deposed dictators ``Baby Doc'' Duvalier and Ferdinand Marcos, inside trader Dennis Levine, and now arms dealers in the United States-Iran imbroglio: All have in recent months found their Swiss bank accounts the source of much international speculation. And the Swiss, to their dismay, find themselves once again trying to explain and defend their banking laws.
The Swiss protest that their laws are fair - but the plaint tends to go unheeded. There is too much romance associated with numbered accounts, gold under the streets of Zurich, and mysterious, wealthy clients of the Bahnhofstrasse, Zurich's banking street.
Nevertheless, the issue of banking secrecy has been a delicate one for the Swiss in recent years. The US has put pressure on Switzerland to provide more help in solving tax-evasion cases. Most recently, the US and Britain have been insisting that the Swiss cooperate on insider trading. One British diplomat was blunt: ``Any such discussions must include the Swiss.''
The Swiss are proud of their laws, which are highly protective of the right to privacy. But the country has been stung by growing criticism that it is a dumping ground for dirty money. Foreign pressure fueled the conflict at home in the early 1980s. In 1984, a public referendum calling for a change in the 50-year-old secrecy law was soundly defeated, but only after much spirited public debate.
That secrecy law is currently protecting information about Swiss accounts that may have been involved in the US-Iran arms deal. No Swiss law has been broken in any transfer of funds, and so no request for information can be made. Andreas Hubschmid, secretary of the Swiss Bankers Association, says, ``Giving government money to the contras [or Nicaraguan rebels] is not a crime here. There is no parallel sanction in Switzerland.''
The Union Bank of Switzerland seemed to be implicated when a bank officer's business card surfaced, but UBS, with unusual candor, says it does not have the accounts.
``That link was thoroughly checked,'' says spokesperson Beatrice Bondy, ``and UBS is not involved. That was a purely private account and has nothing to do with Iran or the contras.''
Anyone can open a numbered account, which is simply a normal bank account handled by number rather than name, and only a few bank employees know the name behind the number. Swiss law requires a bank to ascertain, however, that a new account is being opened by someone who will not use it for criminal activity as defined by Swiss law. For foreigners, ``we have mutual- assistance treaties which are based on the principle of double criminality - is it a crime under the laws of both countries,'' says Mr. Hubschmid. Insider trading, for example, is not a crime in Switzerland, although this will probably change in 1988.
Criminality has been the issue in many cases where the Swiss and foreign governments have been at loggerheads. Until dictators with Swiss accounts started tumbling, the most common examples were those where the Internal Revenue Service was after a tax evader. The Marc Rich affair in 1983 is a classic case. The US demanded information on his Swiss bank accounts, and the Swiss refused because tax evasion is not a felony in Switzerland (or for that matter, in many countries on the Continent). But tax fraud is. Once the IRS investigation showed fraud, the Swiss cooperated.
Absconding with national funds is also a crime under Swiss law, so the new Haitian government had no trouble persuading the Swiss to freeze Jean-Claude Duvalier's accounts when he fled to France in February. The situation was slightly different when President Marcos left the Philippines in a hurry. Corazon Aquino's new government did not immediately request that Marcos's Swiss accounts be blocked. The Swiss federal government took the unusual step of initiating the freeze itself. Swiss banks were outraged. At issue was the role of Switzerland: The law calls for ``neutral assistance'' in criminal investigations, and to the banks that means a passive and not an initiating role. ``The Swiss authorities did it themselves because of fear for the Swiss image abroad,'' says Hubschmid.
Foreign pressure is partly to thank for more openness in Swiss banks. But changes in international banking have created a need for change from within the Swiss banking community. A shift away from a base of wealthy private investors to institutional ones means that what happens outside the country has more of an impact here. The Swiss may be more open about some things, but those who like their privacy will probably still find Swiss bankers more tight-lipped than most.