An Analyst: The French writer and philosopher Voltaire wrote in 1894, “If you see a Swiss banker jumping out of a window, follow him, for sure there is something to be gained.”
Switzerland has a lot of reputation. Swiss chocolate is the best in the world. The country also has a reputation in heavy industry. If you want to eat cheese, you have to go to Switzerland. The country is called the capital of the world’s banking sector. Let’s do a little slander. The most reliable place to keep black money is Switzerland. The reputation or notoriety of Swiss Bank is world class.
The law of this country is to keep the information of bank customers secret. That is why this Swiss bank is a great place to hide the money of corrupt military-civilian rulers-dictators, politicians and dishonest businessmen of the developed world including Africa, South America and Asia. There is no greater place in the world to hide money or wealth.
Lately, however, questions have been raised about the growing pressure on the Swiss banking system. As a result, Switzerland has had to move away from the privacy law. At the end of the year, the country’s central bank released an account of the money deposited. Bank account information kept by the citizens of Bangladesh is also available there. This is also a kind of progress. But now many countries have also agreed to get customer information. The question is, is the Swiss bank losing its glamor? Is Switzerland no longer a safe place to hide money?
Swiss Bank: How to start
The history of the Swiss banking system is quite old. Swiss banks, secret money and privacy – these three issues are also intimately involved. And this secrecy dates back to the beginning of the seventeenth century. The Great Council of Geneva Bank enacted the Privacy Act in 1813, primarily to protect Europe’s elite. Religion also had a role to play here. The banks of neighboring France were largely occupied by Christian Protestants. Catholics were not interested in keeping money in these banks. The then Catholic king of France also began to keep money in Swiss banks. Financial security was further strengthened in the 180’s when money held in Swiss banks was brought under insurance. When Switzerland gained the status of a neutral country in 1815, the inflow of money into the Swiss bank increased a lot.
Business is booming in World War II
Basically, the two world wars made the business of the Swiss bank a success. During World War I, Swiss bankers began touring France to advertise their respective banks. The goal is the country’s elite and rich class. And the main attraction in the advertisement was the word of the Bank Privacy Act. War creates uncertainty, which is a big cause of economic crisis. As a result, a lot of money started coming to the Swiss banks. Again, many European countries imposed new war taxes to raise money for the war. This further increased the business of Swiss banks. At this time the rich people are increasing the crowd in the Swiss bank just to evade taxes.
In 1934, Swiss Bank took another step in protecting privacy. Earlier, leaking bank customer information was considered a civil offense. The Swiss Federal Assembly makes new laws. Under this law, leaking customer information is considered a criminal offense. The new law is seen as a milestone in the confidentiality of bank customers’ information. At that time, France and Germany raided the branches of Swiss banks to stop tax evasion of their citizens. Many secret names were leaked. As a result, confidentiality laws are tightened.
Hitler also kept money
The rise of the Nazi party and Hitler in Germany and his anti-Semitic attitude further boosted the business of Swiss banks. The Swiss banks at this time worked to protect the wealth of the Jews from the Nazis. Of course, business interests are involved. Wealthy Jews began to keep their wealth in Swiss banks. At the same time, they took measures to keep the money and gold of the Nazis and their allies in a vault under the ground. It is said that before the extermination of the Jews, Nazi leaders confiscated their wealth and hid it in Swiss banks. Many influential Nazi members even forcibly wrote off the assets held in Swiss banks in their own names.
Adolf Hitler also kept money in the Union Bank of Switzerland (UBS). It amounted to 1.1 billion Reichmarks (then the German currency, in 1948 it was replaced by the Doysmark). After the Second World War, when various measures were taken to recover the wealth of the Jews, the pressure on the Swiss banks increased. In the aftermath of the 1990s, the United States formally demanded the return of Hitler’s money. UBS also refunds the equivalent of Euro 800 million. If there is no ownership and it is confiscated, there is a specific law on how much money will be returned to an authority. It is said that Hitler considered occupying Switzerland in 1940 to protect the wealth of the anti-Nazis. Although later it did not work anymore.
ChristophMayley was once a security guard at UBS. In 1997, he reported as a whistleblower that the bank had burned all documents during the Holocaust, without any evidence of ownership of the assets. If there are multiple cases in this regard, an agreement has to be reached with the families of the murdered Jews. For this, UBS has to pay 125 crore dollars and ChristophMaili gets seven and a half lakh dollars.
The story of Birkenfield
The situation began to change after the onset of the 2008 global economic downturn. At this time the pressure on the Swiss banks is increasing. On December 3, 2006, the maximum penalty for violating the bank’s privacy law was increased from six months to five years. But before that, another American citizen gave a big push.
The incident took place in 2006. Bradley Birkenfield’s story has gone down in history as ‘Birkenfield Disclosure’. Bradley Birkenfield has been instrumental in reducing the Swiss bank’s booming business. Berkenfield, a U.S. citizen, worked for the Swiss bank UBS. He was the first to break the Swiss banking secrecy law. He joined UBS in Geneva in 2001 to take charge of asset management. He resigned from the bank in 2005. Earlier, he had seen some internal documents made by the bank, which were prepared by the law department of the bank. The document outlines the responsibilities of asset managers who work with U.S. clients.
The document said that in case of any deviation, the organization will not be responsible, the asset managers will have to take all the responsibility. Birkenfield raised the issue with his superiors in a letter, but received no response. He then resigned. Because it was Birkenfield who arranged for American citizens to keep money in Swiss banks. And to attract rich Americans, Swiss banks used to organize various events including yacht races.
In 2006, Birkenfield contacted the US Department of Justice. He wants to provide information under the Whistleblower Act. According to the law, if someone provides inside information and the tax evasion is recovered, the whistleblower will get 30 percent of the total collection. At the same time, he wants impunity from any kind of trial. However, when negotiations with the judiciary failed, Birkenfield contacted the US Securities and Exchange Commission (SEC). The FBI then launched an investigation.
The investigation found that a large number of US citizens’ money was deposited in Swiss banks, through which a large amount of tax evasion has taken place. Two big banks were accused for this. Such as UBS and LGT Group. Of these, 19,000 U.S. citizens had 1.6 billion to ???? 2 billion deposited in UBS. Despite the leaked information, the U.S. Department of Justice has just begun prosecuting Birkenfield. Egan Olenikoff, one of the country’s richest men, has been charged with aiding and abetting tax evasion. In 2009 he was sentenced to 40 months in prison in Birkenfield. He was released from jail on August 1, 2012. However, on September 11 of the same year, he received a Euro 104 million reward as a whistleblower under the Birkenfield Act.
UBS was fined Euro 60 million for the incident, forcing them to pay it. Several countries have launched investigations into allegations of tax evasion against Swiss banks. France, Germany, Belgium and Israel launched similar investigations, which are still ongoing. Swiss banks are also going to pay fines for this.
On February 19, 2009, US authorities filed a lawsuit against UBS. The bank was asked to provide information on 52,000 US citizens in the case. After that, Hillary Clinton was appointed as the Secretary of State. When he visited Geneva in March of the same year, the matter was settled. It was then decided that the Swiss Financial Market Supervisory Authority (FINMA) would provide information to 4,450 people out of 52,000. However, this was widely criticized in the United States itself. Senator Carl Levine presided over the hearing. He described it as “disappointing”.
Many countries have taken similar initiatives. In 2014, the 48 G20 and OECD countries agreed to take a new approach to this end. A uniform process of information exchange or a framework of ‘common reporting standards’ is developed. Basically it is an automated information exchange structure or automatic exchange of information system. So far, about 100 countries have signed agreements under this framework. As a result, they are automatically receiving information from Switzerland through the appropriate process. It has been effective since 2016. In addition, in 2015, the Swiss government signed a new agreement with Germany, Austria and the United Kingdom. Its name is Rubik’s Agreement. It says that if a customer pays the tax due, Swiss Bank will not disclose their name. Much like the policy of whitewashing black money.
The Swiss Bankers Association, however, still writes on its website that the right to privacy is an integral part of the Swiss legal system, which is protected by the federal constitution. However, keeping money related to crime will not get this protection. And in this case, there is no obstacle in disclosing the identity of the customer. However, legal proof of the customer’s involvement with the crime must be shown.
Bangladesh is not in agreement
However, Bangladesh has not yet taken part in this process. India has already started getting information under this framework. Pakistan, even the Maldives, is a signatory to the framework. Common Reporting Standards (CRS) is a financial sector issue of a country. For this, the stability of the sector is a little important prerequisite, just as the financial sector has to follow all kinds of international laws and standards. The crisis of Bangladesh is here. Here the definition of defaulted loan is changed based on the personal opinion of some or the other, even if the finance minister changes, many things change, various types of financial scandals do not take action. Therefore, compliance with the Common Reporting Standards (CRS) will require major reforms in the tax system and the financial sector. Without maintaining uniform international standards in these areas, Bangladesh will not be able to participate under the automatic information exchange structure.
Only speeches and statements
Many must have thought that after the fall of HM Ershad, there was a lot of talk about recovering his smuggled money. It was said that Ershad’s money was kept in a Swiss bank. For this, the then caretaker government hired a US company called Fire Fox. But there was no solution. At that time, of course, there was no policy to disclose customer information in any way. As a result, it cannot be said that Ershad’s money was not kept there.
The account of money kept by Bangladeshis in Swiss Bank was first known in 2004. The people of Bangladesh can know this information from the annual report of the Swiss National Bank, the central bank of the country. However, writing about this started from 2014. On June 26 of that year, Prime Minister Sheikh Hasina told parliament that her government would send a request to the Swiss government for a list of depositors. Earlier in the day, at the Awami League’s founding anniversary function at SuhrawardyUdyan, he also asked to find out how much money was kept in the Swiss bank.
After the Prime Minister’s remarks, a letter was sent from Bangladesh Bank’s Bangladesh Financial Intelligence Unit (BFIU) to sign a Memorandum of Understanding (MoU) with Switzerland’s Financial Intelligence Unit (FIU). In July of the previous year (2013), BFIU became a member of Egmont Group. The Egmont Group is an international forum made up of Financial Intelligence Units (FIUs) from around the world that deal with information on money laundering and terrorist financing. But so far the progress is the same.
A meeting of the working committee was held on 15 October 2020 to formulate and implement guidelines and policies to prevent money laundering and terrorist financing. The minutes of the meeting said, ‘Abu HenaMoha, Chief Officer of Bangladesh Financial Intelligence Unit, in November 2019 to review the strategies pursued by various countries to take effective initiatives including exchange of information to recover money laundered in different countries of the world including Swiss Bank. A committee headed by RaziHasan was formed with representatives from the Anti-Corruption Commission, the National Board of Revenue, the Ministry of External Affairs, Customs Intelligence and the Department of Investigation. The committee deals with cases related to the recovery of money laundered from Bangladesh to different countries of the world, the existing legal and institutional framework, various complexities of information exchange, A report has been prepared to review the laws of different countries and determine the strategy for effective rescue operations. In other words, the work of collecting information is still going on, nothing is happening.
Swiss Bank is losing its glamor
The number of Swiss banks has only increased in the era of booming business. But as the pressure increases, the number of banks decreases. For example, in 1996 the number of Swiss banks was 403, in 2019 it has decreased to 156. So far, 85 Swiss banks have been fined ? 5.5 billion for violating the law. One of the largest banks, UBS, was fined ?? 80 million in 2009 and another, Credit Suisse, was fined ? 2.8 billion in 2014. The share of Swiss banks in global asset management has also declined.
The biggest pressure on Swiss Bank was from 2009 to 2014. At this time 13.5 billion dollars has left Switzerland. Apart from that, the rival of Swiss Bank has also stood. The banking systems of the Cayman Islands, Panama, the British Virgin Islands and the Bahamas have also become popular with the rich. The Cayman Islands are now number one on the Financial Privacy Index. This is followed by the United States, Switzerland, Hong Kong and Singapore. Citizens of Bangladesh are now taking advantage of citizenship instead of investing in countries like Malaysia, Singapore and Canada without keeping money in Swiss banks.
Even then, it cannot be said that the Swiss bank is losing its pomp or glory. The big reason for this is reliability. Switzerland is a neutral and stable country. Another reason for the survival of the Swiss bank is its interest rate policy. Leaving money in Swiss bank but no interest is available. Almost zero interest, sometimes negative interest rate. Even so, owning one is still beyond the reach of the average person. Because, the rate of inflation in Switzerland is even lower. As a result, the total profit is two and a half to three percent, which is much higher than other countries.
Due to pressure from the United States and Europe, Swiss banks are now focusing more on emerging economies, especially Asia. UBS and Credit Suisse are now at the top of Asia’s asset management. They are now looking at the countries where the number of middle class is increasing and the number of rich people is increasing. The name of Bangladesh will also come up in this list one day. But there is no way to stop money laundering in Bangladesh, there is no initiative. So no matter how lavish the Swiss bank is, there will be no shortage of opportunities and places for smugglers to smuggle money.
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