12

The term "Money in the Swiss Banks" is used as a synonym to monetary corruption (black-money, money laundering, offshore wealth, and so on).

  1. Indian black money in Swiss banks
  2. $200bn of Pakistan in Swiss banks
  3. Swiss bank hid money for suspected criminals

How can Switzerland maintain a banking system which is unaccountable (almost) to the rest of the world?

  • 5
    They do cooperate with US and EU tax authorities in some ways through treaties and (Swiss) laws. Is the question why don't they cooperate more with the places they do or why don't they work closely with the places they don't? – user9389 Aug 1 '17 at 20:02
  • 3
    "How does the country that keeps all the politicians' dirty money hidden ensure that those same politicians don't try to tear down the banking system with all their money in it?" – A Bailey Aug 1 '17 at 20:27
  • 4
    If you read the articles you link to, you will find that they, in fact, can't maintain that system due to how things are changing mostly with EU regulations. Wikipedia covers it: en.wikipedia.org/wiki/Banking_in_Switzerland#Banking_privacy – user1530 Aug 1 '17 at 21:04
  • Why should the banking system of one country be accountable to any other country? Keep in mind that the supposed "criminals" of one country can easily be considered victims of persecution in others: e.g. Jews fleeing Nazi Germany, non-religious Iranians fleeing the Islamic Republic, drug dealers fleeing American persecution... – jamesqf Aug 2 '17 at 18:22
  • @jamesqf Even if we consider (for argument's sake) that they do it for all the wrong reasons, it's undeniable that powerful countries like Germany, France or the US have tried to influence the Swiss banking system. To what extent and how Switzerland is able to resist that pressure is therefore an interesting question, quite apart from any debate about whether it should be this or that way. – Relaxed Aug 2 '17 at 23:30
21

It really was not all that long ago (1990's) that banks were not really connected to each other and while they had computers to help track and calculate balances, the paper trails were the way changes to accounts were tracked. Before this it was much harder for criminals and honest businessmen to transfer their funds across borders.

Through the World Wars and many other conflicts across post industrial Europe, Switzerland developed a reputation for being a stable place to store your wealth during times of crisis. It stayed neutral during the wars, and protected vulnerable assets of the elite of both sides. It became the go to place for wealthy to store their wealth because of the guaranteed protections as well as the neutrality that it strove to maintain. This was assisted by the fact that the terrain of Switzerland makes conquering the nation incredibly difficult, allowed it to operate in an independent and neutral manner.

Then the internet came. A great argument could be made that no industry was more revolutionized in the internet age, than banking. Suddenly deposit slips and account ledgers that had worked for close to a millennia for managing bank accounts were slowing business down. It used to be that a business needed to take its checks to the bank to deposit them and then wait to make sure the totals all matched. Now a computer scans the checks and does the math and makes the deposit automatically. In 1990 my father owned a business that took in about 30% cash 68% paper checks with about 2% credit card transactions. That same business today is about 5% cash 95% electronic transaction, and 0% paper checks, because they no longer accept paper checks that way, they get scanned and processed electronically.

Today Switzerland is trying and failing to maintain its status as the bankers of the worlds richest. It is far easier for the governments of the world to track the transactions, and so far more criminals are being caught trying to launder money and avoid taxes through the Swiss banks.

I suspect the main reason that they are allowed to continue they way they are is that they have shown a willingness to open up their books for inspections by friendly nations and to expose those people who are involved in illegal activity. How they will adapt to the internet age is yet to be seen.

  • 7
    Note that they aren't "allowed" to continue the way they were. Wikipedia covers it well. They've enacted all sorts of agreements with the EU and other nations to make things a lot more transparent over the past few decades: en.wikipedia.org/wiki/Banking_in_Switzerland#Banking_privacy – user1530 Aug 1 '17 at 22:19
  • 1
    @blip - the elite still hide their wealth in swiss banks just like they always have, its the new money that is getting turned over. – SoylentGray Aug 2 '17 at 14:35
4

Actually, Swiss banks are far from unaccountable nowadays, smart people started moving their money to places like Singapore 10 years ago.

Since the mid-1990s, the mood has changed and some provinces (canton/Kanton) elected public prosecutors like Bernard Bertossa much more willing to satisfy requests coming from abroad. Switzerland's export industry (manufacture and services) is also substantial and tightly integrated with its neighbours so it had to yield to external pressure – especially through the OECD – in a way that Liechtenstein or Caribbean states haven't.

One key factor in all this is that tax evasion is a two-way street: Switzerland is profiting by channeling wealth that only exists thanks to its larger neighbours' economic activity through its banks but the sportsmen, managers, heirs and business owners who put their money in Switzerland also profit from the arrangement and they are far from powerless in their country of origin.

And there are many states which are in a kind of “grey area”, which do not have a reputation as full-blown tax and bank haven but do have a few exotic exemptions. Think about Belgium and personal taxes for people who made their fortune abroad or the Netherlands and its corporate tax exemptions (the so-called Dutch sandwich). They stand to gain if their neighbour would close one loophole but they don't want to give up their own special niche. That makes finding an agreement much more difficult and impairs any concerted effort at putting pressure on countries like Switzerland or fighting anything but the most egregious abuse.

So whenever there is an effort to push back against tax havens, there are always very long discussion about who and what to target. Case in point, the OECD created a list of uncooperative territories back in 2000. Some members wanted to include Switzerland in that list but the OECD always stopped short of that.

Incidentally, the EU and some member states like Germany or France have also long been complaining about the lack of cooperation but it has remained relatively powerless in this area, not only because Switzerland is not a member but also because Luxembourg is and was playing a lot of the same games, while having the ability to block or slow down EU action in the area. This is another reason why the OECD has taken the lead.

You must log in to answer this question.