Swiss banks get a bad name. Data leaked over the weekend has led to fresh allegations that Credit Suisse engaged in practices that allowed corrupt officials to hide money in secret accounts.
An international investigation involving media outlets from outside Switzerland, the Organized Crime and Corruption Reporting Project (OCCRP), found that the Swiss bank had been lenient in accepting money from dubious origins through politicians in developing economies who sought to take advantage of Swiss secrecy laws. The bank has issued a detailed statement strongly rejecting the accusations and observing that some of these accounts were opened in the 1940s, at a “time where laws, practices, and expectations of financial institutions were very different from where they are now”.
The incident is the latest among several major revelations in the past year, which have in some instances resulted in hefty fines. They also provoked the resignation of the bank’s CEO in 2020, and its chair at the end of 2021.
“The allegations are the latest example of Swiss banks being identified as black boxes of misconduct that take advantage of a legal system that prioritizes money-making at the expense of ethics and fairness”- Arturo Bris
Regardless of whether or not the OCCRP’s allegations are true, it is clear that Switzerland is no longer the haven of banking secrecy it once was. Credit Suisse has strengthened its compliance practices greatly in recent years and, given its reputation has already been highly damaged, it is difficult to imagine that the bank would have continued with such reproachable behavior.
This weekend’s allegations are the latest example of Swiss banks being identified as black boxes of misconduct that take advantage of a legal system that prioritizes money-making at the expense of ethics and fairness. Ignorance of the recent legal and political reforms in the country, coupled with a legendary view of the Swiss banker (popularized by Hollywood’s “The Wolf of Wall Street” and Showtime’s “Billions”) explain this phenomenon. But also, the inability and unwillingness of Switzerland to countervail this image has created a dark legend about its economy that will last for generations.
The reality is that Switzerland is a law-abiding, tax-compliant, and obedient country that has reformed what was a perfectly defensible business model (a race to the bottom in corporate taxation and movement of capital) so as to please bigger economies where tax evasion and corruption are indeed a generalized problem. My own taxes have been inspected carefully by the authorities every single year since I arrived in the country.
One wonders whether the fact that Swiss banks are caught more often than others is an indication of their transparency, rather than of their misconduct- Arturo Bris
Switzerland’s two biggest banks, Credit Suisse and UBS, downsized significantly after the 2008 financial crisis and yet became the scapegoats for the outrageous transactions of some of their American counterparts. After the LIBOR scandal, UBS paid a record fine of $1.5bn in recognition of its own misconduct; it was the highest fine imposed among several other institutions participating in the interest-rate-fixing scheme.
One wonders whether the fact that Swiss banks are caught more often than others is an indication of their transparency, rather than of their misconduct. Perhaps non-Swiss banks are better at going above and beyond regulation? In the most corrupt of countries, judges and politicians collude to make claims of reported corporate malfeasance disappear. All these revelations about Swiss banks could indeed mean that the country is doing a good job by prosecuting crime and curtailing misconduct.
As more news filters in about the Credit Suisse accounts, let us not forget it takes years to build a reputation and only minutes to lose it. The last three years have been difficult for Credit Suisse, and coming back from all these crises will be painful; internal processes and company culture will need to improve in parallel with better explanations of what Swiss banks actually do.
27 November 2023 • by Michael Skapinker in Finance
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