April 24, 2013

Earlier this month I had written a blog captioned “White Paper on Black Money  notwithstanding, not a single paisa has been recovered”


This blog had highlighted how the BJP’s sustained campaign against black money had forced the UPA Government to present a White Paper on the issue. This White Paper rightly affirmed that success of the country’s “inclusive development strategy critically depends on the capacity of our society to root out the evil of corruption and black money from its very foundations.”


The BJP regrets that there has been absolutely no follow up to the White Paper. Both corruption and black money continue to corrode India’s polity and governance, more particularly in the last nine years.


emmaIn sharp contrast to India’s indifference to this matter, there are reports about a virtual crisis having been precipitated in the banking sector of Switzerland because of the global campaign against banking secrecy laws initiated by some powerful western countries. The international news agency Reuters has recently circulated an article written by its Bureau Chief in Switzerland Emma Thomasson bearing the caption: Battle for the Swiss Soul. The thrust of the article is summed up in the words


“Even today, few Swiss would like to discuss the fact that much of the country’s prosperity was built on the bankers helping foreigners evade taxes.”


This article opens with a quote from a James Bond film of 1999 “The World is Not Enough”, where Bond asks “If you can’t trust a Swiss banker, what’s the world coming to?”


Emma, the learned writer of the article goes on to reply to James Bond’s query thus,


It has come to this : Swiss banks, under pressure from countries such as the United States, France and Germany, have been giving up their secrets, in some cases handing foreign tax authorities the names of their account holders. To avoid being blacklisted by the Organisation for Economic Cooperation and Development (OECD), the Swiss Government has agreed to share more information with foreign authorities hunting tax cheats.


Emma writes in her article:


“Swiss bankers have long adhered to an unwritten code similar to that observed by doctors or priests. Bankers do not acknowledge clients in public for fear of exposing them as account holders; they often carry business cards with just a name, rather than bank or contact details; and, at least until the 1990s, they never advertised abroad..”


news-paperThe right wing Swiss People’s Party sees in the loosening up of banking secrecy laws a kind of surrender. This surrender, the party holds, is a “betrayal not just of the clients but of core Swiss values”. Thomas Matter, a banker and politician of the Swiss People’s Party put it very bluntly: “Swiss people love freedom; the State was always for the citizen and not the other way round”.


However, Swiss banks have lately been under such immense pressure from Washington, Paris and Berlin that in 2009, UBS, the country’s biggest bank, agreed to give the United States names of more than 4000 American clients and besides, pay a $ 780 million fine to avoid prosecution for helping Americans evade taxes. Two other major banks, Credit Suisse and Julius Baer also have handed over to Washington information on their employees engaged in U.S. business, while Credit Suisse has made provisions in its accounts for hefty fines.


While Zurich and Geneva are the main financial centres of Switzerland, the country’s close-knit banking fraternity has had its roots in the ancient hermitage city of St Gallen. Until recently St Gallen was home to Wegelin & Co., Switzerland’s oldest private bank. In 2012, the U.S. Justice Department indicted this Wegelin bank on charges that it enabled wealthy Americans to evade taxes on at least $ 1.2 billion hidden in offshore accounts.  In January this year, the Bank pleaded guilty. Wegelin executives who had already sold all their non-U.S. business to a fellow bank Raifeissen, announced that they would wind up what remained of their Bank.


The guilty plea was a crucial turning point in this entire Swiss debate because without saying so, Wegelin’s executives had by implication incriminated all their fellow bankers as well. A prominent conservative politician Christoph Darbellay publicly called Wegelin executives “traitors”.


Sergio Ermotti, Chief Executive of U.B.S. however said: Bank secrecy, as we knew it till a decade or so back, is now over. The St Gallen banker who bought Wegelin’s non-U.S. business also said: “We are in a real transformation process.”


Raifeisen boss, Pierin Vincenz has broken off with the conservatives, and said that Switzerland would have ultimately to accept transparency and comply with global standards.  More and more bankers and academicians are veering round to this view.  In the global war against black money, this would be a great help. One can only hope that India takes full advantage of these developments.




New Delhi

April 24, 2013