2012 could be regarded as the year of the banking scandal with bank employees being found guilty of massive fraud (with or without the connivance of their employer depending upon whom you chose to believe); orchestrated manipulation of a key international borrowing rate (Libor) and at least one major bank (HSBC) found guilty of money laundering and sanctions busting (circumvention of UN sanctions applied to Iran). With the exception of the UBS “rogue trader”, nobody has been indicted or jailed over any of these flagrant breaches of both public trust and criminal law – perhaps if the mob had established its own bank, money laundering would be seen in a better light.
The latest scandal to come to light involves “crime” on a more personal level which is perhaps why a small Swiss bank has fallen on its sword and ceased trading as a bank. The Wegelin bank in St Gallen, Switzerland was established in 1741 and is one of the oldest Swiss banks. It has been held accountable by American authorities for actively helping American nationals to avoid tax on their assets – not a crime in Switzerland. The bank has no branches in the USA and was not in breach of Swiss law, but it has agreed to pay fines of $57.8 million to US authorities in respect of helping some 100 Americans to hide $1.2 billion from Uncle Sam’s tax men. It is unclear if criminal proceedings will proceed against any of the bank’s staff.
The Swiss banking system has prided itself for years on its secrecy and now it appears that a practice which is fully lawful in sovereign Switzerland may come under prolonged scrutiny from a foreign jurisdiction. The case could have larger repercussions for other Swiss banks with US clients, of course. Banks have been unwilling to accept accounts from American nationals (living outside of Switzerland) in recent years because of pressure from US authorities. The Wegelin case contrasts with a similar matter involving Swiss banking giant UBS which agreed to pay a fine of $780 million (and reveal client information) over tax evasion, but it was not required to plead under a “deferred prosecution” agreement where charges were dropped upon payment of the fine.