Will Swiss banking laws change? The U.N and the U.S. target the country’s “tradition” of handling dirty assets.

Will the world's most discreet banking haven amend its secrecy laws?

For centuries, Switzerland has been revered as the tight-lipped, austere banking heaven for those who need the secrecy and the benefits of a regime of trust. Several countries have their share of the state-of-the-art banking establishments and financial institutions, but none afforded to offer the level of extreme trust and discretion that came to be identified with Switzerland.


The Swiss has capitalised on the level of trustworthiness they can offer and their commitment to the code of secrecy has attracted the affluent from around the world who stashes their savings in Swiss banks. The category included, in addition to the legitimate wealth, human rights abusers in undemocratic jurisdictions and the cream of the criminal crop.


The Russian invasion of Ukraine has brought to the practice of enabling under the spotlight, havens and preferred destinations for financial refuge came under detailed scrutiny. New developments about the fall of “Londongrad” and the reasons behind the influx of dirty Russian money into the U.K. does not skip a day. Businesses around the world were urged to roll back their investments in Russia, and the “Golden passport” programmes implemented by certain EU were earmarked for review.

The country whose mere name has symbolized neutrality, has backtracked when the dirty war waged by Russia has changed the status-quo globally. Switzerland has taken a U-turn and authorities have frozen more than 7 billion dollars of Russian assets. The move was lauded on the world stage yet fell short of convincing the globe that the Swiss are eager to take the extra mile to ensure Russia is punished and isolated, and the world is behind Ukraine at the expense of profits.


Lately, the U.S. and the U.N. started increasing their pressure on Switzerland, to urge Swiss lawmakers to review the current banking secrecy laws.


The country has been accused of not doing her fair share to help with the global hunt for the Russian assets. According to Mark Pieth, the Swiss anti-corruption expert speaking at the U.S. Helsinki Committee, the Swiss legal system still has the liberty to help oligarchs obfuscate the sources of their wealth.


“It is…clear that lawyers investing money for their clients are not acting as lawyers: they are financial operators.” commented Mark Pieth in his testimony, point to the influence of enablers in derailing the efforts to pin down Russian assets. The enablers, according to him, are tenants of a grey zone that stretches between the business of providing legal advice and conducting financial operations on behalf of their clients.


The Helsinki Committee – the U.S. Commission for Security and Cooperation in Europe – where Mike Pietch provided his testimony, does not possess the power to enforce. Nevertheless, it has a considerable consultative influence on the U.S: foreign policy.



The Article 47


For Switzerland, the world’s most popular offshore financial haven that is not quite off the shore, it is about the tradition of discretion that the country has come to be famous for, as much as it is about the loopholes that can be exploited to cater to the kleptocratic appetite for playing hide and seek with their illicit gains in different parts of the world.


The discretion that is the Swiss trademark is enshrined in the Swiss legislation in the form of Article 47.
Article 47 forbids any outing of information on the clientele of Swiss banks, and renders making the information about a bank’s clientele public, a crime; opening the way for the prosecution of journalists, or whistle blowers.


In this age, prosecuting whistle blowers is not seen as a couth act for democratic jurisdictions. As more and more countries launch programmes to protect ethically sound employees brave enough to blow the whistle on the wrongdoings of their institutions, the Swiss Article 47 stands like an arcane legislation that already fulfilled its purpose – of consolidating the basis of the shelter provided to the unjustly persecuted, or at-risk individuals who had dealings with the Swiss banks.

The politicians of the country have already voted against a relaxing of the banking secrecy law.


Furthermore, the parliament had refused to subject the legal firms and lawyers capitalising on “attorney-client privilege”, to AML laws. They were content to keep country’s policy rest on authorities intervention should there be an obvious breach – measures to be applied at the sight of a smoking gun.


Swiss authorities fear that any revision to be made to the article would prompt public prejudgements against individuals and state that no member of the press or media had been convicted under the law.


Irene Khan, the UN Special Rapporteur for freedom of opinion and expression, describes the Swiss law barring press freedom and as “a problem in authoritarian states”, urging Switzerland to practice what she preaches when it comes to preserving press freedoms.


Khan’s escalating of the press freedoms and freedom of information for Switzerland has followed the Suisse Secrets investigation, the leak that revealed that 30.000 clients of the second biggest Swiss bank, Credit Suisse, happen to be oppressors, drug traffickers, money launderers and others.


Khan will bring the issue to the UN Human Rights council on 24th June.




Radical change ahead?


A fast-tracked revision of the existing Swiss law seems unlikely, given the adamant attitude of Swiss lawmakers on the current efficacy of enforcement, and the country’s being on par with global standards regarding ML controls and white-collar crime.

The country in the past had been confronted several times over her enabling of tax evasion, such as with the UBS scandal.


If the Swiss authorities stick to the policy of acting at sight of obvious breaches and take their time to regulate the enablers, the U.S. jurisdiction can do more than waiting for the results. The DOJ can blacklist these individuals for visa bans, or include them into the sanctions list as making funds or services available to sanctioned individuals, including counsel, constitute a breach of the sanctions regime.