Switzerland‘s private banks, used for decades by the world’s wealthy to hide money and avoid tax, are pushing for extra legal protection of client information that could halt a much-heralded exchange of data with dozens of countries.
The Alpine country is preparing to dismantle bank secrecy next year when it begins sending information about its customers’ accounts to foreign tax agencies.
But Switzerland’s multi-trillion-dollar financial industry is seeking new safeguards to protect bank data against misuse that could expose clients to crimes such as kidnapping or blackmail.
“Data could be sold or used to put pressure on clients or their families,” said Yves Mirabaud, chairman of the Association of Swiss Private Banks and senior managing partner at Mirabaud, a Geneva-based private bank.
“I’m referring to countries where we’re not very sure that the democratic process is the same as ours, or where corruption is very high.”
Wealthy clients have pulled tens of billions of dollars out of Swiss bank accounts because of a worldwide crackdown on tax evasion following the global financial crisis last decade.
That culminated in the Automatic Exchange of Information program fostered by the Organisation for Economic Cooperation and Development (OECD), which aims to ensure that offshore accounts are known to authorities.
The participation of Switzerland, the world’s largest center for overseas wealth, in the data exchange agreement was heralded at the time as a major breakthrough in ending tax avoidance.
Banks in Switzerland are “fully committed” to implementing the Automatic Exchange of Information, said a spokeswoman for the Swiss Bankers Association, the main banking lobby.
But they are lobbying to add an “activation” clause that means information would only be handed over to a country if two criteria are met—a level playing field with other financial centers, and an assurance the data will be used properly.
They say giving information to countries in regions such as South America or Africa, where data protection standards can be weak and corruption rife, risks it falling into the wrong hands.
In 2018 Switzerland is due to start swapping information with 38 foreign tax authorities, including all European Union countries, and with a further 41 from 2019.
“We want to be sure that when we provide information that it does not get misused or compromise a client’s security,” said Boris Collardi, chief executive at Julius Baer, Switzerland’s third-biggest private bank behind UBS and Credit Suisse.
The Swiss government will send to parliament a dispatch, which contains its proposals on the exchange of information with these 41 countries, by July 5. Parliament will then be asked to decide on the implementation of these plans.