Switzerland refuses to co-operate with tax authorities in cases involving stolen bank data

Switzerland will not cooperate with foreign authorities on tax cases where client data has been stolen from banks, its Finance Department has announced.

‘No administrative assistance can be provided in the case of violation of public policy or the principle of good faith. This refers specifically to the case of HSBC of course. If a demand from another state were against the public interest, a state would not be informed,’ said Finance Department Deputy Secretary General Thomas Saegesser.
 
Switzerland, which manages trillions of dollars in offshore wealth, relaxed its cherished bank secrecy and agreed to comply with international standards last year after its banks came under pressure from foreign authorities.
 
But the country’s private banks have been lobbying the government to introduce clauses banning the use of stolen bank data in a raft of tax cooperation treaties it is negotiating.
 
A new ordinance, probably coming into force in October will seek to establish clear limits for handing over client data at the request of other states, Saegesser explained. ‘The competent authority has to decide in every individual case what constitutes the public interest,’ he said. The ordinance would be followed by a new act to anchor the rules in legislation.
 
HSBC said in December that a former employee stole client data from its Swiss private bank’s headquarters in 2006 and 2007 in a breach of Swiss bank secrecy. Although it is understood that fewer than 10 clients were involved.
 
Meanwhile another former Swiss banker is due to arrive in Germany to divulge information on banking secrecy. Rudolf Elmer, who ran the Caribbean operations of the Swiss bank Julius Baer for eight years until he was dismissed in 2002, is set to disclose the inner workings of Baer, one of many Swiss institutions that investigators claim helped clients evade billions of dollars in taxes by routing money through offshore havens in the Caribbean and Switzerland.
 
‘Offshore tax evasion is the biggest theft among societies and neighbour states in this world,’ he told the New York Times. He is being put up in a five star hotel in Düsseldorf by the tax authorities.
 
In the US the Internal Revenue Service and the Justice Department are actively encouraging insiders who engaged in such practices to reveal the secrets of their employers based on the premise that it takes a rogue to catch a thief as part of a crackdown on offshore tax evasion.

According to Elmer’s lawyer Jack Blum, his knowledge covers more than 100 trusts, dozens of companies and hedge funds and more than 1,300 individuals, from 1997 to 2002.
   
He contends that his documents detail the undisclosed role of American investment management companies in funnelling American, European and South American clients who wished to avoid taxes to Julius Baer, the backdating of documents to establish trusts and foundations used to evade taxes and the funnelling of trades for hedge funds and private equity firms from high-tax jurisdictions through Baer entities in the Cayman Islands.
 
Nothing indicates that Julius Baer, a 120-year-old private bank, is under investigation. The bank is known for intense privacy. Its board chairman, Raymond Baer, told shareholders last April that ‘the fiction of citizens being fully transparent must never become reality.’