Former Bayern Munich boss Uli Hoeness may be the man sentenced to a term in
jail, but court room revelations of how bankers helped him to cheat the German
tax authorities have also put the Swiss financial centre on trial.
The Munich court heard that
Hoeness opened his Vontobel account in 1975 after
being charmed by a banker during a trip to the Swiss resort of Lenzerheide.
Hoeness later used the bank to indulge in an orgy of risky trades - numbering up
to 300 a day - that saw him rack upms in losses.
Local media are at a loss as to understand how a financial markets amateur such
as Hoeness could have been allowed to gamble so prolifically with such
Such lurid details follow on from a United States Senate hearing into the
behaviour of some Credit Suisse bankers who helped clients evade taxes and other
criminal investigations. Casino banking, diamonds being smuggled in toothpaste
tubes, bank staff flouting US visa regulations by courting clients whilst on
‘holiday’: this is not the conservative, reliable, discrete image that Swiss
private banks want to portray.
Hoeness appears to have already been forgiven by thousands of football fans
despite admitting to cheating his country out of €27m (CHF33m) in
taxes. But it might take Swiss banks more time to restore their reputation
following a welter of details chronicling greed and deception.
“The past will probably continue to haunt the Swiss banking sector for a long
time,” Martin Janssen, a professor at the University of Zurich’s Institute for
Banking and Finance, told swissinfo.ch.
Ironically, the bad press continues to arrive as Switzerland implements a
so-called Weissgeld (or clean money) strategy for its financial centre. But the
stated good intentions of banks to weed out tax dodgers in future is being
overshadowed by dubious past behaviour.
“All these cases are linked to attempts by the Swiss financial centre to resolve
problems from the past,” Cindy Schmiegel-Werner, spokeswoman for the Swiss
Bankers Association, told swissinfo.ch. “This is obviously going to be a painful
process for Swiss banks, but it is something they will just have to go through.”
For anti-tax evasion campaigner
Nicholas Shaxson, a member of Tax Justice
Network who used to live in Zurich but who now resides in Germany, the facts
that are emerging from investigations are just as important in Switzerland as
they are to the outside world.
“There used to be a fundamental lack of questioning in Switzerland about the
activities of the financial centre,” he told swissinfo.ch. “But these stories
appear to have shifted some domestic opinion that private banking in Switzerland
has in fact been a dishonourable business.”
Banks have committed themselves to enhanced due diligence measures to ensure
that they know their clients and force them to prove that their assets have been
declared to the tax authorities of their home countries. Any existing client who
refuses to comply with these demands risks having their account closed.
In addition, the Swiss government is cooperating with an international drive to
introduce a global standard automatic exchange of tax information designed to
weed out tax cheats wherever they go.
Since the 2008 financial crisis, Swiss banks have come under constant pressure
from the international community to clean up its act and no longer accept tax
In 2009, UBS bank was fined $780m and later forced to hand over thousands
of client names to the US.
Some 14 other banks are still under active US investigation. Last year Wegelin
and Bank Frey ceased operations under the weight of the probe.
Credit Suisse is the next big target of the US authorities, with a Senate
subcommittee hearing summoning CEO Brady Dougan to a hearing last month and
presenting evidence of wrongdoing by bank employees.
The Swiss banking sector was also last year implicated in the tax evasion
offences of former French budget minister Jerome Cahuzac.
The German and French authorities have bought CDs of stolen Swiss banking data
to help them uncover tax cheats. Some of this data has been passed to other
The Swiss government has already agreed to renegotiate dozens of bilateral tax
agreements with other countries under pressure from the Organisation for
Economic Cooperation and Development.
Switzerland has ditched its legal distinction between tax fraud and evasion, now
giving both offences equal weight under the law.
The Alpine country is also cooperating with efforts to introduce a globally
harmonized version of automatic tax information exchange in the future.
According to Shaxson, Swiss banks still have some way to go to become fully tax
compliant and to eradicate Switzerland’s image as a tax haven.
“The global community used to regard tax havens as an exotic side-show, but
since the financial crisis [of 2008] they have become reviled,” he said. “This
has forced Switzerland into a defensive retreat, but this has been restricted to
bilateral deals with powerful countries.”
“If Switzerland is serious about reforming, it will get rid of banking secrecy.”
But despite the slew of negative stories, offshore assets continue to flood into
Switzerland. The CHF2.2 trillion ($2.5 trillion) of foreign money in Swiss
vaults amounts to a quarter of all cross-border private banking deposits around
The SBA expects Swiss banking know-how, honed from centuries of application, to
continue to attract the same share in years to come. And the assets withdrawn by
European clients to escape tax prosecution from their home countries has swiftly
been replaced by Asian inflows.
“Swiss private banks are putting in enormous efforts to retain client trust,”
Bank Sarasin analyst Rainer Skierka told swissinfo.ch. “Not many banks around
the world are able to provide comparable asset management professionalism,
especially in countries lacking legal safety.”
“The further away from Switzerland you go, you see less impact from the
discussions surrounding black money.”