Swiss banks linked to $21-trillion tax fiddle

Switzerland has been implicated among an array of tax havens harbouring a staggering $21 trillion of offshore assets stashed by the super-rich worldwide, a new report charges.

Swiss banks linked to $21-trillion tax fiddle
Photo: Stephen Hyun

The research was compiled by James Henry, former chief economist at consulting firm McKinsey, for the Tax Justice Network, a British campaign group.

Henry says Switzerland is among a group of secretive jurisdictions, such as the Cayman Islands, whose private banks have lured the world’s richest people to hide their wealth.

Details of his report, The Price of Offshore Revisited, were released online by British newspaper The Observer on Sunday.

The assets of the extremely high net worth individuals are “protected by a highly paid, industrious bevy of professional enablers in the banking, legal and accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy.”

The world’s top ten private banks, including Switzerland’s UBS and Credit Suisse, managed more than 6.2 trillion dollars in 2010, up from 2.3 trillion dollars just five years ago.

The massive tax evasion has “been going on for a very long time and governments haven’t been taking any action about this,” John Christensen, director of the Tax Justice Network, told World Radio Switzerland on Monday.

The amounts involved in the past few years though have risen dramatically to the point where they are now “threatening economic and social stability,” Christensen said.

Henry’s report compiles data from sources that include the Bank of International Settlements and the International Monetary Fund.

The report indicates that the cumulative value of the money that has flowed out of many developing countries since the 1970s would be more than sufficient to retire their debts to the rest of the world.

Christensen said tax codes globally are “riddled with loopholes” which are exploited by banks such as UBS and Credit Suisse.

These banks have made an industry out of helping wealthy people move their money offshore to avoid paying taxes, he said.

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Probe unearths second spying case at Credit Suisse

An internal Credit Suisse probe confirmed Monday that a second executive had been spied on, following earlier revelations that the bank's former head of wealth management was tailed by private investigators.

Probe unearths second spying case at Credit Suisse
Photo: Depositphotos

But Switzerland's number two bank maintained that just one senior leader, who has since been forced out, was entirely to blame for both incidents and that rest of the top brass had not been aware of the activities. 

Releasing the investigation conducted by the Homburger law firm, Credit Suisse said that “it has been confirmed that Peter Goerke, who was a Member of the Executive Board at the time, was placed under observation by a third-party firm on behalf of Credit Suisse for a period of several days in February 2019.”

The probe was launched following media reports last week that spying at Credit Suisse ran deeper than one case.

The banking giant was shaken by the discovery last September that surveillance had been ordered on star banker and former wealth management chief Iqbal Khan.

READ: Credit Suisse boss resigns following spying scandal

Kahn was tailed after he jumped ship to competitor UBS, sparking fears he was preparing to poach employees and clients.

That revelation came after Khan confronted the private investigators tailing him, leading to a fight in the heart of Zurich. Khan pressed charges.

An initial investigation by Homburger blamed former chief operating officer Pierre-Olivier Bouee, who stepped down, but found no indication chief executive Tidjane Thiam was involved.

The probe results released Monday echoed those findings, concluding that Bouee “issued the mandate to have Peter Goerke put under observation.”

“As was the case with Iqbal Khan, this observation was carried out via an intermediary,” it said, stressing that Bouee “did not respond truthfully” during the initial investigation “when asked about any additional observations and did not disclose the observation of Peter Goerke.”

The new investigation also did not find indications that Thiam or others in the board or management “had any knowledge of the observation of Peter Goerke until media reported on it,” the statement said.

“The Board of Directors considers the observation of Peter Goerke to be unacceptable and completely inappropriate” it said, adding that it had issued an apology to Goerke.

It added that “safeguards” were already in place to avoid future similar misconduct. Switzerland's market watchdog FINMA meanwhile said last week that it was “appointing an independent auditor to investigate Credit Suisse in the context of observation activities.”

“This investigator will clarify the relevant corporate governance questions, particularly in relation to the observation activities,” a statement said Friday.