The protection of privacy in the Swiss banking system is legendary as it is anecdotal, and has featured in films including the famous James Bond series.

The secrecy of the Swiss banking system earned its fame partly through corrupt public officials who hid their ill-gotten money there. Usually, loot becomes public property only once a government has gone through a process to reclaim it after dictators fall from power.

Joseph Mobutu Sese Seko of Congo, Sani Abacha of Nigeria, Ferdinand Marcos of the Philippines and Jean-Claude Duvalier of Haiti are well-known figures whose financial activities helped put the secrecy
of the Swiss banking system under the spotlight.     

Indonesia’s former dictator Soeharto, believed to have been one of the richest world leaders of all time, whose accounts were said to contain US$15 billion according to one estimate, was also widely suspected of hiding his cash in Switzerland.

However, a popular demand to trace these funds after he fell from grace in 1998 evaporated following a court ruling that he was unfit for trial.

Switzerland will only receive requests from foreign governments to return money stolen from public funds when the requesting countries are pursuing criminal investigations of their own.

Soeharto’s death in 2008 effectively buried hopes of retrieving his wealth, suspected to have been stashed in overseas banks.

Switzerland has often been criticized by other countries that it is a haven for tax evaders and place for kleptocratic public officials to stash their stolen money.

However, since 1977, Switzerland has toughened its laws, requiring its 330 banks to know their clients and sources of funds they intend to deposit. Would be depositors are required to divulge detailed information, which must be verified. Providing false information is a criminal offense.

A bank may refuse to serve so-called politically exposed persons, including public officials such as Cabinet ministers, politicians, or heads of state, who have been deemed to pose a reputational risk if they become a client.

The bank will also reject clients if it has doubts concerning the origin of their funds, because it is illegal for the bank to accept funds it knows have been obtained through crime.

The accounts of politically exposed persons are constantly watched and, in case of any suspicion, the bank may take the initiative to report to the authorities in the account-holder’s country of origin.

Swiss Bankers Association spokesman James Nason says many of the long-held perceptions about absolute banking secrecy in Switzerland are “absolute myth”.

“People save their money in Switzerland because they trust its legal certainty and the duty of fiduciary care exercised by the Swiss bankers, but secrecy is not their primary concern,” he says.

In a show of sincerity about its pledge to fight international organized crime, over the past decade Switzerland has facilitated the return of illegally gotten money.

Swiss officials take pride in returning the millions of dollars stolen by Abacha, Marcos and Duvalier to their countries’ coffers.

“Switzerland has been the only country in the world that has returned millions of dollars [stolen by leaders] to the requesting countries,” a top government official says.

The policy to return dictators’ illegally earned money has, in turn, convinced the international community that banking secrecy is no obstacle for countries hoping to coordinate with Switzerland to combat banking crime.

“Illegal money is poison to our reputation,” Nason said.

Switzerland is showing the world it is moving away from its infamous status of being a tax haven.

The Swiss House of Representatives has approved 10 double taxation agreements as sought by the Organisation for Economic Cooperation and Development (OECD), an international economic organization of 31 countries. Among the areas of collaboration is promoting the growth of bilateral tax treaties.

In fact, Switzerland has also formed such agreements (on bilateral basis) with dozens of other countries outside the OECD, including Indonesia.

What makes its agreements with the OECD so special is that they were drawn up based on Article 26 of the OECD’s Model Tax Convention, which binds member countries to share information in cases of suspected tax fraud.

This means Switzerland has to provide “administrative assistance” — not only in the form of information about document forgery, but also about tax fraud — to the authorities of requesting countries.

In the latest instance, Switzerland caved in to the US government demand for UBS to provide it with the identities of 4,500 American citizens who had stashed an estimated $20 billion in Switzerland to avoid taxes at home. In return, the US dropped its threat to sue UBS. Switzerland’s efforts to shed its tax haven status are good news for a corrupt country like Indonesia too, meaning greedy and corrupt officials here will have to turn elsewhere to hide their loot.

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