What The End of Swiss Banking Secrecy Means For India -- Chitra Subramaniam

By Chitra Subramaniam May 7, 2014

In a recent statement to reporters he said if the Swiss government does not cooperate with India in its tireless and ceaseless pursuit of illegal Indian money in Switzerland, he would shame Bern in front of the G-20. Fact of the matter is many powerful countries in the G-20 – an economic grouping of countries that technically challenges the G-8 - are also members of the OECD. 

What this latest development can mean for India, if the Indian government wants, is the following. When an Indian opens a bank account in the Alpine country, s/he will be required to sign a document which will state that information will be shared between Bern and New Delhi. This will include normal reporting information like bank balance, dividends and interest and sales proceeds used to calculate capital tax gains. This is already the practice between OECD countries and Switzerland and Singapore have now joined the group. 

Estimates of how much money is illegally held by Indians in Swiss banks ranges from US$1.42 billion to US$2.18 billion with the CBI and the finance ministry constantly contradicting each other of either exaggerating or under-quoting. Money goes where money feels safe so while tax-evaders and money-launderers are not waiting to be caught, there will always be a paper and/or electronic trail. 

The other frequently asked question in India is– and The News Minute received a fair share of these in the last 24 hours – how far back will the information go. The short answer is also the straight one – everything depends on New Delhi. As things stand now, if India or any other country asks for information relating to illegal accounts and tax evasion, the Swiss will answer. The Swiss banks can no longer have illegal accounts held by foreigners.

Simply stated, it is not for want of laws that New Delhi has failed. It is want of will – now and for decades. The national Indian pastime of passing the buck is the country’s best kept secret and there many jokes in Switzerland’s banking, financial and political circles about how Indian politicians and businessmen open their eyes wide shut when it comes to l’argent sale or black money. 

Swiss banking secrecy and the fabled numbered and secret accounts date back to 1934 when Jews fleeing Nazi Germany deposited their money and documents to be kept safe in the deep vaults of a country most believed was neutral. Switzerland’s neutrality is an armed neutrality – not just militarily but also armed strategically with information, money and precision. Just like invading tanks cannot overrun the country and its alpine topography, Swiss banking secrecy and its methods have developed and strengthened over several decades as all countries deposited their wealth in a country whose political stability served all interests. 

All that has changed dramatically over the past decade as a result of national but more importantly, international pressure from countries seeking to retrieve their money and assets deposited in Swiss banks by dictators and corrupt politicians, drugs and arms dealers. Push came to shove in 2009 when the United Bank of Switzerland (UBS) paid a fine of US$780 million to the US government, entering into a deferred prosecution agreement on charges of conspiring to defraud the American government by impeding their tax authority, the Internal Revenue Service (IRS). Read about the UBS story here- UBS tax evasion controversy

For the record, I add here that during the Bofors investigations, unknown to me, a Ms. Donovan from London was transferring money into my UBS account in Switzerland. I returned the money as soon as it showed up in my monthly statement. UBS did not disclose who Ms. Donovan was. Suffice for the moment to say that along with the UBS, another Swiss banking giant Crédit Suisse was also involved in the Bofors payoffs. I also received a legal notice from a Delhi-based public relations consultant-turned image guru. I will write about that in another post. 

Fearing a similar trans-Atlantic probe, top private banks changed the company structures and holdings to limit liability. The latest Swiss bank to be investigated is Crédit Suisse – slated to plead guilty in a US court shortly – and banking sources say the bank could be fined as much as US$1.4 billion for helping American citizens evade taxes by providing false and fraudulent information. Read- Tunisia, Peru, Nigeria and now America to retrieve illegal money in Swiss banks: India?

We wrote this spoof last week. That was before the end of Swiss banking secrecy. Read -Swiss Banks and India – The Accidental and Unwilling Press Release