Revealed: Credit Suisse leak unmasks criminals, fraudsters and corrupt politicians | Cr... - 0 views
www.theguardian.com/...fraudsters-corrupt-politicians
switzerland bank secrecy corruption tax evasion whistleblower
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The huge trove of banking data was leaked by an anonymous whistleblower to the German newspaper Süddeutsche Zeitung. “I believe that Swiss banking secrecy laws are immoral,” the whistleblower source said in a statement. “The pretext of protecting financial privacy is merely a fig leaf covering the shameful role of Swiss banks as collaborators of tax evaders.”
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Swiss financial institutions manage about 7.9tn CHF (£6.3tn) in assets, nearly half of which belongs to foreign clients.
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It identifies the convicts and money launderers who were able to open bank accounts, or keep them open for years after their crimes emerged. And it reveals how Switzerland’s famed banking secrecy laws helped facilitate the looting of countries in the developing world.
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his case is one of dozens discovered by reporters appearing to show Credit Suisse opened or maintained accounts for clients who had serious convictions that might be expected to show up in due diligence checks. There are other instances in which Credit Suisse may have taken quick action after red flags emerged, but the case nonetheless shows that dubious clients have been attracted to the bank.
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Like every other bank in the world, Credit Suisse professes to have stringent control mechanisms to carry out extensive due diligence on its customers to “ensure that the highest standards of conduct are upheld”. In banking parlance, such controls are called know-your-client or KYC checks.
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A 2017 leaked report commissioned by Switzerland’s financial regulator shed some light on the bank’s internal procedures at that time. Clients would face intensified scrutiny when flagged as a politically exposed person from a high-risk country, or a person involved in a high-risk activity such as gambling, weapons trading, financial services or mining, the report said.
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Such controls might be expected to prevent a bank from opening accounts for clients such as Rodoljub Radulović, a Serbian securities fraudster indicted in 2001 by the US Securities and Exchange Commission. However, the leaked data identifies him as the co-signatory of two Credit Suisse company accounts. The first was opened in 2005, the year after the SEC had secured a default judgment against Radulović for running a pump-and-dump scheme.
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One of Radulović’s company accounts held 3.4m CHF (£2.2m) before they closed in 2010. He was recently given a 10-year prison sentence by a court in Belgrade for his role trafficking cocaine from South America for the organised crime boss Darko Šarić.
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Due diligence is not only for new clients. Banks are required to continually reassess existing customers. The 2017 report said Credit Suisse screened customers at least every three years and as often as once a year for the riskiest clients. Lawyers for Credit Suisse told the Guardian these periodic reviews were introduced “more than 15 years ago”, meaning it was continually running due diligence on existing clients from 2007.
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The bank might, therefore, have been expected to have discovered that its German client Eduard Seidel was convicted of bribery in 2008. Seidel was an employee of Siemens. As the multinational’s lead in Nigeria, he oversaw a campaign of industrial-scale bribery to secure lucrative contracts for his employer by funnelling cash to corrupt Nigerian politicians.
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After German authorities raided the Munich headquarters of Siemens in 2006, Seidel immediately confessed his role in the bribery scheme, though he said he had never stolen from the company or appropriated its slush funds. His involvement in the corruption led to his name being entered into the Thomson Reuters World-Check database in 2007.
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However, the leaked Credit Suisse data shows his accounts were left open until at least well into the last decade. At one point after he left Siemens, one account was worth 54m CHF (£24m). Seidel’s lawyer declined to say whether the accounts were his. He said his client had addressed all outstanding matters relating to his bribery offences and wished to move on with his life.
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The lawyer did not respond to repeated invitations to explain the source of the 54m CHF. Siemens said it did not know about the money and that its review of its own cashflows shed no light on the account.
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A representative for Sederholm said Credit Suisse never froze his accounts and did not close them until 2013 when he was unable to provide due diligence material. Asked why Sederholm needed a Swiss account, they said that he was living in Thailand when it was opened, adding: “Can you please tell me if you would prefer to put your money in a Thai or Swiss bank?”
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One client, Stefan Sederholm, a Swedish computer technician who opened an account with Credit Suisse in 2008, was able to keep it open for two-and-a-half years after his widely reported conviction for human trafficking in the Philippines, for which he was given a life sentence.
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Swiss banks have cultivated their trusted reputation since as far back as 1713, when the Great Council of Geneva prohibited bankers from revealing details about the fortunes being deposited by European aristocrats. Switzerland soon became a tax haven for many of the world’s elites and its bankers nurtured a “duty of absolute silence” about their clients affairs.
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The custom was enshrined in statute in 1934 with the introduction of Switzerland’s banking secrecy law, which criminalised the disclosure of client banking information to foreign authorities. Within decades, wealthy clients from all over the world were flocking to Swiss banks. Sometimes, that meant clients with something to hide.
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One former Credit Suisse employee at the time alleges there was a deeply ingrained culture in Swiss banking of looking the other way when it came to problematic clients. “The bank’s compliance departments [were] masters of plausible deniability,” they told a reporter from the Organized Crime and Corruption Reporting Project, one of the coordinators of the Suisse secrets project. “Never write anything down that could expose an account that is non-compliant and never ask a question you do not want to know the answer to.”
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The 2000s was also a decade in which foreign regulators and tax authorities became increasingly frustrated at their inability to penetrate the Swiss financial system. That changed in 2007, when the UBS banker Bradley Birkenfeld voluntarily approached US authorities with information about how the bank was helping thousands of wealthy Americans evade tax with secret accounts.
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Birkenfeld was viewed as a traitor in Switzerland, where banking whistleblowers are often held in contempt. However, a wide-ranging US Senate investigation later uncovered the aggressive tactics used by UBS and Credit Suisse, the latter of which was found to have sent bankers to high-end events to recruit clients, courted a potential customer with free gold, and in one case even delivered sensitive bank statements hidden in the pages of a Sports Illustrated magazine.
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The revelations sent shock waves through Switzerland’s financial sector and enraged the US, which pressured Switzerland into unilaterally disclosing which of its taxpayers had secret Swiss accounts from 2014. That same year, Switzerland reluctantly signed up to the international convention on the automatic exchange of banking Information.
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By adopting the so-called common reporting standard (CRS) for sharing tax data, Switzerland in effect agreed that its banks would in the future exchange information about their clients with tax authorities in foreign countries. They started doing so in 2018.
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Membership of the global exchange system is often cited by Switzerland’s banking industry as a turning point. “There is no longer Swiss bank client confidentiality for clients abroad,” the Swiss Bankers Association told the Guardian. “We are transparent, there is nothing to hide in Switzerland.”
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Switzerland’s almost 90-year-old banking secrecy law, however, remains in force – and was recently broadened. The Tax Justice Network estimates that countries around the world collectively lose $21bn (£15.4bn) each year in tax revenues because of Switzerland. Many of those countries will be poorer nations that have not signed up to the CRS data exchange.
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More than 90 countries, most of which are in the developing world, remain in the dark when their wealthy taxpayers hide their money in Swiss accounts.
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This inequity in the system was cited by the whistleblower behind the leaked data, who said the CRS system “imposes a disproportionate financial and infrastructural burden on developing nations, perpetuating their exclusion from the system in the foreseeable future”.
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“This situation enables corruption and starves developing countries of much-needed tax revenue. These countries are the ones that therefore suffer most from Switzerland’s reverse-Robin-Hood stunt,” they said.
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“I am aware that having an offshore Swiss bank account does not necessarily imply tax evasion or any other financial crime,” they said. “However, it is likely that a significant number of these accounts were opened with the sole purpose of hiding their holder’s wealth from fiscal institutions and/or avoiding the payment of taxes on capital gains.”
