‘Swiss Secrets’: What would EU blacklisting mean for Switzerland?

The Swiss Secrets scandal threatens to shift the country back to the European Union’s blacklist - but what does that mean for Switzerland?

A Credit Suisse logo against a blue sky. Photo: SEBASTIEN BOZON / AFP
A Credit Suisse logo against a blue sky. Photo: SEBASTIEN BOZON / AFP

In view of a recent data leak showing that Credit Suisse bank accepted money from illicit sources, the European People’s Party (EPP) has called on the EU to “re-evaluate Switzerland as a high-risk money-laundering country” and add it to the list of nations at high risk for financial crime.

ANALYSIS: How the latest banking scandal has damaged Switzerland’s reputation

Credit Suisse bank held tens of billions of euros of dirty money for decades, a new cross-border media investigation claimed Sunday. 

The investigation was coordinated by the Organised Crime and Corruption Reporting Project (OCCRP), which unites 47 different media outlets worldwide including France’s Le Monde and The Guardian in Britain.

What is the EU blacklist? 

Created in December 2017, it lists countries that are allowing tax evasion by corporations and individuals. Such schemes enable rich foreigners to avoid paying taxes in their own countries.

The goal of this list is to “shame” tax haven nations into reforming their systems by bringing them up to the EU standards.

‘Swissleaks’: The Credit Suisse scandal explained

The 28 EU finance ministers drew up the lists — that followed several scandals including Panama Papers and LuxLeaks — in the hopes of “naming and shaming” countries into better combating tax evasion by multinationals and wealthy individuals.

What would it mean for Switzerland to be placed on this list? 

For Swiss authorities, being placed on the list has few direct implications but would result in increased diplomatic pressure to implement domestic changes. 

Blacklisted countries face only limited sanctions, consisting of freezing them out of European aid or development funding.

Indeed, Switzerland is no stranger to this list: in 2017, the country was placed on it  because “it intentionally attracted foreign investors by allowing corporations and wealthy individuals to pay a low, lump-sum tax on the money they kept in Swiss banks”.

However, Switzerland was removed from the list in 2019 because that year Swiss voters accepted a legislation which introduced major changes in the Swiss tax system by ending some preferential tax schemes and replacing them with new regulations which are in line with international standards.

This legislation introduced major changes in the Swiss tax system by ending some preferential tax schemes and replacing them with new regulations which are in line with international standards. 

This tax reform, which will enter in force in 2020, means the Swiss are now compliant with EU demands.

Does the notorious Swiss banking secrecy still exist?

It depends. For Swiss residents who do not hold double nationality, the bank-client confidentiality still exists.

ANALYSIS: Is Switzerland actually a tax haven?

But for foreigners, banking secrecy is a thing of the past, as Switzerland now cooperates with the EU and other nations in the exchange of their foreign clients’ financial information.

In fact, many banks are now reluctant to work with overseas clients.

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No need to boost Switzerland’s press freedoms: parliamentary committee

A Swiss parliamentary committee on Friday rejected calls to overhaul banking secrecy rules that critics warn stifle free speech in the country.

No need to boost Switzerland's press freedoms: parliamentary committee

Switzerland’s commitment to press freedom has been questioned since it was revealed that no Swiss media had dared participate in an international media investigation into the dealings of Credit Suisse.

The vast “Suisse Secrets” investigation by dozens of media organisations from around the world claimed in February that leaked data revealed how Switzerland’s second largest bank held more than $8 billion in accounts of criminals, dictators and rights abusers.

Credit Suisse flatly rejected the “allegations and insinuations” in the probe.

While the investigation focused on the bank’s alleged handling of dirty money, it also shone a spotlight on Article 47 of Switzerland’s Banking Act, which critics say has weakened media freedom in the country.

READ ALSO: ‘Swiss Secrets’: What would EU blacklisting mean for Switzerland?

Experts say the 2015 law, which made it a criminal offence to reveal leaked banking data punishable with up to five years in prison, effectively silences insiders or journalists who may want to expose wrongdoing within a Swiss bank.

Risk ‘too big’

So while 48 media companies from around the world participated in the Suisse Secrets investigation, no Swiss news media took part due to the risk of criminal prosecution.

“The judicial risk is simply too big,” the large Tamedia media group, which has taken part in previous international data leak investigations, acknowledged at the time.

The United Nations’ top expert on freedom of expression, Irene Kahn, wrote to the Swiss government in March to voice her concerns about the law.

“The Swiss banking law is an example of the criminalisation of journalism,” she said in an interview with the Tages-Anzeiger daily this week, warning that this could result in self-censorship.

Amid the criticism, the Economic Affairs and Taxation Committee of the Swiss parliament was asked to examine calls for an overhaul of the legislation.

After hearing arguments from the banking sector and from experts on financial crime and media rights, the committee members rejected the call to change the law, a parliamentary statement said Friday.

“The majority of the commission did not find it necessary to intervene at a legislative level,” it said.

The committee, which is tasked with discussing and providing recommendations on issues before they are debated in the full parliamentary chamber, highlighted the progress made by Swiss banks in recent years in addressing money laundering and other economic crimes.

Now, “they are in line with international standards,” the statement said.

It also cautioned that changing the law could result in “public accusations targeting individuals”, without providing further details. And the committee members stressed that “no journalist had ever been convicted until now by a court of violating Act 47”.