Europe & UK

October 12, 2018

Prosecutors cannot extend Swiss banking secrecy rules to all corners of globe to pursue whistleblowers


swissbanking

On October 10, in a prominent case attracting international scrutiny, the Federal Supreme Court of Switzerland—the supreme court of the Swiss Confederation—ruled that prosecutors cannot extend Swiss banking secrecy rules to all corners of the globe to pursue whistleblowers.

The case involves a former private banker, Rudolf Elmer, who was given a suspended sentence by Zurich’s upper court for forging documents and threatening Julius Baer (one of the oldest and largest Swiss banking institutions) following his dismissal in 2002.

According to the Swiss Banking Act, employees of Swiss-regulated banks are required to keep client information confidential; however, several staff members leaked account details to foreign authorities in the past decade as Western governments crack down on tax evasion.

Zurich prosecutors had appealed to the Federal Court to interpret the law so that the secrecy obligation is widened to include people with looser working relationships with Swiss banks and their subsidiaries abroad. However, by a 3-2 majority, the Federal Court rejected Zurich prosecutors’ appeal in this 14-year-old legal battle.

Notably, if the prosecutors’ move would have become successful, EU lawmakers feared that the move would have deterred potential whistleblowers from supplying information on people accused of shifting their wealth to tax havens through accounts protected by secrecy laws.

In this regard, Ganden Tethong, attorney for Elmer, said, “It was made clear by the Court that Swiss bank secrecy law is not applicable to banks in countries outside of Switzerland. I think that was very clear today and I’m glad it is now clear for all.”

Elmer, who headed the Cayman Islands office of Swiss private bank Julius Baer, sent documents with details of alleged tax evasion to WikiLeaks—an international non-profit organization that publishes secret information, news leaks, and classified media provided by anonymous sources—and to tax authorities across the globe.

In 2016, Zurich’s upper court had ruled that the bank secrecy law did not apply to him [Elmer] as an employee of the Caribbean subsidiary, rather than of the parent bank in Zurich. The top court upheld this view.

On the other hand, the prosecutors argued that if they could not apply the law to people connected to Swiss banks outside the country, this deprived banking secrecy of its substance “with far-reaching consequences that cannot be accepted”. However, Elmer denied all charges.

The federal court rejected appeals from both the prosecutors and Elmer, and therefore, the Zurich court’s sentence stands.

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