Hypocrisy and High Corruption
The Swiss system to combat illicit flows is flawed, as pointed out by Tax Justice Focus - the Switzerland edition - Kleptocrats: Is Switzerland a disppearing paradise? "It leaves large parts of its implementation to the discretion of the financial intermediaries themselves."
Illicit money is taken in by highly-placed bankers, motivated by the circles of influence within power elites, in combination with some nice fees. As Tax Justice Focus points out, the failure of the intermediaries to report suspicion of money laundering is punishable, and doing business with politically exposed persons (PEPs) incurs an increased risk of criminal offense. "But no private or public body other than the bank has information on the account holders". Swiss bank secrecy prevents the Swiss authorities from looking into Swiss bank accounts too.
The ineffectiveness is borne out by the way a Financial Times article on February 11 says, on the assets of Mubarak and his entourage, that
So, on "all funds held by the listed people" ... Nicholas Shaxson, author of Treasure Islands, observes in a BBC Radio 4 interview today, that it's very hard to trace these things. He describes how a government will give the appearence of cracking down, but finding out who owns actually owns assets is inordinately difficult as they tend not to be owned in the name of the person. Ownership will typically be laddered through a number of secrecy jurisdictions - typically 5 or more for the very wealthy - via complex financial structures and various flavours of secrecy: plain vanilla banking secrecy of the Swiss variety; trusts, and companies with nominee directors. Even if you are able to get information out of one jurisdiction, then you have to crack the next one and it becomes very, very difficult.
While measures to prevent and detect illicit funds are ineffective, Swiss authorities declare themselves to be squeaky-clean in terms of asset recovery when it appears to be expedient to bow to the political and media call to do so.
Rather ironic that, as the FT says,
Yes please Switzerland, maybe you'd like to act in in “in a credible, participative and transparent manner” yourselves. Mark Herkenrath of Alliance Sud has a brilliant quote on Reuters:
"What is the point of being a pioneer in returning money but at the same time being the first point of call for wealth of dubious origin?"Quite likely a lot of the money has moved on already. Certainly the delay by authorities allowed plenty of time for bankers to arrange that. There will not be a payment order sent from on bank to another with beneficiary name "Mubarak". No. There will be some trust, some offshore company name, even the name of another "frontperson". One trust can be closed down and a new one opened. New offshore companies can be created. Money can be parked in one secrecy jurisdiction for a while, then, perhaps in chunks over time, moved to other places via other anonymous structures. And none of which will have the name of the real person behind it. Back-office bank and trust company workers may have no idea who is really behind the money, but some very very senior people in the banks will do, and possibly will have even courted the business.
And of course it's not just Switzerland. We'd like to remind you of the report by our friends at Global Witness that banks in the UK and US, amongst other jurisdictions, knowingly took on and maintained accounts for kleptocrat leaders of struggling nations Undue diligence - How banks do business with corrupt regimes.
As said by Ian Birrell in today's Guardian's, in We help the dictators to steal