Tuesday, November 22, 2011

Ruedi Elmer - an interesting twist to the story

The higher court judgement, in Swiss whistleblower Ruedi Elmer's appeal heard last week Thursday, has some very important implications. (See earlier blogs on the story here and here.)

The Swiss court hearing Ruedi's appeal against his conviction for breaching Swiss banking secrecy said it lacked clear evidence to rule on the case. As Reuters reports:
Judge Peter Marti said ... it was not clear whether the CD-roms Elmer had handed over contained data of bank clients in Switzerland or just in the Cayman Islands.

"If the data also originate from Zurich, the Swiss banking law also applies. We don't know precisely, however, what was on the CDs," Marti told the court.

And here's the twist:

He ordered the public prosecution service and [Bank] Julius Baer to prove the origins of the data on the disk, placing the onus on the Swiss bank to publish client data.

In other words, as reported in swissinfo:
Thursday’s high court ruling puts Julius Bär in an awkward situation.

Only the bank and Elmer himself know exactly what the stolen data contains, and the bank has refused to give details.

This judgement has a crucial element: As an article in the Neue Zürcher Zeitung describes, Swiss law has no jurisdiction in the Cayman Islands, therefore this case presents no violation of Swiss banking secrecy. (Google translation of the article here). The lower court ruling had implied an assertion by Switzerland of extra-judicial application of bank secrecy, but the appeal ruling now determines that the lower court decision contradicted usual practice in the finance industry

The idea that Ruedi could be held criminally liable in Switzerland for data that had been held in Cayman was always considered not only unjust to TJN but also bizarre, as it is a well established principle that Swiss bank secrecy can only be valid for data held in Switzerland. According to the article in the Neue Zürcher Zeitung, the Swiss financial supervisory authority, Finma, has even issued caution that Swiss banking clients' data are not protected by Swiss secrecy laws where a bank outsources operations to another jurisdiction.

The Neue Zürcher Zeitung report is more accurate than others we have seen, in terms of clarity on the point that bank secrecy applies to the jurisdiction where the data is held. Other reports risk leading readers, who may be unfamiliar with the issue, to interpret bank secrecy as applying to whether the clients themselves are from Switzerland or Cayman. Reuters writes, somewhat ambiguously: "Judge Peter Marti said ... it was not clear whether the CD-roms Elmer had handed over contained data of bank clients in Switzerland or just in the Cayman Islands." Similarly, from swissinfo: "since if the data is that of Cayman Island customers, they are not covered by Swiss banking secrecy".

This distinction is very, very important. To explain in other terms, the issue is not whether clients are Swiss or Cayman, it is whether the data are from the Swiss or Cayman institutional entity.

Which brings us to the second crucial element of the judgement: the dilemma of the bank. Will they risk the appearence of diluting, or breaking, bank secrecy by revealing data to the authorities?

This ruling appears to be a hopeful turn of events for Ruedi. And, a very intriguing development on the implications of bank secrecy not only in Switzerland, but also in other places where bank secrecy is enshrined in law.


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