Swiss Banks Face Trouble as Countries Crack Down on Tax Fraud

SwitzerlandPublic_Domain_Photography / Pixabay

We have extensively reviewed how the controversial laws in Switzerland have not only contributed to its economic stability, but at the same time have made tax fraud easier, in a previous post. Now the Swiss face a more urgent problem; the fear of a slow economic wipe out. When all the developed world is focused on a massive crackdown of banks that allow secretive accounts and therefore promote tax evasion and fraud, and the Swiss banks have historically been the ‘eye candy’ of all such investigations and allegations, the wealthy and affluent of the world have started moving their assets to other more ‘favorable’ places, thus threatening the image of this economic deity.

 Swiss Banks Face Trouble as Countries Crack Down on Tax Fraud

According to estimates Western Europeans may move 135 billion francs ($139 billion) from Swiss banks, which amounts to 15 percent of their total assets. If Swiss banks do not adapt to a more open banking system that takes them off the radar of investigations, their existence might be at stake here. These doomed predictions were made by Herbert Hensle, global head of the Strategy & Transformation team of Cap Gemini, SA. Clients have already pulled 3 billion sfr from their offshore accounts, Bank Sarasin reported last week.

The same forecast has been emphasized by top ranking officials of the  Reyl Group , a Geneva based bank in operation since 1973, Vontobel Holding , a private bank of Vontobel Group, Lombard Odier & Cie, the oldest bank in Geneva, and several other Swiss banks. The CEO of Reyl Group, Francois Reyl, said,“It will not be a big bang, but an erosion as amnesty programs are put together, and as clients declare themselves and come clean, those banks which don’t adapt will die a slow death.”
Similar comments were made by the CEO of Vontobel Holding, Zeno Staub, who believes that about 100 Swiss banks will wipe out as an aftermath of consistent fund withdrawals. Vontobel has suffered 86 percent decline in the influx new money from clients.
“Sometime in 2013 or 2014 we will have a drop in assets under management of something like 25 percent of the undeclared money,” Bernard Droux, a managing partner at Lombard Odier & Cie. said in a statement.
The one after another financial meltdowns has prompted the governments to find every penny of hidden cash and unpaid taxes to stabilize their crumbling assets and rising debts. Several countries, like America, the United Kingdom, France, Germany, and Greece, have started investigations into offshore assets. While technically, Swiss banks provide a status of safe haven for hiding assets, they have only brought themselves into a red zone which is now always under scrutiny.

It is ironic, though not unexpected, that the country that has recently made pompous claims regarding its economic stability in the face of the euro crisis  could suffer from a similar crisis in terms of ‘assets’ that it is has been so proud of lately. For more information on history of Swiss banks and raids by authorities, read  Switzerland: Economic Stability Built on Theft and Fraud.

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About the Author

Tabinda Hussain
Tabi covers hedge funds for ValueWalk. Although Tabi is an expert in hedge funds, her academic background is in Biology. Follow her on twitter @tabihussain

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