The Minister Who Dismantled Swiss Banking Secrecy by Matthew Allen, swissinfo.ch
As the curtain falls on Eveline Widmer-Schlumpf’s career in government, one of the most abiding legacies she leaves behind is the collapse of Swiss banking secrecy under her watch as Finance Minister.
Her predecessor, Hans-Rudolf Merz, told the world in 2008 that it would “break its teeth on Swiss banking secrecy” if it tried to bring Switzerland to heel over tax evasion. But it has been the Swiss establishment spitting teeth after losing a bruising encounter with the United States that paved the way for a global surrender of secrecy.
Praise and vitriol concerning Widmer-Schlumpf’s personal role in the process is spread out across the political spectrum. Her media comments throughout the crisis frequently inflamed rightwing politicians, who in 2012 demanded that the mandate to conduct banking secrecy negotiations be switched to the foreign ministry.
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There is one thing nearly everyone can agree on: the business model of employing secrecy to help foreign clients evade taxes in their own countries was defunct by the time Widmer-Schlumpf became Finance Minister in November 2010.
But opinions diverge markedly when analysing exactly how this was achieved and judging whether Switzerland ended up with the best possible deal.
“Eveline Widmer-Schlumpf did not come into office with an agenda to bring down Swiss banking secrecy,” Peter V Kunz, international comparative law expert at the University of Bern, told swissinfo.ch. “She tried to resolve the issue in an orderly way.”
The problem that Widmer-Schlumpf faced, according to Kunz, was that the decisive blows in the Swiss-US tax evasion battle had already been landed by the time she came into office. These were the successful prosecution of UBS bank by the Department of Justice and the subsequent release of bank client data to the US by the Swiss financial regulator.
“This was a crucial mistake,” said Kunz. “Once that data had been given to the US without legal authority it allowed the European Union to turn around and demand the same treatment.” In other words, it opened the floodgates for the rest of the world to impose irresistible pressure on Swiss banking secrecy.
To date, this has resulted in Switzerland signing separate FATCA and ‘non-prosecution’ bank data transfer deals with the US – setting up both a future clean money policy and paying for past misdemeanors.
In addition, Switzerland has signed up to the global automatic exchange of tax information system that allows for further data sharing deals to be set up with other countries, including the EU bloc.
Martin Janssen, professor emeritus of finance at the University of Zurich and current head of the Ecofin banking consultancy group, believes that too much ground was conceded.
“The Swiss banking sector had to be reformed, but Widmer-Schlumpf went further than was necessary to achieve this end,” he told swissinfo.ch. “Foreign countries were not demanding the handover of such detailed Swiss bank data, but she wanted to strip away more from Switzerland’s banking centre than was necessary.”
Former UBS executive Raoul Weil, who successfully defended himself against tax evasion charges in a Florida court in 2014, is also of the opinion that the Swiss authorities played an unnecessarily weak hand when negotiating with the US.
“The strategic error of Swiss policy was that it sent banking secrecy to the grave without demanding something back in return,” he told the Tages Anzeiger newspaper. Weil is convinced that future secrecy could have been surrendered in exchange for a free pass for past banking offences.
Instead, negotiators were sent in too late and with one arm tied behind their backs, thus unpicking the earlier stout work carried out by Merz in defence of Swiss banks, Weil opined in the newspaper interview.
Too fast, too far?
But not everyone in Switzerland sees it that way. Margret Kiener Nellen, a parliamentarian with the leftwing Social Democratic party believes that Widmer-Schlumpf pitched her strategy perfectly.
“Her personality, sense of justice and conviction in the rule of law allowed such advances to be made at a faster rate than they might have been achieved under another person,” Kiener Nellen told swissinfo.ch. “However, it would be wrong to say that she went too far, too fast as some opponents have accused.”
The real villains of the piece are the banks that “spent millions” in the past lobbying against Social Democrat political initiatives to end banking secrecy. Had the banking lobby group not spent so much energy shooting themselves in the foot, “the issue could have been settled to the satisfaction of the international community by the mid-1990s,” Kiener Nellen concluded.
As far as Kunz is concerned, transnational banking secrecy was doomed before Widmer-Schlumpf was in a position to influence events. But there was simply no political or legal imperative behind her attempts to also erode secrecy in the domestic market, he said.
And nor could Kunz see the necessity to twice (2013 and 2015) start a political consultation process on the contentious issue of Switzerland cooperating with foreign tax complaints that are based on data stolen from Swiss banks.
The dossiers on domestic banking secrecy and stolen data will now get handed to Widmer-Schlumpf’s successor, who will be named following the cabinet reshuffle on December 9. However, the other banking reforms carried out during her tenure will remain carved in stone.
Outgoing Finance Minister Eveline Widmer-Schlumpf was born on March 16, 1956, in Felsburg, canton Graubünden. She is married with three children and four grandchildren.
She received her degree in law at the University of Zurich in 1981 and a doctorate in 1990. She worked as a lawyer from 1987 to 1998.
She was elected to the district court of Trin in 1985, presiding from 1991 to 1997. As a member of the Swiss People’s Party, in 1998 she was elected to the cantonal government, acting as president in 2001 and 2005.
In 2007, she became the sixth woman to be elected to cabinet, taking office on January 1, 2008. The People’s Party pushed her out and she ended up, with her cabinet colleague Samuel Schmid, in the more moderate Conservative Democratic Party.
The 246 members of the two chambers of parliament will vote for her replacement on December 9, and are expected to confirm the other six cabinet incumbents. The cabinet members will then decide on who will be responsible for which portfolios.