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Ex-World Bank Chief Economist wades into Swiss banking secrecy controversy

DEVELOPING countries and emerging markets have suffered the most from the Swiss banking system, long a haven for ill-gotten gains from Africa and elsewhere, a former Senior Vice President and Chief Economist at the World Bank has said.

Joseph E. Stiglitz, an American Nobel laureate in economics, was reacting to extensive revelations by the Organised Crime and Corruption Reporting Project (OCCRP) about the secretive nature of banking in Switzerland.

The revelations that focused on Credit Suisse were reported by a number of international media organisations, including The Guardian in the UK, for which Stiglitz wrote an Opinion piece this week.

Noting that the revelations had ‘two particularly alarming aspects’, he wrote: ‘…it appears the countries that suffer the most from the bank’s assistance to bad actors are developing countries and emerging markets.

‘The revelation confirms what experts have warned of for a long time: Switzerland agreed to an automatic information exchange mostly with other advanced countries, but not with poor countries, and especially those that might be the home to these illicit activities.

‘As a result, kleptocracy and corruption can still flourish,’ Stiglitz added.

The other aspect was the fact that the exposures ‘only saw a small portion’ of Credit Suisse’s client data.

Stiglitz wrote: ‘But if in this tiny portion are already so many problematic customers, including dictators and their families, suspected war criminals, intelligence officials and chiefs, a human trafficker, sanctioned businessmen and human rights abusers – a true rogues’ gallery – what would we see if the window into the bank were larger?’

He went on: ‘It’s good to see that journalists believe in their duty to report, and that they fight for “the right to know” of the citizens of countries such as Switzerland, who can’t control what their politicians hide.

‘Politicians in advanced countries are fond of making speeches condemning corruption elsewhere.

‘But it is countries like Switzerland that are the key enablers: that provide the haven, ensuring the long-term returns.’

Stiglitz however pointed out that while Western countries were passing laws to allow for such revelations, ‘Switzerland, one of the oldest democracies in the world, seems to have doubled down on its commitment to secrecy, regardless of the incentives it provides for bad behaviour, by threatening journalists and others who try to access data showing what is going on in the dark shadows of its financial system’.

He added: ‘Regrettably, but not surprisingly, no Swiss outlet was able to join the global journalism collaboration due to the danger of severe legal consequences under the country’s banking secrecy laws.

‘But journalists in other countries should be given kudos too, for risking the possibility of Swiss authorities’ prosecution.

‘Surely, Switzerland must know the chilling effect of its legislation: perhaps its very intent was to preserve its business models as long as possible, of taking a little slice of the ill-gotten gains of others, in return for providing a safe and secret place to hoard and store the gold,’ Stiglitz added.

Drew Sullivan, co-founder and the publisher of the OCCRP, said that the last 50 years had seen the ‘dramatic globalisation of organised crime and corruption, now totalling trillions of dollars every year’.

He said that the ‘criminal services industry’ – corrupt banks, law firms, registration agents, and lobbyists — had aided ‘the world’s most corrupt officials and tycoons [to] easily loot, launder, and hide stolen money’.

Sullivan went on: ‘The result is an unprecedented transfer of wealth and global web of high-level corruption and organised crime that has fuelled global inequality, the rise of extremist groups, and the decline of democratic institutions all over the world.’

But he said that there was good news on the horizon through the OCCRP and its network of journalists.

‘We have our own network to track the criminal networks — organised, coordinated, and cross-border.

‘Using cutting-edge tech tools, expert researchers, and decades of investigative experience, we expose global crime and corruption so people can hold power to account,’ Sullivan said.

Credit Suisse said in a statement that it ‘strongly rejects the allegations and insinuations about the bank’s purported business practices’.

‘The matters presented are predominantly historical, in some cases dating back as far as the 1940s, and the accounts of these matters are based on partial, inaccurate, or selective information taken out of context, resulting in tendentious interpretations of the bank’s business conduct.

‘While as a matter of law Credit Suisse cannot comment on potential client relationships, we can confirm that actions have been taken in line with applicable policies and regulatory requirements at the relevant times, and that related issues have already been addressed,’ the bank with trillions of dollars under its management said.

 

Source
Desmond Davies

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