Swiss prosecutors are seeking a court ruling that would make it easier to convict whistle-blowers for breaking the nation’s bank secrecy law wherever they are in the world, legal documents showed.
The Swiss Banking Act requires employees of Swiss-regulated banks to keep client information confidential, but a number of staff have leaked account details to foreign authorities in the past decade as Western governments crack down on tax evasion.
In the unpublished documents reviewed by Reuters, Zurich prosecutors have asked the nation’s highest court to interpret the law so that the secrecy obligation is widened to include people with looser working relationships to Swiss banks and their subsidiaries abroad.
The documents, dated Nov. 21 last year, form the basis for an appeal by prosecutors to the Swiss Federal Supreme Court against the acquittal last year of former private banker Rudolf Elmer on charges brought under the secrecy law.
Elmer, who headed the Cayman Islands office of Swiss private bank Julius Baer until he was dismissed in 2002, later sent documents revealing alleged tax evasion to the anti-secrecy group WikiLeaks and to tax authorities across the globe.
Zurich’s upper court ruled last year that the bank secrecy law did not apply to him as an employee of the Caribbean subsidiary, rather than of the parent bank in Zurich.
In their appeal, prosecutors argue that if they cannot apply the law to people connected to Swiss banks outside the nation it deprives banking secrecy of its substance “with far-reaching consequences that cannot be accepted.”
Under Swiss law, no public hearing will be held, but the documents show the Swiss Federal Supreme Court is considering the written appeal.
On June 9, it invited Elmer’s side to make a written response, which his lawyer has since submitted. The court is expected to issue a written judgement next year.
A spokeswoman for Zurich’s senior prosecutors declined to comment beyond noting: “It’s up to the supreme court to decide on open questions.”
Julius Baer also declined to comment.
Elmer was arrested twice in Switzerland, in 2005 and 2011, and spent more than seven months in investigative custody.
“I was defamed, criminalized and isolated,” Elmer said, adding that prosecutors were trying to set an example of what could happen to people who speak out and to their families.
“The law in this case has been bent, stretched and, most importantly, abused by the judicial system of Zurich in order to protect its money-making machine,” he said.
Switzerland is the world’s largest center for overseas wealth management and has had to respond to international pressure, especially from the EU and US, for greater transparency.
That includes participation in the Automatic Exchange of Information program, an agreement among developed economies which aims to ensure that an offshore account is known to tax authorities in the account holder’s nation of residence.
If the appeal is successful, the ruling would have no legal basis in most nations as they have no bank secrecy rules, so Switzerland could not extradite people from the likes of Britain or the US on such charges, but accused people would be vulnerable to arrest if they entered Switzerland or could face the stigma of being charged with a crime in their absence.
Some EU lawmakers are worried that the prosecutors’ move, if successful, might deter potential whistle-blowers from supplying information on people accused of shifting their wealth to tax havens through accounts protected by secrecy laws.
In the appeal, prosecutors called for Elmer to receive a 36-month jail sentence, 24 of which would be suspended.
Last year, the Zurich court gave him a suspended sentence for forging documents and threatening Julius Baer following his dismissal.
Elmer denies all the charges.
One EU lawmaker expressed concern over the lack of protection for whistle-blowers in Switzerland, saying the aggressive prosecution of Elmer and others confirmed the nation had not really changed its ways regarding tax crimes and money laundering.
“We’re going to be paying very close attention to this case,” said Ana Gomes, who cochairs the European Parliament’s Committee of Inquiry into money laundering, tax avoidance and tax evasion. “We’ll be putting pressure on our authorities in the way they deal with Switzerland and, of course, the way the Swiss deal with whistle-blowers is extremely relevant for us.”
Swiss banks employ large numbers of people in London, as well as New York, and a British lawmaker said employees of bodies under British jurisdiction cannot be subject to an extraterritorial law.
“This would be unacceptable,” said John Mann, a Labour Party member of the British parliamentary Treasury Select Committee. “We need a position whereby people feel confident to whistle blow wherever they are based. There’s a danger this could have ramifications for the Swiss banks in Britain.”
Prosecutors argued that a legal precedent is needed to send a message to disgruntled people laid off from Swiss banking groups across the globe.
Referring to Elmer in the appeal, they said: “A former banker, disappointed and embittered by his career, perceived himself to be in lawless territory... and caused great damage.”
The law, they argued, does not require that “the contractual activity be exercised under Swiss law” for Swiss bank secrecy to apply.
Even contractors, lawyers and consultants who perform work for a Swiss bank internationally should fall under the obligation, they added.
Anti-corruption expert Mark Pieth disputed this in documents submitted by Elmer’s lawyer to the court.
Should Switzerland extend the Banking Act beyond lenders regulated by the nation’s financial watchdog or expand the definition of staff covered, parliament would have to change the law, Pieth said in a legal opinion seen by Reuters.
Bank secrecy has been eroded since Switzerland agreed, beginning in 2008, to transfer details of thousands of UBS clients to US tax authorities. In return, the US government dropped charges against the bank for helping wealthy Americans dodge taxes.
The scandal was set off by former UBS employee Bradley Birkenfeld, who in 2007 gave US authorities information exposing the methods Swiss bankers used to help clients conceal assets.
In the aftermath, Swiss laws and bilateral treaties were amended to allow greater information-sharing on tax matters, but at the same time prison sentences for breaching banking secrecy were increased from a maximum of six months to up to five years.
Whistle-blowers and new disclosure standards have proven costly for Swiss banks, which have suffered hundreds of billions of dollars in outflows as a result and become the subject of tax inquiries in a number of nations.
More than a third of Swiss private banks have permanently closed.
An attempt to apply bank secrecy to the thousands of people working for Swiss bank subsidiaries abroad would be “way too broad,” said Luc Thevenoz, who heads the University of Geneva’s Center for Banking and Financial Law.
However, if Elmer were found on appeal to have been employed directly by Julius Baer rather than its Caribbean subsidiary, it would be admissible to convict him regardless of where he was based.
“They want to persuade the court that Elmer was an employee of the Swiss entity,” Thevenoz said.
“If they succeed, I have no problem with the conclusion that Elmer would have been bound by Swiss banking secrecy. If they fail, I don’t see how the court can convict him,” he said.
Additional reporting by Mark Hosenball, Oliver Hirt and Joshua Franklin
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