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Switzerland Faces Possible EU Blacklisting Amidst Credit Suisse Scandal

On Monday, the fallout from the Credit Suisse scandal, a massive leak of banking data, threatened to devastate Switzerland’s entire financial sector, with the European Parliament’s main political grouping raising the possibility of adding the country to a money-laundering blacklist.

The European People’s Party (EPP), the European parliament’s largest political grouping, demanded that the EU review its relationship with Switzerland and consider whether it should be added to a list of countries with a high risk of financial crime.

According to experts, such a move would be disastrous for Switzerland’s financial sector, as it would be subjected to the same level of enhanced due diligence as transactions involving rogue countries such as Iran, Myanmar, Syria, and North Korea.

“When Swiss banks fail to apply international anti-money-laundering standards properly, Switzerland itself becomes a high-risk jurisdiction,” said Markus Ferber, the EPP’s economics affairs coordinator. The EPP represents Europe’s centre-right political parties.

“When the list of high-risk third countries in the area of money laundering is up for revision the next time, the European Commission needs to consider adding Switzerland to that list.”

The Credit Suisse Scandal

After media outlets such as the Guardian, the Organized Crime and Corruption Reporting Project (OCCRP), Süddeutsche Zeitung, and Le Monde divulged how the Credit Suisse scandal, a massive leak of data, revealed apparently widespread failures of due diligence by the bank, the EPP released the proposal.

Clients of the Swiss bank who were involved in torture, drug trafficking, money laundering, corruption, and other serious crimes were identified as part of the investigation, dubbed Suisse Secrets.

Switzerland Faces Possible EU Blacklisting Amidst Credit Suisse Scandal

“Bank privacy laws must not become a pretext to facilitate money laundering and tax evasion. The Suisse secrets findings point to massive shortcomings of Swiss banks when it comes to the prevention of money laundering,” Ferber said. “Apparently, Credit Suisse has a policy of looking the other way instead of asking difficult questions.”

He went on to say that because of the close ties between EU and Swiss banks, anti-money laundering flaws in the Swiss banking industry “also pose a problem for the European financial sector.”

In a statement, Credit Suisse said it “strongly rejects the allegations and inferences about the bank’s purported business practices,” claiming that the issues uncovered by reporters were mostly historical and based on “selective information taken out of context, resulting in tendentious interpretations of the bank’s business conduct”.

According to the bank’s lawyers, any previous individual failures do not reflect the bank’s current business policies, practices, or culture. Since then, the bank has announced the formation of an internal taskforce to look into the matter. “To protect our clients,” it stated, “we have robust data protection and data leakage prevention controls in place.”

The Swiss government has refused to respond on the EPP statement, but has stated that the country complies with international standards in the areas of tax information exchange, money laundering, terrorist financing, and corruption.

If the country is added to the EU’s list of high-risk third countries, regulated professions such as bankers, lawyers, and accountants will be required to perform additional due diligence on any transaction or commercial relationship with a person or company in the country.

Being added to the EU list, according to Tom Keatinge, director of the Centre for Financial Crime and Security Studies at the defense think tank RUSI, could have a significant and far-reaching impact on Switzerland’s banks and broader financial sector. “There’s a lot of potential for collateral damage,” he said.

Extreme Swiss Banking Secrecy Law

An anonymous source who complained about “immoral” Swiss banking secrecy laws leaked the Credit Suisse data to Süddeutsche Zeitung.

Politicians and media organizations in Switzerland were outraged when it was revealed that Swiss investigative journalists were barred from participating in the Suisse secrets investigation due to the country’s infamous banking secrecy law.

For decades, Swiss law has made it illegal for financial professionals to reveal banking information. However, in recent years, it has been broadened to include outsiders who receive banking data, such as investigative journalists.

In the midst of international outrage, Andrea Caroni, a Swiss politician who advocated in 2015 for expanding article 47, the iconic section of a 1934 banking law that introduced excessive secrecy regulations, acknowledged on Monday that “maybe the rules are not set perfectly” and suggested he would be open to a review.

Samira Marti, a national councillor for the Swiss Social Democratic Party, said that the group would submit a proposal in the spring session of the Swiss parliament to combat article 47’s “censorship,” and she urged the country’s centrist party, Die Mitte, and the Green Liberal party to join them.

The Green Liberals have stated that they will support Marti’s call for action. “Journalism plays an essential role in uncovering illegal practices,” said Julie Cantalou, the party’s co-secretary general. “We are therefore supportive towards the idea to reform article 47, and look forward to working with Samira Marti on this important matter.”

Meanwhile, the Swiss Green Party announced that it had submitted a legislative proposal to reform Article 47 immediately.

“The Suisse secrets show once again that Swiss banks continue to do business with dictators, autocrats and criminals,” the party said in a statement. “With a proposal submitted today, the Greens are now campaigning for an immediate revision of the Banking Act.”

Finma, the Swiss financial regulator, confirmed this morning that it was “in contact” with Credit Suisse regarding the investigation, but declined to be drawn on the details of its conversations with the bank. This could be the first step toward a formal investigation into the Suisse secrets disclosures.

The timing of the leak, according to one Swiss commentator, is “catastrophic” for Credit Suisse, which was hit by a series of rolling scandals last year that dragged down its stock price.

The bank’s latest controversy, according to Samuel Gerber, deputy editor of the Swiss financial publication Finews, could jeopardize a planned international review of Switzerland’s anti-money-laundering measures later this year.

Credit Suisse had “already lost a lot of its reputation,” according to Daniel Thelesklaf, the former head of Switzerland’s anti-money-laundering body.

“This can become another crack in the wall,” he said. “Unless Credit Suisse undergoes a massive change of culture, it will lose the trust of its remaining clients soon.”



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