The fallout from a huge leak of Credit Suisse banking data threatened to damage Switzerland’s entire financial sector on Monday after the European parliament’s main political grouping raised the prospect of adding the country to a money-laundering blacklist.
The European People’s party (EPP), the largest political grouping of the European parliament, called for the EU to review its relationship with Switzerland and consider whether it should be added to its list of countries associated with a high risk of financial crime.
Experts said that such a move would be a disaster for Switzerland’s financial sector, which would face the kind of enhanced due diligence applied to transactions linked to rogue nations including 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 coordinator on economic affairs for the EPP, which 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 EPP released the proposal after media outlets including the Guardian, Süddeutsche Zeitung, the Organized Crime and Corruption Reporting Project (OCCRP), and Le Monde revealed how a massive leak of Credit Suisse data had uncovered apparently widespread failures of due diligence by the bank.
Quick GuideSuisse secrets
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What is the Suisse secrets leak?
Suisse secrets is a global journalistic investigation into a leak of data from the Swiss bank Credit Suisse. It comprises more than 18,000 bank accounts that were leaked to Süddeutsche Zeitung by a whistleblower who said Swiss banking secrecy laws were "immoral". The data, which is only a partial capture of the bank’s 1.5 million private banking clients, is linked to more than 30,000 Credit Suisse clients. The leak includes personal, shared and corporate bank accounts – holding, on average, 7.5m Swiss francs (CHF). Almost 200 accounts in the data are worth more than 100m CHF, and more than a dozen are valued in the billions. While some accounts in the data were open as far back as the 1940s, more than two-thirds were opened since 2000. Many of those were still open well into the last decade, and a portion remain open today.
The Guardian was among more than 48 media partners around the world including journalists at Le Monde, NDR, the Miami Herald and the New York Times. They spent months using the data to investigate the bank, in a project coordinated by Süddeutsche Zeitung and the Organized Crime and Corruption Reporting Project (OCCRP). They unearthed evidence Credit Suisse accounts had been used by clients involved in torture, drug trafficking, money laundering, corruption and other serious crimes, suggesting widespread failures of due diligence by the bank. It is not illegal to have a Swiss account and the leak also contained data of legitimate clients who had done nothing wrong. In its response, Credit Suisse said it "strongly rejects the allegations and inferences about the bank’s purported business practices".
The investigation, called Suisse secrets, identified clients of the Swiss bank who had been involved in torture, drug trafficking, money laundering, corruption and other serious crimes.
“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 added that the close ties between EU and Swiss banks meant that anti-money-laundering deficiencies in Switzerland’s banking industry “also pose a problem for the European financial sector”.
Credit Suisse said in a statement it “strongly rejects the allegations and inferences about the bank’s purported business practices”, arguing that the matters uncovered by reporters were largely historical and based on “selective information taken out of context, resulting in tendentious interpretations of the bank’s business conduct”.
Its lawyers told the Guardian any past individual failings by the bank did not reflect its current business policies, practices or culture. The bank has since announced it has set up an internal taskforce to investigate the leak. “We have robust data protection and data leakage prevention controls in place to protect our clients,” it said.
Switzerland’s government declined to comment on the EPP statement, but said the country meets international standards around exchange of tax information, money laundering, terrorist financing and corruption.
The country’s addition to the EU high-risk third countries list would mean regulated professions, such as bankers, lawyers and accountants, would be required to conduct enhanced due diligence on any transaction or commercial relationship with a person or company in the country.
Tom Keatinge, the director of the Centre for Financial Crime and Security Studies at the defence thinktank RUSI, said that being added to the EU list could have a significant and far-reaching impact on Switzerland’s banks, as well as its broader financial sector. “There is the potential for considerable collateral damage,” he said.
The Credit Suisse data was leaked to Süddeutsche Zeitung by an anonymous source who complained about “immoral” Swiss banking secrecy laws.
In Switzerland, politicians and media organisations reacted angrily to the discovery that Swiss investigative journalists had been prevented from participating in the Suisse secrets investigation because of the country’s notorious banking secrecy law.
Swiss law has for decades criminalised the disclosure of banking information by financial professionals. However, in recent years it was expanded to cover outsiders receiving banking data, potentially including investigative journalists.
Amid international controversy, Andrea Caroni, a Swiss politician who in 2015 advocated expanding article 47, the infamous section of a 1934 banking law that introduced extreme secrecy regulations, accepted on Monday that “maybe the rules are not set perfectly” and suggested he would be open to considering a review.
Samira Marti, a national councillor for the Swiss Social Democratic party, said the group would submit a proposal to combat article 47’s “censorship” in the spring session of the Swiss parliament, and called on the country’s centrist party, Die Mitte, and the Green Liberal party to support them.
The Green Liberals said they would back Marti’s call for action. “Journalism plays an essential role in uncovering illegal practices,” said Julie Cantalou, a co-secretary general of the party. “We are therefore supportive towards the idea to reform article 47, and look forward to working with Samira Marti on this important matter.”
Meanwhile, Switzerland’s Green party announced that it had tabled a legislative proposal for immediate reform of article 47.
“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.”
In what could be the first step towards a formal investigation into the Suisse secrets disclosures, Finma, the Swiss financial regulator, confirmed this morning that it was “in contact” with Credit Suisse concerning the investigation, but refused to be drawn on the details of its conversations with the bank.
One Swiss commentator described the timing of the leak as “catastrophic” for Credit Suisse, which last year suffered a series of rolling scandals that battered its share price.
Samuel Gerber, the deputy editor of the Swiss financial publication Finews, also warned that the bank’s latest controversy could jeopardise an international review of Switzerland’s anti-money-laundering measures expected to take place later this year.
Referring to past scandals, Daniel Thelesklaf, the former head of Switzerland’s anti-money-laundering body, said Credit Suisse had “already lost a lot of its reputation”.
“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.”