----------------------------------------------------------
Unsubscribe?, send your mail to: [EMAIL PROTECTED]
with body mail: "signoff indonews"
need more help?, send your mail to: [EMAIL PROTECTED]
with body mail: "info refcard"
----------------------------------------------------------
From: kang bondet <[EMAIL PROTECTED]>
Article in the "Multinational Monitor", November 1992
Switzerland without capital flight?
Swiss banks are number one in international private
banking, more commonly
described as the capital flight business. A coalition of
Swiss non-governmental
organizations has recently taken on the issue. Their goal
is a Switzerland without
capital flight.
Swiss citizens still like to believe that their country's
foreign reputation is made of by
chocolate, cheese and the Red Cross. But they are wrong.
Haile Selassie, the Shah of
Iran, Ferdinand Marcos, Baby Doc Duvalier, Sese Seko
Mobutu and Nicolae Ceaucescu
are just a few of the global villains who have hidden
their ill-gotten wealth in Swiss bank
accounts and have shed a dubious light on mountain
republic. "The Swiss have been
profiting from dirty money for more than 50 years and
almost nobody seems to criticize
them for it", an op-ed piece in the "Cicago Tribune"
exclamed in 1987, in fact calling for
sanctions against Switzerland. And in 1990, Philippine
activists formed a "Swisswatch"
group in order to protest the uncooperative handling of
the Marcos deposits by Swiss
courts. To the dismay of Swiss authorities and business
circles, they picketed the Swiss
embassy in Manila for weeks and brought the issue to the
attention of the international
press. So more and more, the Swiss reputation abroad is
tainted by flight capital and the
fortunes of deposed dictators.
Astonishing figures
And rightly so. Switzerland today is number one in
foreign private banking worldwide. Not
per capita, but in absolute terms. Private banking is the
most important service which
Switzerland pays to the rich of this world, and arguably
its biggest contribution to the
underdevelopment of the third world. Given the discreet
nature of the business, statistical
evidence is hard to come by. Studies which the renowned
McKinsey consulting firm
conducted on the role of the Swiss financial center might
give a clue on the Swiss role in
capital flight. By computing figures from these studies,
one can estimate the private
deposits from the third world on Swiss bank accounts at
roughly 250 - 300 billions Swiss
Francs. (The study was based on confidential interviews
with top bankers. At present, 1
SFr. equals 75 US cents.)
According to the conservative "Economist" magazine,
"international private banking and
tax evasion border on the synonymous." In other words:
The rich private citizens from the
third world who succeed to bring their fortunes to
Switzerland will usually not declare them
to their tax authorities. Furthermore many countries in
the third world do not allow free
export of capital. So often the private deposits are
exported illegally, too - be it by a
private messenger, be it through business practices like
the underinvoicing of exports or
the overinvoicing of imports. Tax evasion and illegal
export of capital are the two most
common practices which constitute capital flight. So
given this definition, and given that the
McKinsey studies are correct, one out of every three
flight capital dollars from the third
world can be estimated to be handled by Swiss banks.
(Credit Suisse banker Hans Mast
meanwhile estimates the Swiss share of the capital flight
cake at 8 - 10 %.)
Matterhorn and neutrality
"The police should fulfill their mandate and confiscate
unlawfully collected money twice a
day", Zurich's renowned private banker Hans J. Bdr says.
But let there be no
misunderstanding: Bdr does not talk about unlawful bank
deposits, but about beggars in
Zurich's downtown area. "The beggars and the drug addicts
in the middle of the city are a
gigantic comparative disadvantage. Our clients notice
that Zurich has become less secure
and dirtier than many other banking city."
The concerned banker has a point. Foreign clients do not
prefer Swiss banks because of
the high charges or the low interest rates these
institutes are known for. ("The Swiss charge
everything that moves", a saying goes in the
international banking community.) The Swiss
financial center is attractive because of its unmatched
social stability, its know-how and
location, and because of its legal foundations. Let's
look at these factors in more detail:
Political and social stability. Switzerland is ruled
by a coalition government in which
all four major national parties (including the
Social Democrats) are represented.
Since 1959, there has not been a single shift in the
party composition of this
government. Switzerland, being a neutral country,
has also succeeded in keeping
out of all foreign wars for almost 200 years,
including of course world wars I and II.
And social unrest is almost unknown. Since the
1930s, the Swiss trade unions have
negotiated agreements with the entrepreneurs which
prevent strikes as a means of
labour disputes. So a Swiss bank safe is probably
still the safest place on earth for
your ill-gotten, or untaxed, dollar. (The youth
riots of the early 1980s and the heroin
addicts in downtown Zurich have changed this picture
somewhat, as Hans J. Bdr
points out.)
Know-how and location. Swiss banks have built up a
reputation for private banking
for more than 200 years. There are banking families
in Geneva who have personally
handled the fortunes of their client families for
many generations. Their discreetion
and security is probably unmatched worldwide. And
they know the business of
investing private deposits. If you walk into a Swiss
bank, you can speak English or
Spanish and open an account without any problems.
And the technical infrastructure
in Switzerland, be it airports or telex
communications, usually works well. Even their
central location in the middle of Europe works to
the benefit of Swiss banks. A
normal foreign client will usually visit his Swiss
bank once a year, on his way to a
skiing vacation in St.Moritz or Zermatt. This is a
comparative advantage which
Luxemburg or other competing financial centers do
not offer.
Banking secrecy
Violations of the Swiss banking secrecy will by law be
punished more severely in
Switzerland than in other countries. (In practice such
violations never happen.) On the other
hand Swiss bankers are obliged to know their clients,
which their Austrian competitors,
e.g., are not. Altogether, the Swiss banking secrecy is
not stricter anymore than the
respective laws in Luxemburg or Austria. But because the
extra-legal factors make
Switzerland such an attractive place for flight capital,
its laws should be stricter than others if
the country were to fulfill its global responsibilities.
Which today is certainly not the case. A
small number of legal clauses play a crucial role in
protecting the Swiss banks' interest in
the capital flight business:
Aiding and abetting. There are no legal provisions
in Switzerland on the handling of
flight capital. Instead a gentleman's agreement
(which is monitored by the Swiss
Federal Banking Commission) prevents the banks from
actively aiding and abetting
capital flight. This means that a Swiss banker is
not allowed to, e.g., organize a
messenger service for private fortunes from, say,
Lagos or Manila to Geneva.
Neither is he allowed to publicize his services in
advertisements like the one in
"South" magazine. (The "South" advertisement was put
in by a Hong Kong-based
money analyst.) Yet the gentleman's agreement does
not prevent so-called
passive aiding and abetting of capital flight. In
practice this means that any Swiss
banker is legally allowed to accept foreign deposits
even if he knows that they
have been withdrawn from taxes and exported
illegally. So as long as the active
part is played by a Hong Kong analyst, by a dubious
foundation in off-shore
Liechtenstein or by a Swiss lawyer, the Swiss banks
do not need to worry about
legal obstacles.
International legal assistance. Remember Imelda
Marcos and Adnan Kashoggi?
They were brought to trial in New York in 1990 after
the Saudi arms dealer had been
arrested in Switzerland and extradited to the United
States. Such a cooperation in
criminal matters is called international legal
assistance. Switzerland has a good
reputation as far as extraditions are concerned, but
a very mediocre one in the
case of financial delicts. In fact, a state judge in
Geneva was supposed to deliver
bank documents on illegal business practices of
Adnan Kashoggito the New York
court. He simply refused to do so for more than
seven months. "I would like to
send some troops to Geneva to confiscate these
documents, but unfortunately I
can't," Pierre Schmid, the director of the Swiss
office of international legal
assistance told me in total frustration.
Again the legal situation works to the benefit of the
banks and their clients. In the case of
the infamous Marcos deposits, the banks and the Marcos
family have been able to block
the release to the Philippines for more than six years by
now. In cases of fraud and
corruption, the Swiss international legal assistance
works extremely slowly. It does not
work at all in the simple (yet popular) cases of normal
capital flight: Swiss law explicitely
excludes tax evasion and illegal export of capital from
such assistance. Again flight capital
is privileged by law in Switzerland.
Charity instead of justice
Meanwhile the Swiss authorities offer charity to the
people of the third world instead of
justice. In 1991, the democratic movements of Mali ousted
military dictator Moussa Traori.
Rumours had it that the Traori clan had brought stolen
wealth at the order of one billion
dollars to Swiss bank accounts. The new democratic
government therefore asked
Switzerland for international legal assistance to release
these deposits to Mali. In an
unprecedenced step, the Swiss authorities themselves paid
for a lawyer who could
represent Mali's interests during the complicated
procedures of Swiss international legal
assistance. Would it not be wiser (and cheaper) for
Switzerland to establish legal
procedures which allowed a foreign country to obtain
justice without need for such
humiliating charity?
Swiss bank accounts only for the very wealthy?
"Are Swiss bank accounts only for the very wealthy?", an
advertisement in "South", a
magazine widely read by elites in the third world, asks.
And the answer reads: "Not at all.
But they may be one of the reasons why the very wealthy
got that way - and stay that way.
(...) If you're after financial privacy, a Swiss bank
account is the world's greatest bargain."
Swiss NGO campaign against capital flight
In May of 1984, the Swiss citizens voted on an initiative
which proposed legal measures
against tax evasion in Switzerland, as well as against
the role of Swiss banks in
international capital flight. The initiative was heavily
defeated with a margin of 73 : 27 %.
Later official polls found out that 60 % of the voters
actually supported the measures
against capital flight. They had rejected the initiative
only because of its internal provisions.
Still, capital flight was no serious issue in Swiss
politics for several years after the vote.
In 1991, the Berne Declaration and the Action Group
Financial Center Switzerland issued a
manifesto for a "Switzerland without flight capital".
(The motto echoes an initiatve for a
"Switzerland without an army" which in 1989 had scored a
sensational relative success.)
The manifesto addressed the main flaws of the legal
situation in Switzerland and proposed
corresponding changes. In the following months it was
signed by close to 200
non-governmental organizations from Switzerland and the
third world. Support came from a
broad political specter, ranging from the Swiss Social
Democtatic Party to the Catholic
Women's Federation.
In a first stage the promoters of the manifesto focussed
on some formal lobbying work.
E.g. a bill reflecting their main demands was introduced
in parliament by a Christian
Democrat Congresswoman. (It is still pending.) In October
1992, a national action week is
planned to show the popular support which measures
against the inflow of flight capital in
Switzerland have. An expert hearing, local public
meetings and a campaign newspaper
will spread critical information on the issue. Grassroots
campaigners will also distribute
fake flight capital bills on the streets in order to
raise public awareness.
The promoters of the campaign try to take on the
international reputation of Switzerland too,
which is so conducive to the Swiss role in capital
flight. They will send letters to finance
ministries around the world to inform them about the
legal changes Swiss NGOs campaign
for. And advertisements in foreign newspapers, if the
necessary funds can be raised,
should have the same effect. Switzerland, their message
will be, might not be such a safe
haven for flight capital in the future anymore.
Peter Bosshard
Bern Declaration (BD)
http://www.access.ch/evb
++++++++++++++++++++++++++++++++++++++++++++++++++++
Didistribusikan tgl. 29 Jan 1999 jam 13:39:02 GMT+1
oleh: Indonesia Daily News Online <[EMAIL PROTECTED]>
http://www.Indo-News.com/
++++++++++++++++++++++++++++++++++++++++++++++++++++
