Credit Suisse scandal threatens Swiss efforts to clean up reputation
Credit Suisse scandal threatens Swiss efforts to clean up reputation
The information that triggered raids in five countries raises new doubts about the effectiveness of Switzerland’s efforts to shed its decades-old reputation as one of the world’s major tax havens.
“It is a wake-up call not only for the banking community but also for (the) authorities,” said Mark Pieth, an anti-corruption expert and criminal law professor at the University of Basel.
“Instead of really just being angry at others they should ask, have we really been zealous enough?”
Switzerland is among the countries that signed up to a global data-sharing program led by the Organization for Economic Co-operation and Development (OECD), known as the Automatic Exchange of Information (AEI), which was designed to root out tax dodgers.
Swiss banks, having paid more than $5 billion to settle allegations of helping wealthy Americans evade taxes, have trumpeted their reformed ways, publicly encouraging clients to sign up to government programs allowing them to declare untaxed assets.
But last week’s raids on Credit Suisse’s offices in London, Paris and Amsterdam as part of a coordinated investigation in five countries show Switzerland still has a way to go to break with its past.
It is a wake-up call for financial markets as well.
“People really thought that, with the upcoming AEI and the cleanup of the European client portfolio completed, this stuff should not be an issue anymore,” Andreas Venditti, a banking analyst at Vontobel, said. “Now the market seems to be confused about what to think.”
Mark Branson, head of Swiss financial watchdog FINMA, said last week’s news was unwelcome at a time when Switzerland is presenting itself as a reformed financial center whose selling point is stability and reliability rather than tax perks.
“These headlines will not vanish overnight although the business model has fundamentally changed,” said Branson, speaking to reporters on Tuesday.
Another sign that Switzerland has to work harder to improve its reputation was the apparently deliberate efforts by Eurojust, the EU judicial agency which helped coordinate last week’s raids, to keep Swiss prosecutors out of the loop on enforcement actions.
Switzerland’s Office of the Attorney General on Friday demanded a written explanation for the snub.
In the new investigation, raids began on Thursday in the Netherlands, Britain, Germany, France and Australia, with visits also made at three of Credit Suisse’s offices. This followed a tip-off to Dutch prosecutors about 55,000 “suspect accounts.”
One of the big questions is how many of the accounts represent existing client relationships at Credit Suisse, Switzerland’s second-biggest bank, and how many are legacy accounts from when Swiss banking secrecy shielded customers’ money from tax authorities.
Iqbal Khan, the head of Credit Suisse’s International Wealth Management division, said in an interview he did not know where the 55,000 figure referred to by the Dutch office for financial crimes prosecution had come from as the bank had fewer accounts than that for all of Europe.
Khan, who is responsible for Credit Suisse’s private banking operations outside of Switzerland and Asia Pacific, said it was not certain if existing clients would be implicated.
Branson said FINMA had been in contact with Credit Suisse about the raids but was not in a position to say what portion of the case related to old accounts.
One thing that does seem certain is legal and regulatory issues are increasingly considered as a cost of investing in Swiss private banks.
Moritz Baumann, a bank analyst and client adviser at Swiss wealth manager Albin Kistler, said: “The fact is that legal issues are practically part of doing business as a bank.”
US says conserving oil is no longer an economic imperative
- Fears of oil scarcity no longer driver of US energy policy
- Surging shale production brings energy abundance
WASHINGTON: Conserving oil is no longer an economic imperative for the US, the Trump administration declares in a major new policy statement that threatens to undermine decades of government campaigns for gas-thrifty cars and other conservation programs.
The position was outlined in a memo released last month in support of the administration’s proposal to relax fuel mileage standards. The government released the memo online this month without fanfare.
Growth of natural gas and other alternatives to petroleum has reduced the need for imported oil, which “in turn affects the need of the nation to conserve energy,” the Energy Department said. It also cites the now decade-old fracking revolution that has unlocked US shale oil reserves, giving “the United States more flexibility than in the past to use our oil resources with less concern.”
With the memo, the administration is formally challenging old justifications for conservation — even congressionally prescribed ones, as with the mileage standards. The memo made no mention of climate change. Transportation is the single largest source of climate-changing emissions.
President Donald Trump has questioned the existence of climate change, embraced the notion of “energy dominance” as a national goal, and called for easing what he calls burdensome regulation of oil, gas and coal, including repealing the Obama Clean Power Plan.
Despite the increased oil supplies, the administration continues to believe in the need to “use energy wisely,” the Energy Department said, without elaboration. Department spokesmen did not respond Friday to questions about that statement.
Reaction was quick.
“It’s like saying, ‘I’m a big old fat guy, and food prices have dropped — it’s time to start eating again,’” said Tom Kloza, longtime oil analyst with the Maryland-based Oil Price Information Service.
“If you look at it from the other end, if you do believe that fossil fuels do some sort of damage to the atmosphere ... you come up with a different viewpoint,” Kloza said. “There’s a downside to living large.”
Climate change is a “clear and present and increasing danger,” said Sean Donahue, a lawyer for the Environmental Defense Fund.
In a big way, the Energy Department statement just acknowledges the world’s vastly changed reality when it comes to oil.
Just 10 years ago, in summer 2008, oil prices were peaking at $147 a barrel and pummeling the global economy. OPEC was enjoying a massive transfer of wealth, from countries dependent on imported oil. Prices now are about $65.
Today, the US is vying with Russia for the title of top world oil producer. US oil production hit an all-time high this summer, aided by the technological leaps of horizontal drilling and hydraulic fracturing.
How much the US economy is hooked up to the gas pump, and vice versa, plays into any number of policy considerations, not just economic or environmental ones, but military and geopolitical ones, said John Graham, a former official in the George W. Bush administration, now dean of the School of Public and Environmental Affairs at Indiana University.
“Our ability to play that role as a leader in the world is stronger when we are the strongest producer of oil and gas,” Graham said. “But there are still reasons to want to reduce the amount we consume.”
Current administration proposals include one that would freeze mileage standards for cars and light trucks after 2020, instead of continuing to make them tougher.
The proposal eventually would increase US oil consumption by 500,000 barrels a day, the administration says. While Trump officials say the freeze would improve highway safety, documents released this month showed senior Environmental Protection Agency staffers calculate the administration’s move would actually increase highway deaths.
“American businesses, consumers and our environment are all the losers under his plan,” said Sen. Tom Carper, a Delaware Democrat. “The only clear winner is the oil industry. It’s not hard to see whose side President Trump is on.”
Administration support has been tepid to null on some other long-running government programs for alternatives to gas-powered cars.
Bill Wehrum, assistant administration of the EPA’s Office of Air and Radiation, spoke dismissively of electric cars — a young industry supported financially by the federal government and many states — this month in a call with reporters announcing the mileage freeze proposal.
“People just don’t want to buy them,” the EPA official said.
Oil and gas interests are campaigning for changes in government conservation efforts on mileage standards, biofuels and electric cars.
In June, for instance, the American Petroleum Institute and other industries wrote eight governors, promoting the dominance of the internal-combustion engine and questioning their states’ incentives to consumers for electric cars.
Surging US and gas production has brought on “energy security and abundance,” Frank Macchiarola, a group director of the American Petroleum Institute trade association, told reporters this week, in a telephone call dedicated to urging scrapping or overhauling of one US program for biofuels.
Fears of oil scarcity used to be a driver of US energy policy, Macchiarola said.
Thanks partly to increased production, “that pillar has really been rendered essentially moot,” he said.