The Daily Campus

Issue date: 2/26/09 Section: Commentary

For decades, Swiss banking has been something of a running joke, the acknowledged tax hideout of the crème de la crème of the world's criminal clientele. The Swiss have made hundreds of millions by defrauding governments of tens of billions. Yet, for centuries, no one seems to have done much about it.

That changed in June 2008 when America, its economy tanking, stepped up to the global plate. The FBI and the Justice Department found that from 2002 to 2007, UBS had actively helped thousands of American clients hide up to $20 billion in cash and avoid up to $300 million in taxes per year, helping to falsify or sidestep proper tax forms along the way. UBS bankers urged their clients to stash valuables, destroy records and use Swiss credit cards to throw off the IRS, and some bankers went so far as to develop private codes for communicating with their clients.

UBS had no choice but to admit it "participated in a scheme to defraud the United States," and last Wednesday agreed to pay the U.S. $780 million in damages. The Justice Department then asked for the account details of up to 17,000 Americans with secret Swiss accounts.

UBS agreed to hand over a list of 323 accounts, with related account statements for 57 of those 323.

The Swiss media called the limited breach of bank secrecy a cave-in and a "true catastrophe." The next day, the IRS filed suit to bring from the shadows the account information of to 52,000 Americans who banked with overseas UBS accounts, in a move Swiss politicians called "foreign blackmail." The Swiss Finance Minister vowed that "bank secrecy will stay," and the UBS has sworn to face the IRS in court this July.

As usual, America has the upper-hand: simply due to the filing of the suit, UBS' market capitalization fell 20 percent in four days, tumbling over $7.5 billion. But in a pleasant change of pace, America also has the moral high ground. Stopping Swiss private banking is the right thing to do, and the world agrees. The German finance minister asked the Organization for Economic Co-operation and Development to blacklist Switzerland for non-cooperation, and British Prime Minister Gordon Brown has toured to drive up support for overturning Swiss private banking.

Swiss financiers are crying out that pulling back the furtive veil will hurt their business and damage Swiss sovereignty - like how you might imagine a Mafioso would bemoan the damage done to his business by the RICO Act, or like how you'd think stealing billions from a country would damage its "sovereignty."

In effect, Switzerland is stealing from America's government, stealing money that could go to our health care, our police and public works, and, cough, our higher education. Switzerland never had a right to profit from abetting financial sneakiness in the first place - and can't keep doing so simply because its been doing it for hundreds of years.

Alistair Darling, the British Chancellor of the Exchequer, summed Switzerland's choices up nicely, saying of the nation that "if it wants to be part of the international community, it's got to be open."

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