It irritates Valentin Zellweger that ‘no longer than six minutes into any James Bond movie, a sleazy Swiss banker still appears.’
He’s probably referring especially to Mr Lachaise, the nasty Swiss banker and financier of terrorists and crooks in The World is Not Enough. At one point Lachaise says to Bond, ‘I’m just trying to return the money to its rightful owner’. To which Bond replies: ‘And we know how hard that is for a Swiss banker’.
The Swiss say they were helpless without legal cooperation of governments where the money came from.
He was speaking at the South African Institute of International Affairs, (SAIIA) this week in a discussion titled ‘The Panama lessons: how to effectively fight corruption and return funds.’ The other panelist was David Lewis, head of the South African NGO, Corruption Watch.
Twenty years ago, bribes were tax deductible for companies in Switzerland and many other countries. Now they are illegal.
By contrast, the two Kabila administrations in the Democratic Republic of Congo (DRC) had given Switzerland zero cooperation in recovering Mobutu Sese Seko’s millions. The reason was that Mobutu’s eldest son—and heir—François-Joseph Mobutu Nzanga Ngbangawe had become deputy prime minister. He blocked the release of the money to the DRC state because he would get it himself.
Dubai is seen as one of those still highly secretive new financial centres that needs greater banking transparency.
The pressures for transparency included the 1996 revelations by New York senator Alfonse D’Amato that Swiss banks were still holding billions of dollars worth of deposits from Holocaust victims in so-called ‘dormant’ accounts. Another was the disclosure by ex-UBS banker, Bradley Birkenfeld, that the major Swiss bank had helped Americans hide up to US$20 billion in assets to avoid taxes.
The Swiss Banking Law of 1934, which makes it a criminal act for a Swiss bank to reveal the name of an account holder, now largely applies only to Swiss nationals—and then only if no crime is suspected.
From January 2003, Switzerland has steadily increased information-sharing about US account holders with the US Treasury. In 2009, under pressure from the Organization for Economic Cooperation and Development, Switzerland agreed to offer legal assistance to foreign authorities in prosecuting foreign bank clients for tax evasion (and not only tax fraud). Switzerland and European Union countries will begin automatically exchanging information on the financial accounts of each other’s residents from 2018.
Lewis fingered Dubai as one of those still highly secretive new financial centres that Zellweger said now needed to join the move to greater banking transparency. Lewis predicted that the many unexplained recent visits there by members of the South African government and its associates would eventually reveal something nefarious. ‘It if walks like a duck and quacks like a duck, it probably is a duck,’ he said.
He and Zellweger said the exposure of the Panama Papers would give strong impetus to the moves already underway internationally to increase the transparency of bank accounts, transactions and offshore companies. The next frontier in these efforts would be for countries to reveal the beneficial ownership of these accounts and other assets, coupled with clear measures for financial institutions to report to financial intelligence units.
That means revealing who really owned them, to prevent corrupt politicians and ordinary criminals using front companies, trusts and other anonymous financial instruments to launder money and otherwise hide their assets.
Zellweger, surprisingly, said that he had not even heard of former president Thabo Mbeki’s recent report, commissioned by the African Union, which said that at least $60 billion in ‘illicit financial flows’ was leaving Africa every year instead of being used for the continent’s development. This included not only money plainly stolen, but also taxes and tariffs evaded by dubious but not necessarily illegal methods – for example, registering companies that earn their profits in Africa, in offshore tax havens.
Lewis noted that at their last summit, the G20 countries had committed to creating registers that would reveal the real beneficiaries of their companies—if not to the public then at least to law-enforcement agencies. Corruption Watch was lobbying for legislation for such a register, and the Panama Papers might help its efforts. South Africa was ‘a very obvious platform for money-laundering,’ because it had by far the largest financial centre in Africa. Its close links to international financial capitals make it easier to conceal the movement of money from there.
Lewis said he shared some of Zellweger’s optimism that the law was catching up with the corrupt, yet only a small percentage of illicit financial flows was now being detected. Registers of beneficial ownership were not the complete answer, but they would help. And in South Africa, Corruption Watch was demanding that any company bidding for a government contract must publicly reveal its beneficial ownership.
Lewis and Zellweger agreed the global attention now being cast on illicit financial flows was motivated much more by concerns about terrorist financing than about money lost to development. But they also agreed the motives were immaterial, as long as the money was traced and recovered.
This article was originally published by the Institute for Security Studies.