As published on au.finance.yahoo.com, Monday 14 November, 2022.
In 2014, Credit Suisse pleaded guilty to helping thousands of Americans evade taxes and paid a $2.6 billion fine. It also promised to reveal any hidden bank accounts.
Credit Suisse has recently come under scrutiny by the U.S. Department of Justice for potentially not complying with that plea agreement, the Wall Street Journal reported last week, citing unnamed sources familiar with the matter.
Former Morgan Stanley CEO John Mack, who last month published “Up Close and All In: Life Lessons from a Wall Street Warrior,” and ran Credit Suisse from 2001-2004, says Swiss banks continue to be some of the most secretive in the world.
“I ran Credit Suisse for a while and they have such a lock on bank secrecy, and who knows what they're doing and how they're doing it. It's their nature,” Mack recently told Yahoo Finance. “Wealthy people all over the world, governments put money in the Swiss banks, and off that capital that they could borrow from, they are able to run great businesses. Their private banking industry is probably one of the best in the world.”
The tradition of bank secrecy in Switzerland stretches back to the early 1700s when French kings began storing their riches in the country. Later, in 1934, financial privacy became law when the country passed the Swiss Banking Act, which strictly limited information that bankers could share with parties besides their clients. In the decades that followed, Switzerland became an established haven for Americans looking to hide their wealth and evade taxes.
The 2000s saw a crackdown in Switzerland against banks that protected tax evaders and other financial criminals. In 2017, the country began participating in the The International Convention on the Automatic Exchange of Banking Information, which calls on banks in different countries to be transparent with each other about their clientele. Still, Switzerland remains a major tax haven for the rich, ranking No. 2 on the Financial Secrecy index this year after the United States.
Credit Suisse has endured several scandals due to secrecy. In February, several news outlets reported that the bank had worked with drug traffickers and the Bulgarian mafia, among other criminals. Credit Suisse denied any wrongdoing.
"The matters presented are predominantly historical, in some cases dating back as far as the 1940s, and the accounts of these matters are based on partial, inaccurate, or selective information taken out of context, resulting in tendentious interpretations of the bank's business conduct," the bank stated. "While as a matter of law Credit Suisse cannot comment on potential client relationships, we can confirm that actions have been taken in line with applicable policies and regulatory requirements at the relevant times, and that related issues have already been addressed."
Despite such scandals, Mack says that regulation has improved.
“I do think the Swiss regulators, though, are much more focused and very thorough, because now they deal with the banks,” Mack said.
Mack joined Morgan Stanley in 1972 and expanded the firm from 300 to 50,000 employees over four decades, according to Simon & Schuster. He recently announced that he is suffering from dementia.