Switzerland – the beautiful land of neutrality, security, and safety.  Well, not so true anymore.  It was with interest that I recently read that UBS, the Union Bank of Switzerland, has cow towed to American pressure.  Facing criminal charges in the US for helping certain Americans evade taxes –  UBS is ready to pay $780 million in fines, plus turn over the names and account details of 300 wealthy Americans. 

UBS officials gave in mighty quickly, when our government threatened to take away its US license – and much to the dismay of Swiss regulators.  And now that this first round of names has been turned over, we’re now asking for information on another 52,000 US citizens who together hold close to $15 billion in secret accounts.

The Swiss, initially elated over the election of Barack Obama and his symbolism of returning to core values and friendship, are now up in arms.  As Pierre Ruetschi writes in La Tribune de Geneve, to accommodate this request of accounts would “destroy in an instant Switzerland’s reputation for confidentiality”… and Washington’s forceful strong arming to obtain this information “practically amounts to a declaration of war.”

War, I think…that’s a pretty drastic conclusion.  Well, Switzerland’s largest party in the coalition government, the Swiss People’s Party, is threatening to repatriate all Swiss gold stored in US vaults, and reconsider longstanding Swiss policy of representing the US in places like Cuba and Iran, where there has been no American diplomatic presence.

The course of these events reveals a number of complicating and surprising facts.  First, we all know about those mysterious Swiss bank accounts, and that certain Americans have been successful in sheltering income over there – but I obviously naively thought for the most part these accounts were more akin to John Grisham novels.  Fifth-two thousand Americans…come on.  Are the stories of financial corruption never going to end?  It is more than mind-boggling and mind numbing to me. 

Second, the client breach of banking confidentiality is important to note.  And I clearly have mixed emotions about this.  When we conduct business with organizations, we expect our records to be kept confidential.  But should organizations like UBS, who have notoriously sheltered money for years for wealthy Americans, be allowed to continue this practice?  I think not.  It’s certainly a fine balance, between overarching ethical principles and the standard ways of managing banking policy. These acts by UBS have opened up a whole new can of worms for us to consider.  I guess the ironic thing, too, is the fact that there has long been a general awareness that these practices were going on.  If our economy was not in such a crisis right now, would we have continued to ignore these tax shelters?

Third, to think that by trying to get these illegal atrocities under control is akin to declaring war on our long time ally Switzerland, and to think that these acts may sustain long term irreparable damage to our relationship, is also mind numbing. 

I’d love to hear your thoughts on this – all around some very interesting revelations and implications from this story.