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Title: Swiss Banking Secrecy and the US-Swiss Conflict Over Holocaust Claims

Swiss Banking Secrecy and the US-Swiss Conflict Over Holocaust Claims

by Anna Berenika Pruska (Author)
©2022 Monographs 262 Pages
History & Political Science
Series: International Relations in Asia, Africa and the Americas, Volume 15

Summary

This book examines US-Swiss relations in the context of Swiss banking secrecy and Holocaust related claims from World War II until the end of the 1990s. During World War II, Switzerland had been purchasing Reichsbank’s gold and safeguarded the assets of the victims of Nazi Germany. This deeply impacted US-Swiss relations in the 1990s, and fueled a major conflict over dormant accounts and heirless assets of Holocaust victims. The US pressured Switzerland for Holocaust restitution using economic sanctions and a negative PR campaign. This culminated in a billion-dollar settlement, a reevaluation of wartime history by the Swiss, and a blow to Switzerland’s international image. This book analyzes US policy towards Switzerland as a case of projection of US economic, as opposed to military power.

Table Of Contents

  • Cover
  • Title
  • Copyright
  • About the author
  • About the book
  • This eBook can be cited
  • Table of Contents
  • List of Abbreviations
  • Introduction
  • Chapter 1. Swiss Banking Secrecy: Its Origins, Foundations and Legal Implications
  • 1.1 The Swiss Banking System: A Historical and Contemporary Perspective
  • 1.1.1 The Historical Foundations of Swiss Banking
  • 1.1.2 Overview and Structure of the Contemporary Swiss Banking Sector
  • 1.2 The Concept and the Customary and Legal Foundations of Swiss Banking Secrecy
  • 1.2.1 Banking Secrecy in the United States
  • 1.2.2 Protection of Banking Secrecy in Swiss Law
  • 1.2.2.1 Swiss Constitution
  • 1.2.2.2 Internal Bank Laws and Code of Conduct
  • 1.2.2.3 Cantonal Laws
  • 1.2.2.4 Swiss Civil Code and Swiss Code of Obligations
  • 1.2.2.5 Swiss Criminal Code
  • 1.2.2.6 Federal Act on Banks and Savings Banks (Banking Act) of 1934
  • 1.3 Limits of Swiss Banking Secrecy Under Domestic and International Law
  • 1.4 The Debate on the Origins of Swiss Banking Secrecy and the Role of the Conflict with the U.S.
  • 1.5 Banking Secrecy and the Swiss Public Opinion
  • 1.6 The Numbered (Anonymous) Accounts Controversy
  • 1.7 Evaluation of the Role of Banking Secrecy in the Rise of the Swiss Financial Center
  • 1.8 Conclusions
  • Chapter 2. Swiss Banking During World War II: The First Major Conflict with the United States
  • 2.1 The Role of Swiss Banks in Gold Transactions with the Reichsbank
  • 2.2 U.S. and Allied Measures to Restrict German Economic and Financial Expansion: The Swiss Connection.
  • 2.2.1 Swiss Assets in the United States: U.S. Freezing Order, Suspicion and Criticism with Respect to the Conduct of Swiss Banks
  • 2.2.2 Blacklisting
  • 2.2.3 London Declaration of January 5, 1943
  • 2.2.4 Declaration on Gold Purchases of February 22, 1944
  • 2.2.5 The Safehaven Program and Bretton Woods Resolution No. VI
  • 2.3 Escalation of Pressure: Negotiations and Impositions
  • 2.3.1 The Currie Agreement
  • 2.3.2 Allied Control Council’s Vesting Decree: Public Law No. 5
  • 2.3.3 The Puhl Affair
  • 2.4 The Washington Accord
  • 2.4.1 The Issue of Looted Gold During Washington Negotiations
  • 2.4.2 The Provisions of the Washington Accord
  • 2.4.3 Fulfillment of the Washington Accord
  • 2.4.4 U.S.-Swiss Sentiments in the Aftermath of the Washington Accord
  • 2.5 The Evaluation of Swiss Conduct During World War II in the Context of International Law: Legalism versus Morality
  • 2.6 The Final Act: The Interhandel Case
  • 2.7 Conclusions
  • Chapter 3. The Conflict Over Holocaust-Related Claims in the 1990s
  • 3.1 Cold War Era Efforts to Resolve the Issue of Holocaust-Related Claims
  • 3.1.1 Overview of Holocaust Compensation Efforts Before 1996
  • 3.1.2 Legal Impediments
  • 3.1.3 The Role of the Holocaust in the United States
  • 3.1.4 Efforts to Settle the Dormant Accounts and Heirless Assets Issue Before the 1990s Conflict
  • 3.2 The Development of the Conflict
  • 3.2.1 The Initial Stage: Involvement of Jewish Organizations and the U.S. Congress
  • 3.2.2 Independent Committee of Eminent Persons-Volcker Commission
  • 3.2.3 Class Action Suits
  • 3.2.4 The Bergier Commission
  • 3.2.5 The Meili Affair
  • 3.2.6 Diplomatic Blunders and the Holocaust Fund
  • 3.2.7 The Eizenstat Report and the Involvement of the U.S. Government
  • 3.2.8 Swiss Reaction to the Eizenstat Report
  • 3.2.9 Holocaust Victims’ Gold
  • 3.2.10 Financial Sanctions
  • 3.2.11 The Involvement of the U.S. State Department: Mediation of the Settlement
  • 3.2.12 The Settlement
  • 3.2.13 The Political Power Game
  • 3.3 Holocaust Litigation: Its Distinctive Features and Historical Legacy
  • 3.3.1 A Hybrid Legal Framework
  • 3.3.2 The United States as Jurisdiction
  • 3.3.3 Litigation and Banking Secrecy
  • 3.3.4 The Role of the Judge in Class Actions
  • 3.3.5 The Historical Legacy of Holocaust Litigation
  • 3.3.6 International Legacy
  • 3.4 Silent Bystander, Willing Accomplice or Righteous Neutral: The Role of Switzerland During World War II in the Light of the Conflict
  • 3.5 The Debate on the Moral Ambiguity and Validity of Holocaust Restitution: How Legitimate Was the Final Outcome of the Conflict?
  • 3.6 Conclusions
  • Concluding Remarks
  • Summary
  • Bibliography
  • Index of Names
  • Series Index

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List of Abbreviations

1MDB:

1Malaysia Development Berhad

AEOI:

Standard for Automatic Exchange of Financial Account Information in Tax Matters

AMLA:

The Federal Act on the Prevention of Money Laundering in the Financial Sector

BSA:

Bank Secrecy Act

BSAAG:

Bank Secrecy Act Advisory Group

BSI:

Banca Della Svizzera Italiana

CAA:

Competent Authority Agreement

CRS:

Common Reporting Standard

CTRs:

Currency Transaction Reports

DPA:

Deferred Prosecution Agreement

FATCA:

Foreign Account Tax Compliance Act

FATF:

The Financial Action Task Force on Money Laundering

FCPA:

Foreign Corrupt Practices Act

FFI:

Foreign Financial Institutions

FIAA:

Foreign Illicit Assets Act

FIFA:

Fédération Internationale de Football Association

FinCEN:

Financial Crimes Enforcement Network

FINMA:

Swiss Financial Market Supervisory Authority

FIU:

Financial Intelligence Unit

FSF:

Financial Stability Forum

GAF:

General Aniline and Film

GAO:

Government Accountability Office

GDP:

Gross Domestic Product

G-SIBs:

Global Systematically Important Banks

HIFCA:

High Intensity Money Laundering and Related Financial Crime Area

HIRE Act:

Hiring Incentives to Restore Employment ACT

IBF:

International Banking Facility

ICE:

Commission of Experts Switzerland – Second World War

ICEP:

Independent Committee of Eminent Persons

IGA:

Inter-Governmental Agreement

IGCR:

Intergovernmental Committee on Refugees

IMF:

International Monetary Fund←11 | 12→

IRS:

Internal Revenue Service

ITSA:

Insider Trading Sanctions Act

KPC:

Kuwait Petroleum Corporation

KYC:

Know Your Customer

MCAA:

Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information

MLAT:

Mutual Legal Assistance Treaty

MLCA:

Money Laundering Control Act

MOU:

The Memorandum of Understanding

MROS:

Money Laundering Report Office of Switzerland

NPA:

Non-Prosecution Agreement

OECD:

Organisation for Economic Co-operation and Development

OFC:

Offshore Financial Center

PEP:

Politically Exposed Person

PIC:

Private Investment Corporations

PSI:

Permanent Subcommittee on Investigations

QIP:

The Qualified Intermediary Program

RFPA:

Right to Financial Privacy Act

RIAA:

Restitution of Assets Illicitly Obtained by Politically Exposed Persons

SAR:

Suspicious Activity Report

SBA:

Swiss Bankers Association

SBG:

Schweizerische Bankgesellschaft

SEC:

Securities And Exchange Commission

SESTA:

Swiss Criminal Code to the revised Stock Exchange Act

SFr:

Swiss Francs

SNB:

Swiss National Bank

SVP:

Swiss People’s Party

TIEA:

Tax Information Exchange Agreement

TJN:

Tax Justice Network

U.S.:

United States of America

UBS:

Union Bank of Switzerland

UNCAC:

UN Convention against Corruption

UNCTAD:

UN Conference on Trade and Development

USA PATRIOT ACT:

The Uniting and Strengthening America by Providing Appropriate Tools required to Intercept and Obstruct Terrorism Act

WJC:

World Jewish Congress

WJRO:

World Jewish Resitution Organisation

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Introduction

Until World War I, the relations between United States and Switzerland could be described as friendly. Often referred to as “sister republics”1 the two countries shared common democratic values, historical experiences, and institutional features, as well as a sense of uniqueness with respect to their republican governments.

In 1776, the year when the United States Declaration of Independence was proclaimed, the Old Swiss Confederacy (Alte Eidgenossenschaft) had existed for almost five hundred years. The confederacy was a loose alliance of thirteen republican states called cantons. The contribution of the Swiss to the development of a republican form of government cannot be underestimated.

In eighteenth-century Europe, republics were an exception rather than the rule and the Swiss enthusiastically welcomed the creation of another republic in the “civilized world,”2 even as far away, as another continent. The first American constitution – the Articles of Confederation and Perpetual Union was modelled on the Swiss confederacy of sovereign states.3 The writings of Swiss professor and member of the Geneva Council of State, Jean Jacques Burlamaqui and his student Emmerich de Vattel exerted a major influence on the American Founding Fathers. In particular, Burlamaqui’s works on natural law strongly resonated with Thomas Jefferson, providing him with counterarguments to the British constitutional doctrine of parliamentary sovereignty.4 However, the absence of adequate central authority in the Swiss model became a source of stark criticism by the American Federalists, as they perceived it as rendering the governing of a state ineffective. Switzerland was criticized for its lack of competence and power at the center.

The constitution adopted by the U.S. in 1787 created a federal republic, a form of government which soon proved to be a reciprocal model for the Swiss, as the Constitution of 1848 transformed Switzerland into a federal state, with power divided between different levels of government. Separate legislative and judicial powers were established, as well as a seven-member executive – the Federal ←13 | 14→Council. The basic principles governing the U.S. constitution were therefore adopted by the Swiss: bicameralism and federalism.

After the Civil War, U.S. local and state governments again turned to Switzerland for inspiration and adopted Swiss tools of direct democracy – the initiative and the referendum. By 1912, eighteen U.S. state governments had one or both these mechanisms in place. By 1918, five more states adopted similar instruments.5

Despite these strong common foundations of the two “sister republics” the relations between the U.S. and Switzerland were characterized by periods of strong tensions, which commenced during World War II and continued throughout the whole postwar period.

The major disagreements between the United States and Switzerland were connected to the concept of Swiss banking secrecy, which is defined in a most rigorous way compared to international standards practiced among developed countries worldwide.6 This concept, firmly established in the Swiss financial sector has led to tensions between the two countries in numerous cases pertaining to money laundering, tax evasion, and other financial sector crimes, as well as in the context of Holocaust claims.

After World War II Swiss banking was associated in the U.S. with numbered bank accounts, safe deposit boxes full of gold and the proceeds of international crime hidden behind the bank secrecy laws of a tiny Alpine country. This view was in stark contrast to the desired Swiss self-representation of a politically stable state in possession of a highly developed economy and capital market, a stable and freely convertible currency, as well as professionally managed financial institutions, which offer world class financial services.

Throughout the post-war period, but particularly from the early 1960s until the early 1990s Swiss banks were accused by the U.S. authorities of facilitating illicit activities and enabling organized crime to pursue money laundering transactions as well as supporting violations in the U.S. financial sector. The two countries also engaged in numerous disputes over the practice of Swiss banking secrecy in relation to tax evasion and tax fraud. This misconduct by foreign nationals was greatly facilitated through Swiss banking practices. Since 2007, the bilateral relations between the two countries have been particularly strained by ←14 | 15→this tax-related conflict and dominated by ongoing U.S. investigations into the involvement of Swiss banks in aiding U.S. taxpayers in tax evasion and tax fraud.

An extensive analysis of the conflicts between the U.S. and Switzerland pertaining to money laundering, violations of financial sector regulations and tax crimes will be the subject of a separate publication.

The purpose of this book is to examine in detail the relations between the United States of America and Switzerland in the context of Swiss banking secrecy and Holocaust related claims during the period from World War II until the end of the 1990s.

The first major conflict between the U.S. and Switzerland erupted during World War II and continued in its immediate aftermath. The character of World War II differed from World War I in that the former was a total war, whereby the U.S. policy was subordinated to the objective of eliminating the enemy, and the Swiss persistence to maintain its economic neutrality was met with much less understanding on the part of the U.S. and its Allies, than during World War I, when neutral Switzerland was determined to secure the supplies necessary for its survival and opposed any attempts at the economic blockade of Germany.7

This was also the first conflict of such magnitude between the two countries, where Swiss banking secrecy was the issue at stake. The rupture resulted from U.S. attempts to trace German funds suspected to be hidden in Swiss banks and the refusal of Switzerland to participate in the Safehaven program, which was designed to track down and block German assets and looted property in neutral countries, thereby preventing a potential resurgence of Nazi Germany via an economic recovery. These funds were later to be used for post war reparations.

Details

Pages
262
Publication Year
2022
ISBN (PDF)
9783631887806
ISBN (ePUB)
9783631887882
ISBN (MOBI)
9783631887899
ISBN (Hardcover)
9783631872819
DOI
10.3726/b20271
Language
English
Publication date
2022 (October)
Keywords
Holocaust Litigation Heirless Accounts Dormant Accounts Washington Accord Looted Gold Origins of Swiss Banking Secrecy
Published
Berlin, Bern, Bruxelles, New York, Oxford, Warszawa, Wien, 2022. 262 pp.

Biographical notes

Anna Berenika Pruska (Author)

Anna Pruska received her Master’s Degree in Finance and Banking from the Warsaw School of Economics, studied Macroeconomics at the Johannes Guttenberg University in Mainz, and pursued her post-graduate studies at the Graduate Institute of International and Development Studies in Geneva, Switzerland. She obtained her PhD in the field of Political Science and Administration at the faculty of International and Political Studies at the Jagiellonian University in Kraków.

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Title: Swiss Banking Secrecy and the US-Swiss Conflict Over Holocaust Claims