Treasure Hunt

Experts question if a new global initiative to expose offshore wealth does enough

01 August 2014
Rudolf Elmer leaked information on the Swiss bank Julius Bär.
CARL DE SOUZA / AFP / Getty Images
Rudolf Elmer leaked information on the Swiss bank Julius Bär.
CARL DE SOUZA / AFP / Getty Images

I FIRST MET RUDOLF ELMER in January 2011 in Zurich, on the day he narrowly escaped a prison sentence in a Swiss district court. Elmer, who is 58 years old, was charged in 2010 under Switzerland’s severe banking secrecy laws for leaking data obtained while he worked at the Cayman Islands branch of Julius Bär, a Swiss bank with a presence in numerous offshore tax havens. The information, according to Elmer, included back-up data on nearly two thousand trusts, funds, companies and individuals from around the globe. Elmer shared part of the haul with the whistleblowers’ website WikiLeaks, which published it in 2008. The court let him off with just a suspended fine of 7,200 Swiss francs, though the prosecution had pushed for a jail term of eight months. At a hasty press conference after the trial, as dozens of journalists clamoured to question him, Elmer told me, “I am on the right side of the street, so if I have to go to jail, so be it.” Besides violations of banking secrecy, he had also faced charges of threatening employees of Julius Bär.

Elmer later told me a car followed him home to a Zurich suburb after the press conference. Four masked men jumped out, and one pointed a gun at his head. “I thought that’s the end because that is the way the Mafia kills,” Elmer wrote in an email. “But it was the special force of Zurich Police.” He was arrested, and held in solitary confinement for 217 days over two stretches without formal charges. He described these events to me as part of a campaign of terror against him by Julius Bär and Swiss authorities, whom he sees as partners in a banking industry that encourages unethical practices in order to attract both licit and illicit international capital. “Even my wife and my six-year-old daughter were stalked, and the police did not care,” he said. “I was seen as a threat to national interest, and the powerful wanted to use me as a striking example to teach every banker what not to do.”

Elmer’s disclosures are part of a recent spate of leaks on the workings of offshore tax havens—jurisdictions whose laws allow clients, both individuals and corporations, to hold secret wealth, avoid taxes and bypass financial regulations in the territories where they live or do business. They provide a glimpse of what the Tax Justice Network, an international advocacy group, calls a vast “shadow economy” of banks, law firms and assorted companies and individuals scattered across the globe that help tax fugitives and criminals conceal their wealth from authorities. Given its secretive nature, gauging the true scale of this economy is impossible. But even by a conservative 2012 estimate from the TJN, tax havens harbour between $21 trillion and $32 trillion in largely untaxed financial assets. The consequences of this phenomenon are particularly acute for developing nations, whose debts are often dwarfed by the untaxed offshore holdings of their wealthiest citizens. In the case of India, citizens holding wealth in tax havens deprive the country of about two trillion dollars in tax revenues and investment every year—more than the country’s annual GDP—according to an estimate by Arun Kumar, an economics professor at Delhi’s Jawaharlal Nehru University.

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    Noopur Tiwari is a journalist based in Paris. She has covered Europe for the last 16 years for Indian media. She is on Twitter as @NoopurTiwari.

    Keywords: corruption austerity WikiLeaks Swiss banks tax evasion tax havens Organisation for Economic Cooperation and Development information exchange