Secrets and lies? Swiss banks and international human rights.

• Author: Ramasastry, Anita

"There is no such thing as good money or bad money, there's just

money."

Lucky Luciano, gangster

1. INTRODUCTION

   What do Hitler and Marcos have in common? Their bankers. Both leaders used numbered Swiss accounts in order to deposit ill-gotten gains. Why? Bank secrecy. In its basic form, bank secrecy refers to the obligation of a bank and its employees to keep information about their customers strictly confidential.(1) Switzerland has been an attractive place to store money because it has historically offered customers confidentiality and security.(2)

   The term bank secrecy denotes different things to different people. For some, bank secrecy means the ability of banks to protect an individual's right to financial privacy. People even refer to bank secrecy and financial privacy as human rights or fundamental rights.(3) Banks are seen as guardians, institutions that protect assets and prudently manage money.(4)

   In Switzerland, bank secrecy was established to protect individuals who were vulnerable to government intrusion. Article 47 of Swiss Federal Banking Law provides that bank employees shall be subject to criminal prosecution if they divulge confidential information about their customers.(5) Some commentators suggest that Swiss banks enacted Article 47 in the 1930s when they sought to make their banking industry more attractive to Jews and other targets of persecution by enacting comprehensive bank secrecy laws designed to shield the identities of their depositors and protect them from the Gestapo.(6) Prior to World War Two, European Jews became increasingly worried about their fate under the Third Reich. They brought their savings to Switzerland, traveling directly or using agents to store their valuables. These customers were attracted by promises of confidentiality offered by the Swiss.(7) Article 47 thus was created both as a means of attracting wealth and as a way of safeguarding individuals in great need of protection.

   Ironically, bank secrecy has proven to be a powerful tool whereby dictators, despots, and war criminals can hide their loot with impunity. Among the notorious leaders who have stashed away money in bank secrecy jurisdictions are the Philippines' Ferdinand Marcos, Romania's Nicolai Ceausescu, Haiti's Jean Claude "Baby Doc" Duvalier, and Zaire's Mobutu Sese Seku.(8) Many of these leaders also have violated the human rights of their citizens.(9) International public opinion displays discomfort with the thought of Swiss banks depositing and profiting from funds that are placed there by such notorious individuals. Perhaps even more egregious is the thought that war criminals have been able to store their spoils in secret accounts. As Chairman of the World Jewish Congress (WJC) Edgar Bronfman declared: "Nobody should be allowed to make a profit from the ashes of the Holocaust."(10) The roles of Swiss banks in relation to the Third Reich and the Marcos regime have been brought into the spotlight due to two recent cases being litigated in U.S. courts. These cases highlight the more problematic aspects of bank secrecy.

   At the same time, these cases also demonstrate that awareness of bank secrecy and the role of bankers has evolved. Swiss banks that accepted Nazi assets during World War Two did so under a distinctly different set of international norms. As scrutiny of non-state actors has grown, so has the understanding of the role of corporate enterprises under international law. Swiss banks and multinational banks generally are held to much higher legal standards today.

   1. Introduction to the Marcos and Holocaust Assets Litigation

      On February 26, 1986, attorney Marvin Belli filed a suit in Hawaii on behalf of eight Filipinos who were U.S. residents claiming to have been tortured by the Marcos government.(11) The suit was filed while Marcos and his entourage were fleeing Manila and were en route to Hawaii after a democratic uprising forced them to leave the country.(12) Marcos was served when he landed at Hickam Air Force base. In all, five cases were filed against Marcos.(13) These cases were eventually consolidated by the Judicial Panel on Multidistrict Litigation and assigned to Judge Manuel Real in the federal district court in Hawaii.(14)

      Marcos died in Hawaii in 1989, but the litigation against his estate continued.(15) In 1995, after receiving a two billion dollar judgment,(16) the Marcos plaintiffs (Marcos Plaintiffs) tried to gain access to more than five hundred million dollars that Marcos had deposited in Swiss accounts.(17) The Marcos Plaintiffs alleged that Swiss banks as agents for the Marcos estate had done more than accept funds--they had actively helped Marcos conceal his wealth. Those who had suffered under Marcos's rule sought compensation for torture, summary execution, disappearance, and prolonged arbitrary detention.(18)

      At the same time, the Philippine government has attempted to retrieve the same funds from Switzerland through international diplomatic efforts. At some times, the Philippine government has been hostile to the human rights litigants.(19) Thus, there have been competing claims for the same assets. In December 1997, the Swiss Supreme Court ordered several Swiss banks to transfer a fifth of the Marcos funds to an escrow account in the Philippine National Bank.(20) How and if the money will be distributed to human rights claimants is uncertain.(21)

      More recently, several class action lawsuits have been filed by Holocaust survivors and the relatives of Holocaust victims in an effort to recover money deposited in Swiss bank accounts prior to and during World War Two.(22) Joined in these lawsuits are: (1) Holocaust survivors who were forced by the Nazis to engage in slave labor and (2) Holocaust survivors and the heirs of Holocaust victims who had property looted by the Nazis.(23) These Holocaust assets plaintiffs (Holocaust Plaintiffs) allege that Swiss banks knowingly accepted profits derived from slave labor as well as looted assets. Additionally, the Holocaust Plaintiffs claim that Swiss banks actively financed such efforts. In these capacities, the Swiss banks are alleged to have violated customary international law.

      Both of these cases are similar in several respects. First, the Marcos Plaintiffs and the Holocaust Plaintiffs seek compensation for violations of their human rights. Second, these cases are class actions whereby plaintiffs seek some form of redress for human rights injuries under the Alien Tort Claims Act (ATCA), which grants federal district courts "original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States."(24) In effect, the Marcos and Holocaust cases both involve class action lawsuits for alleged violations of international human rights. Finally, in each of these lawsuits, Swiss banks are alleged to have played an active role in shielding the wealth of the in wrongdoers. Switzerland's bank secrecy laws, furthermore, are portrayed as the reasons why: (1) the Nazis and Ferdinand and Imelda Marcos placed their stolen wealth in Swiss banks; and (2) it has been difficult to reconstruct accurately the trail of assets that ended up in Switzerland.

   2. Swiss Bank Secrecy and the Current Litigation

      Why is bank secrecy so entwined with these questions? Bank secrecy has previously enabled war criminals and corrupt heads of state (who may or may not have also committed grave human rights violations) to secrete their wealth in a safe jurisdiction. In other words, the existence of numbered Swiss bank accounts has previously encouraged wrongdoers to secrete their plunder in Switzerland.

      To address these issues, the Swiss have amended their laws over the years to provide for information in criminal matters. Based on current legislation, it appears more difficult for a criminal to deposit his ill-gotten gains in Switzerland today and to be guaranteed confidentiality in the event that he is indicted or prosecuted in another country.(25) Nonetheless, the issue still remains--should Switzerland be in the business of accepting these funds in the first place? One could argue that Swiss bank secrecy has made it more difficult for governments and claimants to recover funds once they have been placed in Swiss vaults.

      Swiss banks are not to be held responsible for being global policemen.(26) They might bear some responsibility, however, for actively assisting wrongdoers who are culpable of more than fiscal crime. A line needs to be drawn between the bank as repository and the bank as a facilitator. Additionally, to the extent that human rights victims have a legal cause of action against a leader or head of state, the question remains largely unanswered as to how such victims might gain civil redress if the wrongdoer has placed his or her assets in bank accounts within bank secrecy jurisdictions.

      There are several categories of wrongdoers who use or have used the services of Swiss banks.(27) These wrongdoers include war criminals, political criminals, organized criminals, and individual criminals.(28) One can distingiush at least five separate types of criminal bank customers. First, there are war criminals, such as the Nazis, who used Swiss banks to hide the assets the systematically plundered from occupied nations and wealth they amassed from extermination of Jews and other victims during the Holocaust. Second, there are leaders of nations or "political" criminals, often dictators or heads of totalitarian states, who may also be guilty of human rights violations. These same leaders often secrete their wealth and funds from the nations' treasuries in Swiss bank accounts. Ferdinand Marcos would fit into this category.(29) A third category involves the politician or head of state who has stolen money or received illegal funds (e.g., through taking bribes) and stores such money in Switzerland. The Author draws a distinction between category two and three because a...