How Swiss banking secrecy enabled an unequal global financial system

French kings found the ideal refuge for their wealth: a city-state nestled between the snow-capped Alps and the pristine waters of Lake Geneva. Catholic royalty flocked to Geneva in the 18th century in an effort to conceal their dealings with Protestant bankers.

By 1713, the authorities in Geneva, who would gain a reputation for discretion, introduced rules banning bankers from revealing details about their clients.

That centuries-old code of silence, which was later enshrined in law in Switzerland, came under renewed focus this week after a leak of Credit Suisse data revealed its clients were involved in torture, drug trafficking, money laundering, corruption and other serious crimes, suggesting widespread failures of due diligence by the bank.

The ministerial meeting in Paris that year was deemed monumental, not least because the enfant terrible of banking had reluctantly agreed to join the club. Switzerland had promised to share information about client bank accounts with participating tax authorities around the world.

For a country that had criminalised sharing client information with foreign countries for more than 80 years, adoption of the so-called common reporting standard (CRS) was a significant step. It meant Switzerland and fellow signatories would exchange information about foreigners who held bank accounts in their countries, as part of efforts to crack down on tax evasion and fraud.

More than 90 countries, among them some of the least developed in the world, have yet to exchange banking information with Switzerland.

Its reputation as a tax haven also grew, as wealthy families scrambled to find somewhere to hide their fortunes amid the introduction of inheritance taxes in countries including France in 1901. Lenders pounced at the opportunity, distributing brochures, advertising in local newspapers and deploying bankers across France to drum up new business.

But elsewhere, global regulators were increasingly frustrated with their inability to penetrate the Swiss banking system in order to investigate global fraud and tax evasion.

Revelations from a subsequent Senate investigation outraged American authorities, who fined UBS and Credit Suisse for their roles in aiding US tax evasion and pushed Switzerland into unilaterally disclosing account information about US taxpayers from 2014.

That same year, Switzerland signed on to the CRS alongside 50 other countries and jurisdictions.