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The SWIFT Affair

Johannes Köppel


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1The US “war on terror” and the delicate balance between enforcing security measures and protecting civil liberties divide scholars as well as decision-makers. The new preemptive surveillance regimes are highly controversial. Amoore and de Goede (Amoore and de Goede 2008) regard them as being “a barely visible form of violence in the war on terror”. According to Amoore and de Goede (drawing from the work of Michael Shapiro), the SWIFT surveillance is only one step in a new security practice that aims at providing a complete picture of a person, an “electronic footprint to verify and deny access in advance”.

2Does the war on terror justify such measures? Michael Ignatieff, a well-known scholar and the current leader of the Canadian Liberal Party, wrote in 2004 that we should “choose the lesser evil” by sacrificing certain civil liberties in the fight against terror. (Ignatieff 2004) Didier Bigo, a French scholar, adopts a different view. According to his view, neither terrorism nor the measures employed against it are new or extraordinary. Therefore, civil liberties should be awarded more weight in political decision-making. (Bigo, Carrera et al 2007)

3Finding the right balance between security needs and civil liberties is, in the end, a normative question. However, general trends can be observed: the terrible attacks that took place on 11 September 2001 created a public climate in which a broad majority was willing to sacrifice civil liberties for tougher security measures. That was the moment in time when SWIFT received an request from the US government to reveal its customer data. SWIFT did so, knowing that in order to comply with US law they would breach European privacy laws. They chose to sacrifice privacy protection for security needs during a very particular historical period in which this was deemed appropriate. But the unconditional cooperation with US intelligence lasted only briefly.

4Since 2001, the pendulum has gradually swung back. The voices of civil liberties advocates are much louder than they were in 2001. As Biersteker noted, the UN rapidly introduced an extensive security regime against terrorism after 9/11 but already from 2003 onwards, a general regime fatigue appeared which resulted in an open challenge of the UN anti-terror regime after 2006. (Biersteker 2008)

5SWIFT’s reaction to the US surveillance is an illustration of this development. After fully complying with US demands at first, SWIFT gradually narrowed down the scope of data transfer to US authorities. A wide range of safeguards was put in place in order to enhance data protection from 2002 to 2003. In 2006, the story leaked to the New York Times and thereafter, the most important measure was introduced:  the decoupling of the European SWIFT traffic through a new operation center located in Switzerland.

6One might accuse SWIFT of failing to oppose US demands vigorously enough. Indeed, SWIFT could have reacted more quickly: it could have built the operation center in Switzerland earlier or it could have stopped processing data in the US altogether. It could also have questioned the US subpoenas in court. However, given the general circumstances prevailing at the time, it can be considered that SWIFT reacted appropriately.

7The SWIFT surveillance program is a powerful intelligence tool. But without appropriate oversight, Western societies pay a high price by sacrificing civil rights. Financial intelligence is very accurate (Biersteker and Eckert 2007), but preemptive measures always bear the risk of errors. More seriously, preemptive security measures can turn into self-fulfilling prophecies. Policy makers and the public have become less willing to blindly give in to security demands by intelligence authorities. (Bigo, Carrera et al 2007) Just as terrorism is not an entirely new phenomenon, the violation of civil liberties in times of crisis is not either. Already in 1987, Justice William Brennan stated that “after each perceived security crisis ended, the US has remorsefully realized that the abrogation of civil liberties was unnecessary. But it has proven unable to prevent itself from repeating the error when the next crisis came along.” (Brennan 2008)

8The Swiss people greatly value civil liberties. In May 2008, Switzerland voted on a referendum against the introduction of biometrical passports, which are now required in order to travel to the US. A committee consisting of leftwing and rightwing parties opposed the new passports because the biometrical data would be saved in a central database accessible by the government. Although the referendum was rejected, 49.9% of Swiss people were willing to sacrifice their capacity to travel visa-free for data protection.

9Swiss banks and financial authorities usually justify their strong commitment to banking secrecy as a battle against the erosion of civil liberties; an active fight for privacy rights. Also, banking secrecy represents an enormous comparative advantage for Swiss banks and financial institutions.

10The SWIFT surveillance constituted a clear violation of civil liberties and data protection for clients of Swiss banks. However, with respect to SWIFT, neither Swiss banks nor the Swiss authorities have taken steps towards the improvement of privacy protection of bank clients. The research question must be answered as followed: Switzerland has not taken any steps to oppose the SWIFT program and protect data protection of its citizen before 2007. Even after the revelation of the surveillance by the New York Times, banks and the Swiss department of finance were reluctant to inform the public. More seriously, as this dissertation has demonstrated, the competent authorities misinformed the highest oversight body of the Swiss parliament on the real amplitude of SWIFT surveillance in Switzerland. It was only after pressure from the Control Committee that the financial actors and authorities took measures.

11Why have Swiss banks and authorities obediently accepted the dilution of banking privacy in the case of the SWIFT surveillance? The reason is that the surveillance is worldwide; every financial center is affected. Swiss banks did not have to fear the loss of customers on this basis. Therefore, no efforts for privacy protection were undertaken despite the fact that banking secrecy was breached. The SWIFT affair illustrates how far Swiss banks have moved away from their liberal values. Banking secrecy is nowadays a comparative advantage, privacy protection merely a cover. This is a mistake.

12Swiss banking secrecy can only be justified if it is based on real privacy concerns. The recent vote on biometrical passports has shown that data protection is of the utmost importance to the Swiss people. This is the case, even though total privacy protection for financial data in Switzerland is neither possible nor desirable.  Switzerland (or any other country) cannot be a safe haven for illicit, criminal or even terrorist financing. This fact, however, does not defeat the idea of confidentiality for financial records per se. It is justified to uphold strict banking confidentiality for licit funds if transparency and clear rules are established.

13The only way for Switzerland to maintain some leverage in the future for its banking secrecy is to push for absolute transparency of what is confidential and what is not in the true spirit of data protection. This line of action is necessary to re-establish the trust of customers and the international community. The hesitant proceedings and the lack of transparency on the part of Swiss banks as well as the Swiss government during the SWIFT affair unfortunately is a perfect example of the loss of trust and credibility that can be sustained by an advocate of civil liberties and privacy protection. This trust and credibility is urgently needed if Switzerland wishes to maintain some influence on determining the future of its banking secrecy rules. However, to establish this trust, the Swiss government has to move from being a simple bank spokesperson to showing real leadership. Without trust and credibility, Swiss banking secrecy - and with it Switzerland’s financial center - will be further trampled under increasing fiscal pressure and US security claims.


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