The years of confrontation, 2008 to 2013

Liechtenstein and the Zumwinkel case

The conflict began outside Switzerland. On 14 February 2008 German prosecutors searched the home and office of Klaus Zumwinkel, the chief executive of Deutsche Post AG, on suspicion that he had evaded about one million euros in taxes through a foundation in Liechtenstein. The search took place in front of television cameras, and Zumwinkel resigned within days. The evidence came from a data carrier that a former employee of LGT, the bank owned by the princely house of Liechtenstein, had sold to the German Federal Intelligence Service (Bundesnachrichtendienst, BND). The payment, made from funds of the Federal Ministry of Finance, was reported at 4.2 million euros. The investigations extended to several hundred German taxpayers.¹ In January 2009 Zumwinkel was convicted of tax evasion and received a suspended sentence of two years’ imprisonment and a fine of one million euros.²

The Liechtenstein case set the pattern for everything that followed. It showed that a foreign financial centre’s secrecy could be broken by a single insider with access to client data and a buyer willing to pay. It showed that the German state was prepared to be that buyer. It also produced the first test of the legal question that would dominate the following years: whether German courts could use data that had been obtained through a criminal offence abroad and bought with public money. The answer came from the Federal Constitutional Court in November 2010 and is discussed below. For Zurich, the lesson was immediate. Every Swiss bank with a German clientele had to ask whether its own client files were safe. As the following years showed, several of them were not.

Steinbrück, the whip and the cavalry

The political climate deteriorated rapidly in the months after the Zumwinkel search. The financial crisis of autumn 2008 intensified the international campaign against tax havens, whose most outspoken European voice became the German finance minister, Peer Steinbrück. In October 2008 he said that one had to use the whip as well as the carrot against Switzerland. In March 2009, before a meeting of the Group of Twenty, he compared the threat of an OECD blacklist to the cavalry and Switzerland to the Indians, who only needed to know that the cavalry existed for things to start moving.³

The reaction in Switzerland was fierce. The foreign minister, Micheline Calmy-Rey, called the comparisons unacceptable, aggressive and insulting. Members of Parliament of the Christian Democratic People’s Party answered with comparisons to the National Socialist period. The president of the Social Democratic Party of Switzerland, Christian Levrat, complained to the leadership of Steinbrück’s own party that such rhetoric was counterproductive.⁴ The remarks fell into the days in which the Federal Council, on 13 March 2009, decided to adopt the OECD standard on the exchange of information on request, a decision that Chapter G.III describes. Many Swiss therefore perceived the concession of 13 March as a capitulation to German pressure, although its immediate cause lay in the dispute with the United States over UBS.

Steinbrück’s language left a lasting mark on the Swiss image of Germany. A year later, the German economics minister, Rainer Brüderle, struck conciliatory and even charming notes before the German-Swiss Chamber of Commerce, observing that all or almost all Germans wanted to live in Switzerland. On the substance, however, he stuck to the German position that the Swiss distinction between tax fraud and tax evasion was irritating and hard to understand, and he rejected a flat-rate tax on undeclared German assets without disclosure as the sale of indulgences.⁵ The comparison with indulgences would return two years later, when the German opposition used it against the withholding tax agreement.

The tax CDs

The decisive instrument of German pressure was the purchase of stolen data. At the end of January 2010 it became known that an informant had offered the German authorities a data carrier with information on some 1,400 German clients of a Swiss bank for 2.5 million euros, and that the tax authorities expected more than 100 million euros in additional revenue from it. On 1 February 2010 Chancellor Angela Merkel declared that, as far as the objective was concerned, Germany should come into possession of the data if they were relevant. The finance minister, Wolfgang Schäuble, took the same position and referred to the precedent of the Liechtenstein case.⁶ The Swiss government protested that a state which bought stolen goods made itself complicit in a crime, but the purchase went ahead. The data came from Credit Suisse and were acquired by the Land of North Rhine-Westphalia, whose tax investigators became the best-known buyers of Swiss bank data in the following years.⁷

The German federal structure made this possible. Because tax administration in Germany is a matter for the Länder, each Land decided for itself whether to buy data offered to it. North Rhine-Westphalia, governed from 2010 by a coalition of Social Democrats and Greens under the finance minister Norbert Walter-Borjans, pursued the practice most systematically. In September 2012 the Land government stated that it had bought six data carriers for a total of nine million euros, that they documented the accounts of some 7,000 investors, and that the resulting investigations and voluntary disclosures had produced more than three billion euros in revenue nationwide, 2.5 billion of which came from voluntary disclosures. About 6,700 holders of undeclared money had filed voluntary disclosures in North Rhine-Westphalia alone. Proceedings against two German subsidiaries of Swiss banks for assisting tax evasion had produced a further 200 million euros in fines.⁸ By 2016 the Land had acquired eleven data carriers since 2010, which had led to more than 23,000 voluntary disclosures relating to Swiss accounts and to additional revenue of 1.2 billion euros for the Land and about six billion euros nationwide.⁹

The banks paid as well. Criminal proceedings against bank employees for aiding and abetting tax evasion were brought to an end by the payment of large sums under § 30 of the Administrative Offences Act (Gesetz über Ordnungswidrigkeiten, OWiG), which allows a fine to be imposed on a company for offences committed by its management. Credit Suisse agreed in September 2011 to pay 150 million euros to settle the proceedings of the Düsseldorf prosecutors. Julius Bär had already paid 50 million euros in the spring of 2011. UBS followed in 2014 with a settlement of about 300 million euros with the Bochum prosecutors. Other Swiss banks concluded similar arrangements, among them Basler Kantonalbank in 2015 and Zürcher Kantonalbank in 2016.¹⁰ For the banks, these payments closed the German past of the institution. For their clients, they did not. The prosecutors used the information gathered in the bank proceedings to pursue individual taxpayers, while the settlements increased the pressure on the remaining clients to regularise their position.

The Federal Constitutional Court and the use of stolen data

The legal question was answered in a case that arose from the Liechtenstein data. A couple from the district of the Bochum prosecutors had challenged a search of their home that had been ordered on the basis of the data sold to the BND. They argued that the data had been obtained in breach of Liechtenstein criminal law, passed on by the intelligence service in breach of the principle that separates intelligence and police functions, and used in breach of international law. In its order of 9 November 2010 (2 BvR 2101/09), the First Chamber of the Second Senate of the Federal Constitutional Court declined to hear the constitutional complaint, which it held to be partly inadmissible and otherwise unfounded.¹¹

The Court’s reasoning rested on the established German doctrine that procedural violations do not automatically result in a prohibition on the use of evidence (Beweisverwertungsverbot). Whether evidence may be used must be decided by weighing the circumstances of the individual case, in particular the nature and weight of the violation. A prohibition follows as a rule only from serious, deliberate or arbitrary procedural violations in which the guarantees of the rule of law were systematically disregarded. The Court also saw no breach of international law that would have required the exclusion of the data, since the conduct of the private informant could not be attributed to Germany under the relevant treaties. Against this background, the reliance of the criminal courts on the data to establish the initial suspicion (Anfangsverdacht) required for a search was constitutionally unobjectionable.¹²

The decision was narrower than its political effect suggested. It concerned only the use of the data to justify a search, not their use as evidence at trial, and it did not decide whether the purchase itself was lawful. Its practical message, however, was unmistakable. German prosecutors could rely on purchased data to open proceedings and search homes, and German courts would not exclude such data unless the state itself had acted in a manner that disregarded the rule of law. For the Zurich banks, the decision meant that no legal barrier in Germany would stop the next purchase. The protection of their clients now depended entirely on the security of their own data and on the willingness of the Swiss state to deter the sellers.

The Swiss response: criminal law, arrest warrants and espionage

Switzerland answered the purchases with the instruments of its criminal law. Article 273 of the Swiss Criminal Code penalises economic intelligence (wirtschaftlicher Nachrichtendienst): whoever seeks to obtain a manufacturing or business secret in order to make it accessible to a foreign official agency, a foreign organisation or a private enterprise, or whoever makes such a secret accessible to them, commits an offence against the state. Since bank client data are business secrets in this sense, the sale of such data to a foreign tax authority falls squarely within the provision. Article 271, which prohibits unlawful acts for a foreign state on Swiss territory, and Article 47 of the Banking Act, which protects banking secrecy, complete the framework. Chapter G.III examines the three provisions from the perspective of the advisers and employees who must respect them.¹³ Swiss prosecutors pursued the sellers of data whenever they could identify them, and the events of 2012 showed that they were prepared to pursue the buyers as well.

The conflict reached its peak in the spring of 2012, in the middle of the ratification of the withholding tax agreement. At the beginning of April 2012 it became known that the Swiss authorities had issued arrest warrants against three tax investigators from North Rhine-Westphalia. They were suspected of aiding and abetting economic intelligence and the violation of banking secrecy through their involvement in the purchase of the Credit Suisse data in February 2010, which had cost more than 2.5 million euros and was reported to have brought in some 900 million euros. The chairman of the German tax officials’ union, Thomas Eigenthaler, called the warrants an attempt to intimidate German politics because Switzerland feared that the planned tax agreement would fail. A Social Democratic budget spokesman called them an unfriendly act, and the Green leader Jürgen Trittin accused Switzerland of criminalising tax investigators while Schäuble applauded. The federal finance minister himself remained composed and denied any connection between the warrants and the agreement.¹⁴ The warrants had no practical effect, since the investigators did not travel to Switzerland and Germany did not extradite its officials. Their symbolic effect, however, was considerable. In Germany they confirmed the image of a country that protected tax evaders. Swiss observers, for their part, saw their image of a neighbour that bought stolen goods confirmed.

The Swiss state also acted covertly. In 2017 it became known that the Federal Intelligence Service (Nachrichtendienst des Bundes, NDB) had engaged a former Swiss police officer, Daniel M., to gather information on the North Rhine-Westphalian tax investigators involved in the purchases. After his arrest in Germany, the Higher Regional Court of Frankfurt am Main convicted him of espionage on 9 November 2017 after he had confessed and sentenced him to one year and ten months’ imprisonment, suspended on probation, and a fine of 40,000 euros. According to the proceedings, he had compiled profiles of German tax investigators and had tried to place an informant within the tax administration of North Rhine-Westphalia, with the aim of creating an early warning system against future purchases of data.¹⁵ The case was an embarrassment for both governments. It showed that the Swiss intelligence service had treated the German tax administration as a target at a time when the two states were negotiating a treaty. It came to light years after the conflict it concerned had been resolved by the transition to automatic exchange.

Parliament drew its own conclusions. The revision of Article 47 of the Banking Act, which entered into force on 1 July 2015, extended criminal liability to persons who disclose a secret that has been revealed to them in breach of banking secrecy or who exploit such a secret for their own benefit or that of another, and raised the penalty for those who seek a pecuniary advantage.¹⁶ The provision was aimed at the market for stolen data that the German purchases had created. By the time it entered into force, however, that market had largely dried up, because the automatic exchange of information was about to make the data worthless.

Notes

1. Wikipedia (English), “2008 Liechtenstein tax affair”, https://en.wikipedia.org/wiki/2008_Liechtenstein_tax_affair, on the search of 14 February 2008, the informant Heinrich Kieber, the payment of 4.2 million euros and the number of suspects, which the article puts at about 600 to 700. Cited for orientation, since the press reports of February 2008 were not accessible. ↩
2. Wikipedia (English), “Klaus Zumwinkel”, https://en.wikipedia.org/wiki/Klaus_Zumwinkel. The article records the conviction in January 2009, the two-year suspended sentence and the fine of one million euros. ↩
3. “Steinbrück peitscht, die Schweiz spioniert”, swissinfo.ch, 5 May 2017, https://www.swissinfo.ch/ger/wirtschaft/analyse_spion-im-dienst-ihrer-majestaet/43160522, which quotes both remarks and dates them to 2008 and 2009. ↩
4. “Streit mit der Schweiz: Peer Steinbrück als hässlicher Deutscher”, Der Tagesspiegel, March 2009, https://www.tagesspiegel.de/politik/streit-mit-der-schweiz-peer-steinbrueck-als-haesslicher-deutscher/1476442.html, which reports the reactions of Calmy-Rey, the CVP parliamentarians Thomas Müller and Bruno Frick and the SP president Christian Levrat, together with calls for a boycott of German cars. ↩
5. “Nach schrillen Drohungen wieder versöhnliche Töne”, swissinfo.ch, 24 June 2010, https://www.swissinfo.ch/ger/schweizer-politik/nach-schrillen-drohungen-wieder-versoehnliche-toene/9169380. ↩
6. “Auch Schäuble für CD-Kauf: Merkel kauft Steuersünder”, taz, 2 February 2010, https://taz.de/Auch-Schaeuble-fuer-CD-Kauf/!5148374/, which quotes Merkel’s statement “Vom Ziel her sollten wir, wenn diese Daten relevant sind, in den Besitz dieser Daten kommen” and reports the price, the number of clients and the expected revenue. ↩
7. Haufe, “Schweiz: Haftbefehle gegen deutsche Steuerfahnder sorgen für Empörung”, April 2012, https://www.haufe.de/steuern/steuerwissen-tipps/schweiz-haftbefehle-gegen-deutsche-steuerfahnder-sorgen-fuer-empoe_170_75484.html, which identifies the data carrier bought by North Rhine-Westphalia in February 2010 as containing information on German clients of Credit Suisse. ↩
8. Land North Rhine-Westphalia, press release, “Steuer-CDs sind das wirksamste Instrument gegen Steuerhinterzieher”, 21 September 2012, https://www.land.nrw/pressemitteilung/steuer-cds-sind-das-wirksamste-instrument-gegen-steuerhinterzieher. The minister stated that well over half of the data sets had proved valuable. ↩
9. “Zahl der Selbstanzeigen bricht ein”, Legal Tribune Online, citing a survey of the Länder finance ministries by the Handelsblatt, https://www.lto.de/recht/nachrichten/n/steuerhinterziehung-zahl-selbstanzeigen-bricht-ein-reform-umfrage. ↩
10. The Credit Suisse settlement is described in Chapter G.III with a source. Moneycab, “CS wendet Steuerverfahren in Deutschland ab”, 19 September 2011, https://www.moneycab.com/?p=1130517 (Credit Suisse 150 million euros, Julius Bär 50 million euros in the spring of 2011); Salzburg24, “Rekordstrafe für UBS in deutschem Steuerverfahren”, July 2014, https://www.salzburg24.at/s24-archiv/rekordstrafe-fuer-ubs-in-deutschem-steuerverfahren-art-53912 (settlement with the Bochum public prosecutor of about 300 million euros); finews.ch, “ZKB zieht Strich unter Steuerstreit mit Deutschland”, https://www.finews.ch/news/banken/25667-zkb-einigung-steuerstreit-deutschland-koeln-busse (ZKB 5.7 million euros with the Cologne prosecutors on 27 December 2016, Basler Kantonalbank 39 million euros in 2015). ↩
11. Bundesverfassungsgericht, order of 9 November 2010, 2 BvR 2101/09, https://www.bundesverfassungsgericht.de/SharedDocs/Entscheidungen/DE/2010/11/rk20101109_2bvr210109.html. ↩
12. Bundesverfassungsgericht, order of 9 November 2010 (cited above), paras. 44–45 on the balancing test and the exceptions for serious, deliberate or arbitrary violations, paras. 51–52 on international law and para. 60 on the initial suspicion. The Court’s press release no. 109/2010 summarises the decision under the title “Verfassungsbeschwerde gegen die auf Daten aus Liechtenstein (‘Steuer-CD’) gestützte Anordnung einer Wohnungsdurchsuchung erfolglos”. ↩
13. Article 273 of the Swiss Criminal Code of 21 December 1937 (SR 311.0), text at https://www.droit-bilingue.ch/de-en/3/31/311.0-273-336.html, provides for a custodial sentence of up to three years or a monetary penalty, and in serious cases a custodial sentence of not less than one year. Article 271 is at https://www.droit-bilingue.ch/de-en/3/31/311.0-271-334.html. Chapter G.III discusses the provisions. ↩
14. “Schweiz: Haftbefehle gegen deutsche Steuerfahnder sorgen für Empörung”, Haufe, April 2012, https://www.haufe.de/steuern/steuerwissen-tipps/schweiz-haftbefehle-gegen-deutsche-steuerfahnder-sorgen-fuer-empoe_170_75484.html. ↩
15. “Spionageprozess: Schnelles Ende ohne Schrecken”, Handelsblatt, 9 November 2017, https://www.handelsblatt.com/finanzen/steuern-recht/recht/spionageprozess-schnelles-ende-ohne-schrecken/20561376.html. ↩
16. Chapter F.II describes the revisions of Article 47 with sources. On the entry into force of the extended version on 1 July 2015: medialex, “Die Verwendung von Bankdaten durch Medienschaffende”, 8 July 2022, https://medialex.ch/2022/07/08/die-verwendung-von-bankdaten-durch-medienschaffende/ (“Mit Wirkung ab 1. Juli 2015 wird seither auch bestraft, wer ›ein ihm nach Buchstabe a offenbartes Geheimnis weiteren Personen offenbart oder für sich oder einen anderen ausnützt‹”). ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.