You might think this is a great time for the offshore-banking industry. There is a lot of spare cash sloshing around the world. The mega-rich are still piling up money. Taxes are likely to go up as every developed country tries to cope with huge deficits, creating even more incentive to shift money to some island hideaway.

But it’s not so easy anymore.

A former Julius Baer Group Ltd. banker has handed over the names of hundreds of high-profile clients with offshore bank accounts to the whistle-blowing website WikiLeaks.

The old model of secrecy and confidentiality is dead. In an age of hyper-transparency, when everything is revealed about everyone, it is useless to think they can keep their client affairs quiet.

Instead, the offshore banks must adapt or die. Instead of being secrecy hubs, they should be low-tax ones. That is the only way they can survive.

These are nervous times for the smartly suited private bankers of Geneva, Liechtenstein and Grand Cayman.

Rudolf Elmer, the former Julius Baer staffer, has the potential to blow the business sky-high. He has handed over a pile of data on about 2,000 accounts to Julian Assange, the founder of WikiLeaks. The material hasn’t been published online yet, but it’s only a matter of time before it turns up somewhere. It will make fascinating reading for financial journalists, real-estate agents, and, more importantly, tax inspectors in the home countries of the people on Elmer’s list.

The Swiss are fighting back. A court found Elmer guilty of breaking that country’s bank-secrecy laws, though he is appealing that verdict. He faces additional charges regarding the handing-over of data to WikiLeaks.

It wasn’t the first time offshore banking has been attacked. In 2008, a former employee of the Liechtenstein bank LGT sold the details of hundreds of clients to the German tax authorities.

If nations will pay good money to staff willing to reveal who has cash stashed away in Switzerland or the Cayman Islands, it is likely that somebody will decide to take it. Likewise, if websites such as WikiLeaks are willing and able to publish vast quantities of sensitive data, we can only assume that more and more sources will come forward.

There is always a disaffected banker somewhere in the system. In the past, he or she might have grumbled in a bar. That was harmless. Now, they can use the Internet to get revenge on a spectacular scale.

The authorities in offshore-banking centers can hit back if they want to. They can prosecute the whistleblowers, and they may well have a point: There’s nothing commendable about selling stolen data, or breaking laws that protect financial secrecy.

In reality, they are fighting a losing battle.

Technology has made secrecy about anything almost impossible. It is too easy to e-mail account details to a website or blog where they can be published at the press of a button. Just about everything you might want to know about anyone can be found out on Facebook or Google.

We live in an age of hyper-transparency. Our whole lives are recorded online somewhere. We have little respect for old-fashioned ideas of privacy. It is crazy to think finance is somehow exempt from that. It can no more step aside from it than it can from any other aspect of the modern world.

So what should the offshore banking industry do?

First, quit trying to fight it. It won’t work, and you’ll only end up looking stupid, at best, and nasty, at worst. If the U.S. government can’t stop WikiLeaks from publishing sensitive military information, small nations won’t be able to prevent the release of this kind of data. There will always be another whistleblower ― and you can’t prosecute them all. So just tell your clients their financial details may well be published somewhere. If they can’t live with that, they can go elsewhere.

Two, create tax havens. Technology isn’t just a threat, it’s also an opportunity. Publishing data is now easier, but businesses and people are more mobile than ever. Work doesn’t have to be done in any particular place anymore, and the higher up the ladder you get, the truer that is.

Monaco doesn’t charge people income tax, so if you go to live there, you don’t have to worry about tax evasion. No crime has been committed. Emerging markets, such as Bulgaria, only charge a flat tax of 10 percent. You hardly need to hide money offshore if you live there, either. The point is that financial centers need to be low-tax hubs, rather than secrecy hubs.

The old model of banking confidentiality is dead. That might be a good or bad thing. But it’s a fact, and there is no point in trying to resist it. The offshore-banking industry has to adapt to that ― or else it will die.

By Matthew Lynn

Matthew Lynn is a Bloomberg News columnist and the author of “Bust,” a book on the Greek debt crisis. The opinions expressed are his own. ― Ed.

(Bloomberg)