How strong is Swiss banking secrecy in 2022? Here is the truth!
Nowhere in the world is financial privacy as strongly protected as in Switzerland. That’s according to the “Financial Secrecy Index 2022”. But many claim that banking secrecy is dead. I grew up with Swiss banking secrecy. Thanks to my 30 years of professional experience as a lawyer in Swiss banking, I know exactly how strong banking secrecy used to be and how strong it is today. After reading this article, you will know exactly when you are protected and when you are not.
Position: Founder & CEO of the
Boutique Law Firm Caputo & Partners
Updated on: 08.12.2022
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🎞️ ⬇️Content of the Video⬇️
00:00 👉 Swiss banking secrecy definition 01:27 👉 What does the Swiss bank secrecy act cover? ? 01:59 👉 Where are the Swiss banking secrecy laws codified? 02:19 👉 Does Bank secrecy still exist in Switzerland? 02:38 👉 Swiss banking secrecy history 03:23 👉 The golden area of the Swiss numbered account 04:45 👉 Countries with wild west banking 06:02 👉 Swiss banking secrecy has ended for tax matters 07:06 👉 What changed after the end of Swiss banking secrecy? 08:02 👉 Swiss banks are not interested in collecting money from tax dodgers 08:35 👉 Why are Swiss banks so popular? 09:46 👉 Scandals like “Suisse Secrets” are legacies from the old days of wild west banking 11:09 👉 Swiss bank secrecy laws today? 12:18 👉 When can Swiss bank secrecy be lifted? 15:47 👉 How strong is financial privacy in Switzerland?
Swiss bank secrecy definition
Article 43 in the Banking Act, introduced in 1934, punishes bank employees, as well as persons acting on behalf of the bank, with imprisonment of up to 5 years or a fine if they share or otherwise disseminate account relationship data with third parties. Since 2015, the criminal offense has included disseminating illegally obtained bank account information by third parties (for example, journalists, not bankers only), even if the publication is in the public interest.
Those who act negligently are punished with a fine of up to 250,000 Swiss francs.
What data is protected by banking secrecy?
Banking secrecy in Switzerland is a professional secret comparable to attorney-client privilege that protects client data. It protects client-related bank account information. It’s a Swiss bank account secrecy.
Swiss banking secrecy protects all the data and information related to the account relationship of bank clients.
Where are the Swiss banking secrecy laws codified?
The Swiss banking secrecy rules are codified in Swiss law as follows:
Swiss Banking Act (1934, Article 43)
Civil law (Article 28 Civil Code)
Data Protection Act
Does bank secrecy still exist in Switzerland?
Swiss banking secrecy history
For foreign investors, Switzerland was the most attractive of all tax havens. It was the most reliable tax haven in the world. Those who did not want to pay taxes in their home country opened a bank account in Switzerland. Swiss bank secrecy history shows that already 300 years ago the French kings financed their colonial wars through Swiss banks.
Until 2017, foreign tax authorities cut their teeth in vain on bank secrecy in Switzerland.
Swiss banking secrecy rules, combined with the anonymous bearer shares of a Swiss AG, a British Virgin Island company, or an offshore trust, anonymized the assets. Swiss banking secrecy was vehemently defended by the Swiss Federal Court, the Swiss Bankers Association (SBA), and politicians (Federal Councillor Hans Rudolf Merz, Minister of Finance).
It was an inconquerable fortress (until 2017).
Simple tax evasion was not a crime in Switzerland. Tax fraud was always a crime. Tax evaders could rely on bank secrecy. They abused it. Swiss bankers closed their eyes. Requests for international investigation based on simple tax evasion were constantly rejected.
The era of Swiss bank secrecy ends in 2018
The end of Swiss bank secrecy in tax matters arrived with the OECD treaty network based on the Automatic Exchange of Information (AEOI) and Common Reporting Standard (CRS) signed in 2017. Over 100 countries signed the treaties about the AEOI.
Among them are all important financial centers. The first automatic exchange of information took place in 2018 of the law introduced in 2017. There are no agreements with the remaining 90 countries, most of them developing countries. Here, banking secrecy applies but nobody knows if you will receive your money back from the bank. I had several clients asking for help because the money disappeared with such wild west banks.
The first client data on private individuals left Switzerland for the first time a year later, in 2018.
The account information of clients is forwarded to foreign tax agencies in just over 100 countries. The remaining 90 countries do not participate. Most do not because they cannot afford the expensive IT infrastructure.
Swiss banking secrecy has ended for tax matters with the AEOI since 2017, but only for just over 100 signatory countries. In other areas of privacy, Swiss banking secrecy laws still apply (see “Financial Secrecy Index 2022” at the end). However, Swiss banks still offer the highest level of client confidentiality in the world according to the Financial Secrecy Index 2022.
Today, there is practically no untaxed money left in Switzerland.
As a result of the information exchange, there is practically no untaxed money left in Switzerland today. Those who had untaxed money could not touch it. The due diligence level is very high. Anyone who wants to launder money is in the wrong place in Switzerland. He will be arrested pretty quickly. The background checks developed considerably.
The banks blocked the account until the client could prove that he had legalized the assets (voluntary disclosure programs for tax evasion). Today, it’s impossible to open bank accounts for non-taxed money.
Swiss banks are not interested in collecting money from tax dodgers. Actually, there is a huge international demand for Swiss accounts from clients all over the world.
International private clients are looking for asset protection, stability, and a strong Swiss franc. There is no alternative to the Swiss financial center. Here in Switzerland, clients find maximum asset protection with the safest banks in the world.
Why are Swiss banks so popular?
Since the Covid-19 crisis and the war in Ukraine, the business of Swiss banks is booming. They are flooded with money from abroad. The more insecure the world, the more popular Swiss banks become. They offer the highest client confidentiality based on the strictest bank secrecy rules.
Due to enormous pressure from the US and the European Union (especially Germany), Switzerland changed the secrecy laws and has qualified simple tax evasion as a crime. This only applies if the tax substrate evaded per tax period exceeds 250,000 Swiss francs. Tax fraud was already a crime in the past.
Swiss banks are required to report assets that may have been derived from a crime to the reporting office in Bern (Suspicious Activity Report, SAR). The Money Laundering Act, which came into force in 1998, imposed a reporting obligation.
Among the 90 countries are the most corrupt and the poorest. Swiss banks are very careful with clients from such countries. Scandals like “Suisse Secrets” come from the old days of Wild West banking. There is no substantive news.
Among the 90 countries are those that are increasingly represented in the Suisse secrets leak in February 2022, which involved Credit Suisse client data. Among them are Mozambique and Venezuela. The authorities in these countries do not learn anything about their risk clients, because there is no exchange of information.
In February 2022, the Süddeutsche Zeitung received bank client information about 30,000 bank accounts, known as Suisse Secrets, from a whistleblower. Swiss journalists have kept silent. Journalists who publish confidential client data in media reports that were obtained by violating the Swiss bank secrecy rule risk up to 5 years in prison.
The allegations being bandied about in the media today, and especially in the press, concerning white-collar crime and money laundering are legacy information from the old days of Wild West Banking. Journalists who process illegally obtained account data in Switzerland are not well regarded by the banking world.
Swiss bank secrecy laws today?
How far do Swiss bank secrecy laws go domestically on Swiss territory?
For clients who are liable to pay taxes in Switzerland, Swiss bank secrecy laws still apply to tax matters. The tax agencies do not receive any information from the bank if the client does not declare his accounts to the tax authorities. Since 2015, a tax evasion is a criminal act, if the evaded tax is above 250,000 CHF.
If the client submits forged documents to the tax man, he risks criminal proceedings for forgery and fraud. If criminal proceedings are opened for fraud, the client can no longer invoke Swiss banking secrecy laws. Tax fraud is a crime.
Tax fraud is an offense that appears in the predicate offense catalog of money laundering offenses.
For clients living abroad in one of the more than 100 signatory states, the automatic exchange of information applies. Swiss banks provide client data to the Swiss Federal Tax Administration, which forwards it to foreign tax authorities.
When will Swiss banking secrecy be lifted?
The effect of banking secrecy is not absolute.
In case of serious suspicion of violation of the Money Laundering Act, the banks have a duty to report the suspicion to the Money Laundering Reporting Office Switzerland (MROS) in Bern. The predicate offense (forgery of documents, tax fraud, drug trafficking) to the money laundering offense must be a serious crime. Predicate offenses that are considered mere misdemeanors or infractions do not trigger a reporting obligation.
In foreclosure proceedings, the bank must give customer data to the debt collection and bankruptcy office if the creditor knows the exact account number and the name and address of the bank. The so-called “Search Arrest” is an illegal abuse. Even unspecified group requests from foreign states cannot crack the Swiss banking secrecy laws. Without an exact account number and the name of the bank, the creditor bites the dust in Switzerland.
In civil law, it mainly divorces that trigger account searches. Here, too, the plaintiff must know the account number and the bank. Broad-based searches with unspecified information, so-called “fishing expeditions,” are illegal. There are multiple ways to hide and protect assets, for example with a Cook Island Asset Protection Trust or a Panama Family Foundation.
International mutual legal assistance in criminal matters is only successful in the case of crimes. Crimes are offenses punishable by imprisonment of 3 years or more. In addition, there must be a serious suspicion that a crime has been committed.
International administrative assistance in tax matters must now be permitted in cases of tax evasion and tax fraud, and not only in specific cases. Rather, group requests for several taxpayers are also permitted. However, “fishing expeditions” are not permitted.
If your Swiss bank account is the victim of a group request, you must engage an experienced banking lawyer, or you can call us for help. Only a banking lawyer with specific know-how and practical experience in similar cases can really help. The legal distinction between a “group request” and a “fishing expedition” is controversial.
Cracking bank secrecy is still very difficult. If you do not know the exact account number and the bank, you have no chance. In the real world, private detectives take on the case.
How strong is financial privacy in Switzerland compared to other countries?
Nowhere in the world is privacy in financial matters as strongly protected as in Switzerland.
Switzerland appears in the “Financial Secrecy Index 2022” of the “Tax Justice Network” in 2nd place, followed by Singapore in 3rd place. The USA is in 1st place for the first time.
The Financial Secrecy Index lists 141 countries. The index compares banking secrecy with the importance and size of the financial center. Switzerland was in first place for many years. In 2022, it was overtaken by the USA.
International Beneficial Owner Register
The initiators of the “Tax Justice Network” are calling on the finance ministers of the EU and the G7 countries to create a publicly accessible international Beneficial Owner Register. These “Beneficial Owner Registers” should show the identity of the beneficial owners of bank accounts.
The introduction of the register is apparently intended to promote the implementation of sanctions against oligarchs who are close to Putin. Each bank already identifies the beneficial owner (also known as the “Ultimate Beneficial Owner”).
In many countries, “financial kidnapping” is widespread. Financial kidnapping is the main reason why clients from South America are opening Swiss bank accounts.
The introduction of a Beneficial Owner Registry would not only mean the death of financial privacy and banking secrecy; rather, such a registry would directly threaten the physical integrity of the bank customer.