What
is at Issue?
Swiss Bank
Secrecy:
Legal principle under which Swiss Banks are allowed to
protect personal information about their customers.
At Issue:
–
Deters Accountability,
–
Instrument for Tax Evasion,
–
Aids in Underground Economy,
History
•
Over 300 years.
•
First known dates back to 1713.
•
Until 1934, civil and labor code.
•
Implemented due to,
–
Pressure from French,
–
Protect from Nazi spies.
•
1984, Swiss elected by overwhelming majority
(73%) in favor of maintaining bank secrecy.
Legislation
•
Banking Act of 1934
–
Codified 8 November 1934
–
Privacy is statutorily enforced
–
Swiss law strictly limiting any information
shared with third parties, including tax authorities, foreign governments or
even Swiss authorities, except when requested by a Swiss judge’s subpoena.
Key Provisions
•
Regulated by both civil law and criminal law.
•
2 Articles of the Swiss criminal code regulate
Swiss bank secrecy:
–
Article 162 takes punitive action against the
disclosure of trade secrets or confidential business information.
•
Article 47 of the Swiss Federal Banking Act of 8
November 1934
–
Reveal = Imprisonment of 6 months or 50,000
francs
–
Negligence = 30,000 francs
Tax Evasion
•
Failure
to declare earnings of non-Swiss citizens (tax evasion) is not a crime in
Switzerland, and therefore Swiss banks see no reason to offer information
•
Sharing
client information with other parties, where no crime is suspected, is an
offence under Switzerland's banking laws
Swiss Banking Association
•
360 Member banks of various sizes. Like,
–
UBS,
–
Credit Suisse,
–
Julius Bär & Co. AG,
–
Edmond de Rothschild Group,
–
ICB Banking Group,
–
Zurich Cantonal Bank,
–
Banque Cantonale de Genève,
–
Graubündner Kantonalbank etc.
UBS (United Bank of Switzerland)
•
UBS - the world's biggest banker to the rich -
had to write down $49 billion when it was hit by subprime woes as part of a
disastrous expansion into investment banking.
•
Other problems for UBS include giving names to
the US Dept. of Justice and now it may face charges in Switzerland for
violating Swiss secrecy laws.
Criminal Elements
•
Money laundering and links to terrorist funds,
•
Tax Evasion:
–
A person who owes taxes forgets to pay or
conceals tax-relevant information
–
Not a criminal offense in Switzerland
•
Tax Haven
–
No taxes or nominal taxes within the
jurisdiction
–
Lack of transparency
–
Laws or practices prevent information exchange
Myths
About Swiss Bank Accounts
•
Swiss
bank accounts are only for millionaires (?)
•
Money
invested in Switzerland yields no interest (?)
•
It's
impossible to open an account in Switzerland by correspondence (?)
•
Swiss
bank accounts are very expensive to maintain (?)
Myths
About Swiss Bank Accounts (cont’d)
•
Swiss
bank accounts attract only criminals and dictators (?)
•
It
is difficult to close a Swiss bank account (?)
•
Numbered accounts are anonymous (?)
•
Swiss
banks are financial havens for unlawful activities (?)
A Few Facts
•
Regulated
by Law
•
Criminal
Matters
–
Drug
Trafficking
–
Gun
Smuggling
•
Private
Matters
–
Inheritance
–
Divorce
–
Bankruptcy
Mostly Swiss banks ‘systematically’ refuse to accept any money that is of
dubious origin or poorly founded
Sources
•
http://switzerlandisyours.com/e/banking/secrecy/index.html
•
Dixon,
Kim. “U.S., Swiss formally sign new tax treaty.” Reuters. 23 September 2009.
•
Hilzenrath,
David. “Treaty Conveys Little Power to Break Swiss Bank Secrecy.” Washington
Post. 8 July 2009.
•
Jackson,
J.K. (2009, July). Congressional Research Service: The OECD Initiative on
Tax Havens. Retrieved November 2009 from
opencrs.com/document/R40114/2009-07-24/download/1013/
•
Switzerland
Eases Banking Secrecy (2009,
March). Retrieved November 2009 from http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7941717.stm
•
Article
26 of the OECD Model Tax Convention on Income and Capital. Retrieved December 2009 from http://www.oecd.org/document/53/0,2340,en_2649_33747_33614197_1_1_1_1,00.html
•
HR
1265 and S 506. Retrieved
December 2009 from http://thomas.loc.gov/cgi-bin/thomas
•
Banking
Secrecy and International Tax Issues: Switzerland’s Viewpoint (2009, June). Retrieved November 2009 from www.efd.admin.ch/themen/00796/01377/index.html?lang=en.
•
Danzinger,
M.P. (2009, Sept). Information Exchange Shortcomings in US-Swiss Tax
Agreement. Retrieved November 2009 from http://www.gpif.org/index.php?option=com_content&task=
view&id=263&Itemid=70
•
US,
Swiss Formally Sign New Tax Treaty (2009, Sept). Retrieved November 2009 from http://www.reuters.com/articlePrint?articleId=USTRE58M55S20090923
•
US,
Swiss Complete Tax Treaty
(2009, June). Retrieved November 2009 from http://www.cbsnews.com/stories/2009/06/19/business/main5097360.shtml
•
Swiss
Banking Wins Libertarian Friends in US (2009, June). Retrieved November 2009 from http://www.swissinfo.ch/eng/swissinfo.html?siteSect=43&sid=10828236&ty=st
•
Banking
Secrecy Faces an Uncertain Future (2009, Feb). Retrieved November 2009 from http://www.swissinfo.ch/eng/swissinfo.html?siteSect=43&sid=10383979&ty=st
•
Jucca,
L. (2009, Feb). UBS Tax Deal Is Swiss Bank Secrecy’s Waterloo. Retrieved
November 2009 from http://www.reuters.com/articlePrint?articleId=USTRE51I1ZP20090219
•
Protocol
Amending the Convention Between the United States of America and the Swiss
Confederation for the Avoidance of Double Taxation with Respect to Taxes on
Income. Retrieved November
2009 from www.ustreas.gov/press/releases/docs/US-SwissProtocol.pdf
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