Presentation on Swiss Banking Secrecy & The Myths

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,

–         Facilitates Money Laundering, Organized Crime.

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