Privacy is a fundamental right to any citizen, especially in money related matters. Secrecy is the most important reason for Switzerland’s success as a center of international finance. Swiss banks and their staff are obligated to keep all data, documents, all sorts of relationships between bank and client, strictly private and confidential and are bound to respect clients private matters. The obligation to maintain banking secrecy applies to all those who are employed by or are members of any part of a bank, as well as to its auditors and the members of its board of directors. It continues even after termination of their employment (Federal Law on Banks and Savings Banks of 8 November 1934, Article 47). Any banker who divilges the private records of his client, or a third party, may face a jail sentence or be fined. Confidentiality is not, and has never been, absolute because it does not protect criminals as swiss banks consider it to be of paramount importance for their financial centre to be free of criminal activities. Article 47 of the Federal Law on Banks and Savings Banks, was enacted on 8 November 1934. This article prohibits anyone who functions as an officer, employee, mandatory, liquidator or commissioner of a bank, as a representative of the Federal Banking Commission, or as an officer or employee of a recognized auditing company, from disclosing any information that a bank customer entrusts to them in this capacity. Article 273 of Swiss Criminal Code punishes responsible persons of breaking the law. The convicted persons may face a jail sentence or fine upto CHF 30'000 or both.

Art. 273 2. Espionnage / Code pénal suisse

Celui qui aura cherché à découvrir un secret de fabrication ou d’affaires pour le rendre accessible à un organisme officiel ou privé étranger, ou à une entreprise privée étrangère, ou à leurs agents,

celui qui aura rendu accessible un secret de fabrication ou d’affaires à un organisme officiel ou privé étranger, ou à une entreprise privée étrangère, ou à leurs agents,

sera puni de l’emprisonnement ou, dans les cas graves, de la réclusion. Le juge pourra en outre prononcer l’amende.

[ Source : Swiss Federal Administration ]

Purpose of Bank Secrecy

Protect the bank customer's privacy in their financial matters.
Protect a customer's civil rights under the Swiss Civil Code.
Offer no protection for criminals or illegally gained money.

Consequences of violating customer confidentiality

Anyone violating bank customer confidentiality, or who tries to induce others to violate it, faces imprisonment for not more that six months or a fine of not more than SFr. 50,000. If the violation has been committed by negligence, the penalty is a fine not exceeding SFr. 30,000. The violation of bank customer confidentiality remains punishable even after the termination of the official or employment relationship or the exercise of the profession (Art. 47, Federal Law on Banks and Savings Banks).

Bank Secrecy is waived

In criminal investigations (suspicion of money laundering, membership of a criminal organization, theft, tax fraud, blackmail etc.)

1. When providing international legal assistance (criminal investigations conducted abroad);
2. Bankruptcy proceedings;
3. Civil proceedings (inheritance and divorce, for example).
   
   [In case of foreigners, the bankruptcy, inheritance, divorce proceedings involve a complex set of procedures according to the laws in switzerland, and hardly been any outcome of success]

Tax Avoidance - Tax Evasion - Tax Fraud

In switzerland, in case of mere tax evasion, just avoiding taxes on their part of personal income/assets cannot be considered as crime, and banks are not obligated to release the customer identity to tax authorities or any third parties as the swiss consider this as their own internal matters. However, the situation is different in case of 'tax fraud' considered as criminal offence in switzerland. Ex. false accounting, false invoices. Inorder to get legal assistance in switzerland, for lifting of bank secrecy, the foreign authorities must have a favourable evidence to address a foreign tax payer liable for criminal offense.

Tax avoidance occurs when a taxpayer uses legal means to reduce or avoid the payment of taxes.

Tax evasion is when a taxpayer fails to declare income or assets which therefore cannot be taxed; this is a violation of the law. In this manner a tax is avoided when a tax assessment cannot be performed even though it should, or when a tax assessment is performed incompletely. Swiss banks, as third parties, have no obligation to supply information directly to the tax authorities.

Tax fraud is the most serious case, as the taxpayer uses ways and means to mislead the tax authorities, such as presenting falsified evidence, forged or incorrect records such as account books, profit and loss statements, balance sheets, income statements or any other documentary evidence. Fiscal fraud is similar to fraud or forgery. Tax fraud is subject to criminal prosecution and punishable by imprisonment and /or a fine. In the case of tax fraud, the bank is obliged to inform the investigating authorities and, where necessary, may be called to testify.

[ Source : Geneva Financial Center ]

Due Diligence

Swiss Banks operate on 'know your customer' basis, and it a must for all banks to verify their clients. In accordance with the Due Diligence Agreement (CDB 03), the bank verifies the identity of the contracting partner by obtaining a certified copy of an official identification document (passport, identity card, driving licence, etc.) issued by a public notary or public office that customarily issues such authentications. The bank also checks the mailing address of the new customer through an exchange of correspondence. If you are visiting switzerland, you can directly ensure your identity by visiting the concerned bank. The same procedure applies for numbered account holder, and one should bear that in mind that there is no such thing called anonymous accounts in switzerland. your identity is verified and always known to the bank, governed by bank secrecy laws.

Art. 2 Verification of the contracting partner's identity

1. The banks undertake to verify the identity of the contracting partner when establishing business relations with said partner.

2. This regulation applies to:
- opening of accounts or passbooks;
- opening of securities accounts;
- entering into fiduciary transactions;
- renting of safe-deposit boxes;
- entering into management agreements for assets deposited with third parties;
- the execution of transactions with securities, currencies as well as precious metals and other commodities exceeding the amount of CHF 25,000.
- cash transactions exceeding the amount of CHF 25,000.

Art. 8 Tax evasion and similar acts

Banks shall not provide any assistance to their customers in acts aimed at deceiving Swiss and foreign authorities, particularly tax authorities, by means of incomplete or otherwise misleading attestations.

49.1 It is forbidden to remit to the customer personally or, at his or her request, directly to Swiss or foreign authorities, any incomplete or otherwise misleading attestations.

49.2. Authorities include, in particular, tax, customs, currency and bank supervisory authorities as well as prosecution authorities.

50.1 Subject to this prohibition are special attestations requested by the customer for submission to authorities.

50.2 The bank is not permitted to alter routine records, such as statements of account and securities, credit and debit advices, settlement notes for foreign exchange transactions, coupon and stock exchange transactions, for the purpose of deception.

51.1 Attestations are incomplete if significant facts are omitted in order to deceive authorities; for example if the bank, at the given request of the customer, omits certain items from a given attestation or from a statement of account or securities.

51.2 It is not necessary to mention in the statements of account or deposit that the same customer holds other accounts or deposits.

52 Attestations are misleading if the facts are presented in an ntruthful manner to deceive the authorities, such as:

a) by showing false dates, false amounts or fictitious rates or by issuing credit and debit advices showing false information about the persons debited or credited;
b) by attesting to fictitious claims or debts (regardless of whether or not the attestation reflects the bank's records).
c) by allowing customers to use the bank's nostro accounts for the purpose of cutting tax duties.

The provisions of this agreement apply without restriction to accounts, passbooks, securities accounts and safe deposits designated by a number or code (Swiss numbered accounts).

[Source : Due Diligence Agreement from Swiss Bankers Association]

Download

1. Due diligence agreement with respect to swiss banks code of conduct.

2. Establishment of the Beneficial Owner’s Identity (Form A as per Art. 3 and 4 CDB)

3. Declaration by Swiss attorney or notary upon opening an account or securities account.

[download]

Fighting criminal activities and money laundering

Bank secrecy laws cannot be exploited and are NOT meant to shield criminals and criminial activities. Swiss authorities are increasingly cooperating with other International world countries to combat terrorism, drug trafficking, weapons smuggling, trafficking of women and children etc... Bank secrecy can be easily lifted, without the knowledge of the client by direct judicial orders. The swiss judge may request the clients records from the respective swiss bank, if the client is found to be involved in illegal criminal activities. Banking secrecy is not waived in cases of tax evasion (such as the mere non-declaration of income or assets). Whether all these are committed in Switzerland or abroad, the judge trying the case has the right to obtain information on the accused's bank accounts.Furthermore, Switzerland is party to a number of conventions on judicial assistance and has adopted a federal law on international assistance in criminal matters (EIMP), enacted in 1983 and revised and strengthened in 1997, with a view to speeding up the processing of requests and restricting the possibilities of appeal. Swiss Banks have no interest in money derived from illegal crimes and therefore had adopted strict measures in place to prevent unwanted money from entering the country. Identification of the customer, is very imperative for the swiss banks which forms the very important element of due diligence. The banks are required to know their customers, and make sure that their deposits are free from illegal activities.

Most of the banks in switzerland would ask the client to show proof for economic origin of funds. Thus the identity of the client ALWAYS known to the bank and limited to certain bank staff.

You can also find answers for the most common questions asked about switzerland in FAQ's section.