The Principles of Swiss Banking Secrecy
Almost as famous as Swiss chocolate, Swiss bank secrecy has a far-reaching international reputation. Bank secrecy is simple: banks (and their employees) are legally required not to disclose information on customer identity. This also applies to subsidiaries of foreign banks in Switzerland.
In 1931, when bank secrecy was informal but widely practised, Jean-Marie Musy (then Federal Councillor) said at the General Assembly of Swiss Bankers:
“Official Bank supervision is not desirable for the State or for the Banks … The intervention of official inspectors would worry … clients, who are very much attached to the importance of discretion, and who rely on this discretion. The potential capital flight from our banks that could result from imposed bank supervision, would harm our national economy, and therefore cause our entire population to suffer.”
The History of Banking Secrecy in Switzerland
The principle of bank secrecy was first enshrined in law in 1934. It was designed to protect Jewish emigrants leaving Germany from the Nazis. Heavy penalties were then imposed on banks that did not comply with secrecy requirements. The first change in legislation was made several years later in 1980. The Federal Act on International Mutual Assistance in Criminal Matters was the first step towards Switzerland’s cooperation in fighting international crime. It then became possible to override banking secrecy when extradition was in question. Nearly 20 years later, in 1998, Switzerland again improved bank secrecy transparency for money-laundering, while maintaining client anonymity. In 2005, the country signed a new treaty to further improve the fight against crime. However, Switzerland has never favoured international cooperation over bank secrecy, which remains in force.
Exceptions To Swiss Bank Secrecy
Although bank secrecy still exists in Switzerland, it is important to realise that secrecy does not protect clients from either national or international law. Bank secrecy is lifted when a Swiss bank client is involved in a criminal case and/or investigation, regardless of how serious the case or investigation may be. Bank secrecy is also lifted if a foreign judge is conducting an investigation in Switzerland.