Swiss banking laws and banking secrecy

Banking in Switzerland is characterised by stability, privacy and protection of clients' assets and information. The country's tradition of bank secrecy, which dates to the Middle Ages, was first codified in a 1934 law. All banks in Switzerland are regulated by Swiss Financial Market Supervisory Authority (FINMA), which derives its authority from a series of federal statutes.

The Federal Banking Commission, an independent agency of the Swiss government within the Federal Department of Finance, supervises most banking-related activities as well as securities markets and investment funds. Regulatory authority is derived from several statutes.

The office of the Swiss Banking Ombudsman, founded in 1993, is sponsored by the Swiss Banking Ombudsman Foundation, which was established by the Swiss Bankers Association. The ombudsman's services, which are offered free of charge, include mediation and assistance to persons searching for dormant assets. The ombudsman handles about 1,500 complaints raised against banks yearly.


Banking law of 1934

The Swiss Parliament passed the Banking Law of 1934, which codified the rules of secrecy and criminalizes violation of it. The secrecy provisions were not included in the first draft of the law, which mainly concerned administrative matters such as bank supervision. The provisions, found in Article 47(b), were added before passage of the bill due to Nazi authorities' attempts to investigate the assets of Jews and "enemies of the state" held in Switzerland.


Banking privacy (Bank secrecy)

Swiss bank secrecy does not protect private banking information; the protections afforded under Swiss law are similar to confidentiality protections between doctors and patients or lawyers and their clients. The Swiss government views the right to privacy as a fundamental principle that should be protected by all democratic countries. While secrecy is protected, in practice all bank accounts are linked to an identified individual, and a prosecutor or judge may issue a "lifting order" in order to grant law enforcement access to information relevant to a criminal investigation.


Taxation (Taxation in Switzerland)

Swiss law distinguishes between tax evasion (non-reporting of income) and tax fraud (active deception). International legal assistance is only granted with respect to tax fraud. In domestic prosecutions, banking secrecy may be lifted by court order in cases of tax fraud or particularly severe cases of tax evasion.

Since July 1, 2005, Switzerland has charged a withholding tax on all interest earned in the personal Swiss accounts of European Union residents.


United States & IRS

Swiss bank accounts cannot be opened without the holder signing a legal document asserting that they have no outstanding financial obligations to the IRS. Despite this, Swiss banks have been criticized for improperly shielding individuals practicing tax evasion. Because only tax fraud (actively lying to authorities) is a crime in Switzerland, while tax evasion (passively neglecting to report income) is not, it is believed that many tax evaders have been able to take advantage of the Swiss privacy provisions.

In January 2003, the United States Department of Treasury announced a new information-sharing agreement under the already extant U.S.-Swiss Income Tax Convention; the agreement was intended to facilitate more effective tax information exchange between the two countries. However, Swiss policy has continued to come under international criticism, and in March 2009 Switzerland agreed to renegotiate more effective tax cooperation with the United States and other countries.


Update: IRS cracks open 4,450 Swiss bank accounts

August 19, 2009

Deal with Swiss banking giant UBS gives access to secret accounts of Americans evading tax authorities.

Swiss banking giant UBS said Wednesday it had agreed to give to American authorities the names of up to 4,450 US account holders who the Internal Revenue Service suspects of using Switzerland's vaunted banking secrecy rules to avoid paying billions of dollars in US taxes.

The announcement ends an eight-month legal battle that strained Swiss-US diplomatic ties, saw UBS agree to pay $780 million in fines, and had Swiss bankers worrying that the secrecy laws that made Zurich synonymous with wealth were under siege.

IRS Commissioner Douglas Shulman declared "the world of international taxes has drastically changed" in a conference call with reporters. In a Bloomberg TV interview, Mr. Shulman said this case shows that the IRS can and will expand its global reach to catch American tax evaders.

"We're going to have our targets set on all categories of folks," Shulman said.

He also said the US will be given access to 5,000 Swiss accounts which at one point had $18 billion in assets.

Read more...

IRS cracks open 4,450 Swiss bank accounts | csmonitor.com



Bank UBS is seen in Zurich


UBS Banker turned informant gets 40 months

FORT LAUDERDALE, Fla. (08/22/2009) -- A former UBS banker and key informant in the U.S. tax evasion case against Swiss bank UBS AG was sentenced to three years and four months in prison for helping a billionaire hide assets from U.S. tax authorities.




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Is there a federal law that prohibits a banking institution like UBS from releasing financial information to a third party (employer) without permission? All of the information I have been able to find deals with releasing information to Government Agents, not private individuals. Thank you!

Swiss banks aren't so secret anymore now that Swiss banking giant UBS has agreed to give up the identities of thousands of its clients to US tax authorities...

I agree...certainly as to US citizens anyway.

I agree the US has killed that business for the SWiss