System Trading Blog

Make Your Money Work Harder

Switzerland and [lack of] Banking Secrecy

When dealing with investments, banking secrecy is often an important issue even for the most amiable individuals. “I don’t want others to see millions booked in my name or to my name …” – a recent qoute from an individual with impecable reputation, and no doubt that he has made the millions legally …

Some time ago a choice of a Swiss bank was a safe bet that your money will be in safe distance from taxman or anybody else for that matter. Basically, almost everything went … I remember a meeting in a Swiss bank at the beginning of 90´s: ¨bribe money … we don´t call it like that, we consider it a consulting fee; tax evasion… hm, they have no issues with Swiss taxes, have they? … then it´s no problem!¨. It´s no surprise that money from all over the world flowed to Switzerland. Very few questions asked, legal system protects the client, banking traditions spanning hundreds of years … quite a reasonable choice.

Today Swiss banking system is not that secret anymore. Swiss bank is still much better than any EU bank, not speaking about US (which is hopeless due to paranoia about terrorist finance, even interbank payments for small amounts may be affected), but it has become substandard when it come to secrecy.

US and UK have de facto crashed the strict Swiss banking secrecy, tax collection was the issue. The action was quite brutal at times, US went as far as detaining a senior UBS banker as ¨a material witness¨while he was travelling through a US airport.

Whatever the reason, the Swiss system is not what it was. So far the law required to inform client, if a request for tax information is made by a foreign tax authority and the client had the rights to review such request as well as to review the data given to such foreign authority. In future, Swiss bank account owners could have accounts disclosed without their knowledge. Bearer savings books are being phased out, although Swiss companies are still allowed to issue bearer shares.

Switzerland has pledged to conform with standards as set by OECD (Organisation for Economic Co-operation and Development) and continues down this path slowly. It proceeds with exchange of information agreement, in Y2005 started to tax accounts owned by EU residents (as part of EU Savings Tax Directive), starts to respect foreign governments´ demands for information about unnamed individuals´ accounts in unspecified banks etc.

The bottom line is that we can not rely solely on Swiss banks, or banks in any other country, to provide complete and long-term confidentiality. I´m not talking about illicit funds like profits from drugs or weapons etc. I´m talking about a friendly environment for business without  skyhigh compliance costs and taxes, about tax planning so that no government can claim something what is not due to them, about keeping the funds out of reach of rogue competitors and angry spouses etc.

Fortunately, there are still plenty of opportunities for efficient tax planning and secrecy assurance. Usually, an additional layer of a company in a low-tax, properly regulated jurisdiction is needed. And, with such additional safety layer of a company in place, Swiss banking is still good enough.

Update 20120105: Link to article about US New Tactic



Written by A.S.

August 2, 2011 at 9:36 am

%d bloggers like this: