Are we Inching Closer to the End of Swiss Banking Secrecy?

Bob Bauman (March 2, 2010)

That headline might be a reasonable question following an official statement last week by the Swiss Federal Council…

The country’s governing body officially announced that it no longer wants, “undeclared, untaxed funds from overseas”.

The council said it will act to “regularize untaxed assets” in Swiss banks and keep out new, untaxed cash known as “Schwarzgeld” or black money…

Saying that the “integrity and stability” of one of the world’s leading offshore financial centers were crucial factors, Finance Minister Hans-Rudolf Merz (below) added, “We are not interested in untaxed money”. (My, my, how times have changed!)

But there was no indication about how the government would handle existing funds in banks, or new deposits that had been taxed properly by foreign governments.

But there was one thing Merz made perfectly clear; he ruled out the possibility of Switzerland adopting automatic exchange of information for tax purposes. One must wonder how much longer that will last…

“Automatic exchange of information would be the end of banking secrecy, and it would greatly damage the Swiss financial industry,” Merz said. “The Federal Council continues to reject the automatic exchange of information in terms of laying bare every detail of citizens’ lives,” the statement noted.

Merz reiterated Switzerland’s commitment to adhere to the standards of Article 26 the Organization for Economic Co-operation and Development (OECD) model treaty on tax information exchange. The OECD procedure can only be accomplished in bi-lateral, double-taxation agreements.

Switzerland, under tremendous OECD and G-20 pressures, has signed 18 such treaties in the last year; the first with the United States.

Five agreements are scheduled for discussions in parliament next month amid very real threats by opponents to challenge them to a nationwide vote where they may well be rejected.

Lost in Translation; Fraud – no…Evasion – yes

As I have often noted, foreign tax evasion is not a crime under Swiss law, but tax fraud is considered as a criminal offense.

In a landmark deal with the U.S. last year, the largest Swiss bank – UBS – was forced to agree to disclose bank account details of thousands Americans, who were alleged to have evaded taxes, but the Swiss Administrative Court blocked the release of the names, ruling that would violate Swiss law.

It is generally understood that under the OECD Article 26 procedure, the requesting country must name the individual and the bank involved and also show some prima face evidence of alleged tax fraud. No broad scale “fishing expeditions” are allowed.

So is Swiss bank secrecy dead? Not hardly.

The statement by the Federal Council was in the nature of a public relations ploy, another attempt to show that the top Swiss politicians want to cooperate with other nations seeking tax information.

But there remains in place a strict Swiss bank and financial secrecy law that, unless repealed by parliament, will not allow wholesale release of the names of foreign account holders – no matter how apoplectic the OECD, the G-20 and the IRS may become.

So long as you, as a foreign person with a Swiss account, are not engaged in tax fraud or some other criminal acts, information concerning you cannot be released by Swiss banks. And if information is released improperly, you have the right to appeal to the Swiss courts that I just mentioned that have upheld the law.

Help for You

At the Sovereign Society we meet regularly with Swiss and other offshore banker. We have agreements with reputable Swiss banks willing to accept new accounts from those who identify themselves as Sovereign Society members.

These arrangements are in full compliance with IRS and SEC rules and other U.S. laws. U.S. clients must sign an IRS Form W-9 that allows an offshore bank to report required information to the IRS.

As it has been since our founding 12 years ago, our staff is available to assist in opening a Swiss or other offshore account.

Take advantage of these special Swiss banking arrangements and the advice of our Swiss advisors – sign up here for Sovereign Society membership. Once you are a member, you can contact us for help via email at info@sovereignsociety.com

Sincerely,

Legal Counsel

Editor’s Note: You can learn all about going offshore, about Switzerland and about all the legitimate and legal offshore financial centers – in my new 4th edition of Where to Stash Your Cash Legally: Offshore Financial Centers of the World. Find out how here.

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