News Column

Switzerland's bank account secret is out

January 21, 2014

By Kim Hjelmgaard, @khjelmgaard, USA TODAY

The secret Swiss bank account is no longer what is used to be. For years the accounts were the basis of plots both real and imagined in which people hid cash to avoid the taxman or the police if the gains were from crime. But prior to a midnight New Year's Eve deadline, many of the Swiss banks agreed to divulge to the U.S. government which Americans have accounts here to avoid prosecution on charges of helping them evade taxes. As many as 40 of Switzerland's approximately 300 banks are reported to have said publicly that they would voluntarily hand over closely guarded client information to the Department of Justice in return for prosecutorial immunity. After decades of facilitating, even if not explicitly engineering, the shielding of undeclared assets from foreign tax authorities, a Swiss banking industry built on a legacy of absolute secrecy on behalf of customers may start singing like a canary. "What's really clear is that this (Justice) program is at the limit of what is tolerable for banks in Switzerland ," says Sindy Schmiegel , of the Swiss Bankers Association , in Basel . Adults can open a bank account in Switzerland no matter their citizenship. The banks would normally refuse entreaties from foreign governments looking to see if citizens hiding cash were among the account-holders identified by numbers. That prompted accusations that the Swiss were aiding and abetting crime. But the Swiss Bankers Association insists that anonymity does not absolve account-holders from their obligation to respect what the Swiss Bankers Association refers to as "the legal provisions of the home country with regard to cross-border business." As for the secrecy aspect of the accounts, it's true that under Swiss law banks are not permitted to disclose financial information to third parties. But the banks are required to be aware of the identity of account-holders. And there are numerous provisions under Swiss civil and criminal law that permit banking secrecy to be lifted. Clive Church , a professor of Swiss politics at the University of Kent in Britain , says that the tradition for financial discretion in Switzerland can be traced back fairly precisely to 1934, when it was forged into law as a consequence of French and German agitation. "You often hear that it was introduced to preserve Jewish money from the Nazis," says Church. "That probably happened at first, but it actually came about because the Third Republic and Weimar governments were extremely worried about large leakages of money to Switzerland because both of them were, for all sorts of reasons, politically unstable." In response, Church says that Switzerland with its stable society and well-developed banking sector decided to make it a criminal offense to breach a stringent financial confidentiality law. The Swiss then ended up adopting the concept of concealment as a cornerstone of the nation's cultural identity. "But that's changing now. The industry has realized that you can't just sell yourself on the basis of secrecy. You have to have other services, as well," says Church. This week marks the start of the World Economic Forum at the Swiss mountain resort of Davos , where more than a few of the world's richest people in attendance may have a Swiss account or two. The forum has scheduled a discussion about how, with traditional banking secrecy gone, Switzerland can reinvent itself. "Swiss bankers accept that they are living in a new reality," says Bruno Patusi, head of wealth and asset management at EY, based in Zurich . Meanwhile, the Swiss bank account so long associated in the public imagination as a place to deposit large amounts of money with little expectation of discovery may be on its way out. The comedian Woody Allen once joked: "If only God would give me some clear sign! Like making a large deposit in my name in a Swiss bank." He may want to look elsewhere for a message from above.

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Source: USA Today

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