SWISS SECRECY: NOT A LEGEND
Swiss banking is often identified in America with
banking secrecy. Popular media stories have created
two contradictory pictures: that Swiss secrecy hinders
law enforcement officers from prosecuting criminals,
while others claim that Swiss secrecy does not exist
anymore and is as full of holes as a Swiss cheese.
Neither is true.
The basic position in Swiss civil law is that the
information concerning a customer and the customer's
financial dealings is protected as part of the
individual's legal right to privacy. In Switzerland,
this has been made part of Article 28 of the Swiss
Civil Code, and not only protects the information, but
makes the person violating the secrecy liable to pay
damages to the customer. In addition, the banking law
makes it a criminal offense in Switzerland for a banker
to divulge information about a customer in violation of
the law, punishable by fine or imprisonment. Both the
bank and the bank employee may be subject to various
penalties if a violation occurs.
A bank can only disclose information when
authorized to do so under existing statutory provisions
or by a Swiss court order, which must be founded on
law. Secrecy is interpreted so broadly that it is
illegal for a bank to say whether or not a person is a
customer, since if the bank failed to do so it would be
implying that the person was a customer.
The right of secrecy is a right belonging to the
customer, not the bank. It is the customer's privacy
that is protected by law. The customer can waive the
secrecy, but the bank cannot. For example, the
customer may waive secrecy and ask the bank to give a
credit reference to a specific creditor. But such a
waiver is only valid if the customer acts voluntarily
and not under duress. Therefore, waivers that were
signed pursuant to foreign court orders compelling a
customer to sign a waiver may well be invalid. A
financial institution cannot ask the government for an
order waiving secrecy. Only the customer can waive the
secrecy.
Contrary to an opinion current in America, Swiss
secrecy is not absolute. It can be overridden by
statutory provisions which compel the giving of
information.
Such rules requiring disclosure of information --
usually with a limited scope -- can be found in Swiss
inheritance law (you really wouldn't want your
legitimate heir going into the insurance company with
your death certificate to be told they can't tell him
anything), in enforcement of judgments from creditors,
in bankruptcy or in divorce.
The most widely known limitation on secrecy is in
treaties concerning Swiss cooperation in foreign
criminal matters.
In a criminal investigation conducted in
Switzerland, of a Swiss crime committed by a Swiss
citizen, secrecy can be lifted by court order. The
treaties extend this possibility to foreign crimes by
foreign citizens in foreign investigations, but only in
the limited circumstances spelled out in the treaties.
Before a foreign legal assistance request for
Swiss financial records can be honored the following
conditions must be met:
- Compulsory disclosure is only possible if the
offense that is being prosecuted is punishable as a
criminal offense in both countries (the requesting
state and Switzerland).
- In tax cases assistance is available to
foreign prosecutors only if the investigated violation
of foreign tax laws would be qualified under Swiss law
as a tax fraud and not merely as tax evasion. Tax
evasion is simply the failure to declare income or
assets for taxation. Tax fraud is distinguished by the
fact that "fraudulent conduct" is involved. Normally
"fraudulent conduct" can only be assumed if forged
documents are used.
There is a special provision of the Swiss-United
States Treaty on Mutual Assistance in Criminal Matters
that provides Swiss legal assistance to U. S.
prosecutors even in tax evasion cases if they are
conducting an investigation against an organized crime
group.
- As a general rule, the information obtained in
Switzerland through a legal assistance procedure may
not be used for investigative purposes nor be
introduced into evidence in the requesting state in any
proceeding relating to an offense other than the
offense for which assistance has been granted.
It must be emphasized that foreign authorities or
foreign courts cannot directly ask a Swiss financial
institution for information. Even in cases in which
legal assistance can be granted and therefore secrecy
is lifted, only a Swiss court order - which in these
cases is based upon a foreign request for legal
assistance - can validly lift secrecy.
Considering this, it can be said that secrecy is
strict and is only put aside in case clearly defined by
Swiss law and pursuant to Swiss rules. Secrecy is,
however, not absolute and does therefore not protect
criminals.
Switzerland has long served as a magnet for the
money of wealthy foreigners who perceive the world as
buffeted by over-taxation, over-regulation and
political turmoil. They are attracted, of course, by
the confidentiality and discretion that have been a
hallmark of Swiss bankers since the French Revolution,
when they offered financial refuge to French
aristocrats. In 1934 secrecy was enshrined into law.
