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FIDUCIAIRE AMEDIA

6, rue du Conseil Général 3ème étage
1205 Genève - Suisse

Consultation by appointment in Geneva, Barcelona and Paris

Tel +41 (0) 22 734 3183

Bank Secrecy

What is bank secrecy?

Bank secrecy involves a duty by bank representatives and employees to use discretion. This obligation covers their clients’ financial transactions or those of third parties which they may be privy to during their employment. Any person connected to the bank is also bound by bank secrecy. The secrecy covers the client, not the bank and the client is the only one empowered to waive it. The expression “bank secrecy”, although commonly used, is not appropriate. It is better to call it an obligation of discretion.

The legal framework for the bank secrecy in Switzerland

Bank secrecy is based on varied legal principles:
- Civil law: the contractual relationship between the client and the banker which requires the latter to maintain secrecy about the client’s situation. This duty of discretion is a product of the trust placed in the banker by the client.
- Banking law (Article 47 of the Swiss law on banks)
It contains a sanction for the banker who violates the duty of discretion. Measures include a fine and prison sentence.
There is also a similar provision related to stock exchange transactions for financial traders.

Numbered accounts and anonymous accounts

An account is defined as anonymous when the bank doesn’t know the identity of the client. However, in Switzerland, the law requires that the bank know its clients’ identity. This is the reason why anonymous accounts do not really exist in Switzerland.
However, numbered accounts are used. They are called numbered when the name of the depositor is replaced by a number. This applies to any type of bank account (checking, savings, deposit, securities)
In this case, the Swiss bank knows the identity of the account holder. However, only a limited number of bank employees have access to the client’s personal information. All of the operations take place under the number system and the rest of the bank employees never learn the client’s identity.

Limitations of bank secrecy

The decision to waive bank secrecy lies with the client since he is the one who benefits from it. The bank can’t make that decision.
Bank secrecy is not absolute. Criminal and civil laws include some exemptions. It may be revoked by a legal authority (money laundering procedures) or in the case of tax fraud.

What consequences does the June 3, 2003 directive have on bank secrecy, in terms of taxation of non-resident savings income (in the form of interest payments)?

On July 1, 2005, the procedure of the exchange of information within the context of that directive went into effect. Switzerland is tied to this process through a bilateral convention. The process is completely anonymous and therefore, bank secrecy is preserved.

How is that possible?

Contrary to the duty of disclosure sometimes required by the EU for third countries, the EU witholding tax system allows protection of the private financial information of clients with Swiss accounts.
The spontaneous exchange of information does not constitute a threat to bank secrecy. It is the client who decides whether or not he/she wants to avail himself/herself of this protection. The ability to waive bank secrecy is in compliance with the current law in Switzerland.
Additionally, the exchange of information pursuant to a request in the case of “tax fraud and other similar practices” does not challenge bank secrecy. All of this is in compliance with the usual jurisprudence of the Federal Court as well as the conventions on double taxation signed with certain countries within the last few years. Tax evasion as defined by Swiss law is not included in this agreement.

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