Posted on 03/12/2009 8:17:20 AM PDT by An.American.Expatriate
In 1934, the Swiss Federal Parliament explicitly introduced the notion of bank secrecy for the first time in a section of the law and created criminal sanctions. Why was this law created? The first and most common explanation is the one taken up by the Swiss Bankers Association, which considers the event to be a political act by the Federal Parliament to demonstrate its independence and its neutrality in the face of the threatening power of Nazi Germany.
In the wake of the 1931 financial crisis, the Weimar Republic introduced strict foreign exchange controls. Many cases of economic espionage led by the German tax and customs authorities were exposed in Switzerland, while the Swiss laws were not sufficient to fight effectively against such practices. In reality, while the German agents risked deportation, at the very most, the German clients who fell victim to violation of bank secrecy were harassed by the Nazi government and forced to empty their Swiss accounts to the profit of the Third Reich.
In early 1933, the Swiss government felt it necessary to incorporate criminal provisions in the legislative enactment it was working on. In that way, the justice system would have more dissuasive weapons to guard against foreign infiltration. The will grew even stronger when Hitler came to power in 1933, with his threatening attitude regarding his political opponents and the Jewish population. In June 1933, the German Nazi government created a series of laws that obliged German citizens to declare all foreign holdings. The penalty prescribed for failing to do so was death: Any German national who, intentionally or unintentionally, led by lowly selfishness or some other type of vile sentiment, has accumulated wealth or kept funds abroad will be punished by death. In July 1933, a law was passed on the confiscation of goods belonging to public or State enemies, so allowing the Nazis to seize all of the German Jews' assets.
The Gestapo was in charge of despoiling operations abroad. One of the procedures they used to determine whether a German had an account in a Swiss bank was the following: an SS agent in civilian dress would walk into a Swiss bank and give the teller a sum of money to deposit into the account of Mr. X, who the Gestapo believed had an account in Switzerland. If the banker agreed to make the deposit, there was proof that an account existed. In some cases, the mere look of discomfort on the teller's face was grounds enough for the secret agent. Then all the Gestapo in Germany had to do was exert major pressure on the presumed bank client to give instructions for the Swiss bank to repatriate the funds. (Note that with numbered accounts, neither tellers nor bank employees know the identity of the account holders, who are thus protected against this type of indiscretion.)
When three Germans were put to death in 1934 for having an account in Switzerland, the Swiss authorities were convinced of the necessity for a strict law on bank secrecy to protect Swiss bank clients by the criminal code. With the threat of imprisonment for any banker who violated bank secrecy, the Swiss government imposed a blocking mechanism against its fascist neighbors' laws of extraterritorial pretense. This protected the clients and the Swiss bankers, since no authority could henceforth constrain them by law to commit a crime.
The tenacious Nazis nevertheless continued to conduct banking espionage on Swiss territory. The most resounding case was in March 1935, with the kidnapping of Berthold Jacob, a German Jewish refugee. Mr. Jacob was kidnapped in Basle by a German agent and taken to Germany. Swiss public opinion was outraged by such violation of Swiss sovereignty. The government finally managed to get Berthold Jacob released, but this event made the Swiss people and authorities acutely aware of the necessity for a law on espionage. A section was added to the criminal code in 1937 and served as an effective complement to the provisions on bank secrecy.
Banking Secrecy This information has not yet been revised to include the most recent position. Updated versions are available in French and German.
1. Definition and Legal Basis Banking secrecy refers to the professional discretion of the banks, their representatives and employees in the business matters of their clients, or third parties, of whom they have gained knowledge in the performance of their duties. Also bound to bank secrecy are the experts who work on behalf of the surveillance authority as well as further people connected with the banks. Banking secrecy serves to protect the bank client, not the bank. The client can release the bank from its obligation of secrecy and permit, or even oblige it to reveal details held under banking secrecy. The decision to lift banking secrecy may not be taken by the banker himself.
Banking secrecy is regulated on the one hand under civil law, in particular from the contractual obligation of the banker to uphold the confidentiality of his client’s personal situation. The client’s privacy is also protected under the general provisions of the Swiss Civil Code pertaining to protection of the individual (SR 210; Art. 27 ff.) as well as under the data protection law. Professional secrecy is not solely peculiar to banking, but indeed also applies to other professions such as doctors, lawyers, solicitors and clergy. As in the banking sector, professional secrecy also applies to those trading on the stock market (Art. 43 Federal Act on Stock Exchanges and Securities Trading; SR 954.1).
Under Banking Law, the professional secrecy of the banker based on civil law is regarded as a professional obligation, whose violation is liable to prosecution. According to Banking Law, a banker who reveals the secrets of his client, or a third party, may face a jail sentence or be fined. (Art. 47 of Federal Law on Banks and Savings Banks, SR 952.0). Under Banking Law, however, explicit provisions of other laws are cited under which the banker is obliged to provide information to the authorities or testify in court.
Banking secrecy exists in some form in numerous other countries (e.g. Germany, France, Belgium, Italy, UK and USA), the extent of which varies according to legal system.
2. Legally defined limitations A series of legally defined limitations to banking secrecy exist. Exceptions to banking secrecy are provided for under civil law, debt collection and bankruptcy law, criminal law, administrative law and in cases of mutual assistance in legal matters. In such cases, banking secrecy can also be lifted by order of the courts against the wishes of the client. The supervisory authority (Fed. Banking Commission) is not subject to banking secrecy. Swiss banking secrecy is not absolute and does not apply in cases of prosecution. There is no such thing as an anonymous account in Switzerland. There are, however, so-called "numbered accounts". A numbered account can for example be a current, savings, deposit or securities account where the name of the creditor or depositor has been replaced with a number. The bank, within the framework of its due diligence obligations, is nevertheless required to know the identity of the account holder as well as the true beneficial owner.
3. Strict obligations of due diligence The Swiss financial centre has no interest in money derived from crime and therefore has concerted measures in place to prevent unwanted money from entering the country. Banks in Switzerland are subject to a comprehensive catalogue of obligations with regard to the acceptance and holding of clients funds. When compared internationally, the current regulatory framework is far reaching.
Identification of the contracting partner ("know your customer") forms a central element of the due diligence obligation. The banks are required to know their customers. The due diligence obligations in the acceptance of client funds represent a preventive measure for ensuring the integrity of the financial centre. In Switzerland, banks (as well as other financial intermediaries) are required to apply greater vigilance with respect to their customers. Adherence to these obligations is monitored by the Fed. Banking Commission along with other agencies. Several of these obligations were developed by the SFBC at the end of the 1970s some based on the banking law of irreproachable business conduct. The obligations of due diligence have been consolidated by the SFBC in their circular entitled "Guidelines on combating and preventing money laundering". Since 1998, these guidelines have contained instructions for the special treatment of money deriving from politically exposed persons. The framework law in the area of due diligence obligations for the acceptance of client funds is the Money Laundering Act (MLA), which entered into force on 1st April 1998. Attention should also be paid to the provisions of the Swiss Criminal Code (SCC) referring to money laundering, deficient diligence in the conduct of financial transactions and criminal organisations which have been in force since 1st August 1994.
4. Access to bank information for tax purposes The Swiss tax authorities already have the right to obtain bank information for the purpose of prosecuting tax fraud offences. Such information may also be passed on to other states in the context of mutual assistance in legal matters – or through the process of administrative assistance in the case of the USA. While Switzerland reiterated its reservations to Art. 26 of the OECD model convention (information exchange), it declared its willingness to examine the possibility of also providing administrative assistance to other countries in cases of tax fraud (but not simple tax evasion) as it already does for the USA, albeit on condition that double taxation conventions be re-negotiated.
Swiss bank secrecy tightened due to Nazi spies
The latter is an official Swiss Government link.
I posted this as information only.
For the last several weeks there has been quite a lot of debate about the Swiss Banking Laws and I thought that the
historical origins, as well as the Official Swiss definition the laws would be informative.
Indeed, it shows that the IRS is more feared by the Swiss than the Nazi’s were.
LOL - you DO have a point there!!
But it also shows that there IS a willingness to cooperate ...
Has anyone hacked Swiss banks records??
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