If you still have the quaint idea that offshore bank secrecy laws have any "teeth" to them, think again.
A case in point is the world-famous Swiss bank secrecy law. Article 47 (Art. 47) of the Swiss Banking Act, Paragraph 1 reads as follows:
“Whoever divulges a secret entrusted to him or of which he has become aware in his capacity as officer, employee, mandatory, liquidator or commissioner of a bank, as representative of the Banking Commission, officer or employee of a recognized auditing company and whoever tries to induce others to violate professional secrecy, shall be punished by imprisonment for not more than six months or by a fine of not more than SFr 50,000.”
Sounds impressive, but it's chump change compared to the penalties faced by those depositors in Swiss banks unlucky enough to be "outed" by an employee or other person with access to their banking records. For instance, U.S. law provides for a maximum penalty of five years imprisonment and a $500,000 fine for "willfully" failing to file Treasury Form TD F 90-22.1. U.S. taxpayers must file this form annually if they have offshore accounts with an aggregate value of $10,000 or more.
What's more, the penalty can apply even if you've paid tax on every dollar in the account. Simply not fessing up to the Treasury can land you in jail, even if you've broken no other law. (However, in practice, the Treasury rarely if ever refers violations of this reporting requirement for criminal prosecution unless there is a significant tax deficiency.)
Given the enormous discrepancy between these criminal sanctions, you might think that if Switzerland took its secrecy laws seriously, it would vigorously prosecute violations. That's especially true given the huge and growing problem of agents from foreign tax authorities offering multi-million dollar bribes to employees of Swiss banks in return for supposedly secret client data. Indeed, in the past two years, tens of thousands of client records from Swiss banks have been turned over to revenue authorities in the United States, Germany, the United Kingdom, and other high tax countries in exchange for multi-million dollar payments.
Now, I've learned of what I believe is the only successful prosecution in Switzerland for any bank data breach in recent years. Last month, the Swiss Federal Criminal Court found a former employee of Credit Suisse guilty of violating bank secrecy laws. The penalty was less than draconian: a 24-month suspended sentence and a fine of SFr 3,500. The unnamed culprit appears not to be any of the bank employees who directly profited from payoffs from tax authorities outside Switzerland. Rather, the employee leaked account information to an accomplice.
I don't mean to pick on Switzerland. But if this alpine redoubt, the world's bastion of financial privacy, wants anyone to take its bank secrecy laws seriously, it needs to get serious about punishing those who violate it.
Copyright © 2012 by Mark Nestmann
Are Swiss Banks Safe?
Switzerland is one of the most popular places for our private consulting clients to set up an offshore bank account. That’s not because we’re biased in favor of Switzerland, or against other countries. It’s just that, for wealthier US clients, Switzerland continues to roll out the red carpet. That’s just not true of many other places unless you have a local residency permit.
Given how much we talk about how to protect yourself against bank bail-ins, the main concern for many of our clients is to find a bank that is safe.
How did Swiss banks got their reputation as a place for safe and secure banking options? And do they still live up to it in today’s ever-changing financial landscape with ever more regulations and rules?
You can find more information here: Are Swiss Banks Safe?
