When villains wire money for nefarious activities or demand payment for blackmail in the movies, a Swiss bank account is invariably involved.
It seems that for criminals, a Swiss bank account is the account of choice. Well, at least in the movies.
One reason for this is the (in)famous reputation for banking secrecy that Switzerland has.
Switzerland is well known for its strict bank secrecy laws and restrictions against disclosing client data to third parties.
And, although Swiss banking secrecy has come under fire in recent years, a high level of client data protection remains in place.
However, Swiss banking secrecy is not without its limits.
The Law
Art. 28 of the Swiss Civil Code ensures the right to privacy. This includes privacy extends to information concerning a persons economic situation or their financial relationships.
Thus, Swiss banks are prohibited from disclosing client data to third parties.
Violations of this secrecy is a criminal offence. Both intentional, and inadvertent breaches, can be lead to large fines or imprisonment for the offender.
Confidential data is any data that could lead to the identification of the client. For example, the name and account number, as well as other data points, such as an address or phone number, are considered confidential.
Bankers may also not provide negative responses regarding a person’s relationship with the bank. Therefore, they cannot disclose that a person is not a client of the bank.
This protection extends to relationships in the past. Even if you leave your bank, your former bank is not released from client data protection laws and may not disclose your relationship.
Moreover, even if a banker leaves the profession, he still may not, even 20 years later, disclose any client data.
However, there are certain situations when banking secrecy may be pierced. Banking secrecy is not an absolute right.
When does bank secrecy not apply?
In the case of criminal proceedings or civil proceedings, such as bankruptcy, tax fraud cases, or divorce, a Swiss judge can order the bank to disclose their clients financial information.
Moreover, between 2008 and 2017, Switzerland has come under increasing pressure by foreign governments to provide information on people suspected of having a Swiss bank account for tax evasion or tax fraud purposes.
Since then, Switzerland has entered into information sharing agreements with other countries, allowing the exchange of information on specific tax related customer data to authorised foreign authorities.
Nonetheless, these agreements regarding the automatic exchange of information only provide narrow exceptions to client confidentiality and primarily apply with regard to foreign tax compliance purposes.
Therefore, Swiss bank account holders residing outside of Switzerland no longer enjoy full bank secrecy with regard to income tax.
What Banking Secrecy Means for You
In general, banks have access to a wealth of personal data concerning your financial situation, your financial activities, and financial relationships.
All these data points provide a very personal insight into your life.
Its thus important that this information remains private between yourself and the bank.
Banking secrecy in practice
As discussed above, your bank has an obligation to keep your relationship with them secret, but what does this mean practically?
Confirmation of the existence, or lack therefore, of a banking relationship.
A bank employee cannot confirm the existence of a banking relationship to a third party.
Even if you know that your mother is a client of the bank and you tell the bank this, the bank cannot confirm to you that your mother is, in fact, a client.
Disclosure of customer identifying data
Your bank may not reveal any data to third parties that could potentially result in your identity being revealed.
Vague or general statements that do not reveal your identity are permissible. For example, a colleague at a wedding might mention that he has just onboarded a wealthy French client. This type of disclosure is allowed.
Other disclosures that could reveal your identity are strictly prohibited.
An example of such a breach occurred in the new online banking functionality at Raiffeisen bank.
When entering a payment in online banking, typing the IBAN number would result in the name and address of the payee being automatically filled out.
Although this may be a useful feature for those who don’t like tediously typing in the recipient’s name and address each time, this functionality caused trouble for the bank.
The automatic completion of the name and address constitutes a breach of client confidentiality, as it is possible to plug in IBAN numbers and discover who is a client of the bank.
Disclosure to Swiss tax authorities
In Switzerland, the authorities may not request information on a persons bank account without a legal order from a Swiss judge.
Without such an order, the bank may not disclose information to the tax department, police, or other authorities.
Your Rights to Access Data
As a client, you are entitled to receive information pertaining to your relationship with the bank.
For individuals, this is the case if your name is on the account.
For legal persons, this is the case if you have signing authority on the account and are listed on the company’s trade register.
On the flip side, this means that if you wish to have information on a mortgage account that is in your wife’s name and not in yours, the bank is not allowed to reveal this to you. Your wife would have to grant you power of attorney to the account in order for you to access information on the account.
Through a power of attorney, you can grant others access to a bank account that is in your name. Without this, the bank is generally prohibited from providing any information.
One exception to this, however, is if the account holder passes away. In this case, the legally recognized heirs are entitled to information on the account.
An extra layer of secrecy: numbered accounts
The myth of the anonymous Swiss bank account is pretty much that, a myth.
However, there are the mysterious-sounding numbered accounts. These are accounts that are bound to a number and not a name.
For example, with a numbered account the name on the account is not Donald Duck, but the number 789123.
However, banks have Know Your Client (KYC) rules and legally, the bank must know who is behind a bank account.
Nonetheless, as number accounts are processed according to their numeric identifier internally and not with the customer name, a heightened level of security applies.
Numbered accounts provide an additional layer of privacy by restricting access to the client’s identity to only a few select employees.
In sum, Swiss banking secrecy is not the anonymous hidden bank account of Bond villians as the films like to depict it. Rather, Swiss banking secrecy rests on the core principle of privacy that the Swiss guard across many other aspects of their lives and it is not an absolute right.