Financial Privacy is a blanket term for a multitude of privacy issues:
Financial institutions ensuring that their customers information remains private to those outside the institution. Issues include the Patriot Act, and other debates of privacy vs. security.
The term is also used to describe the issue of financial institutions selling customer information to other companies so that those companies may use that for marketing, and especially telemarketing purposes. This issue however is mixed with the issue of financial institutions sharing information within themselves, which could be considered "sharing information between companies" or "affiliate sharing" since a financial institution is not allowed to be one company for regulatory reasons, but instead must assume a holding company structure. This sense of the word has been the main issue debated in the United States during the 21st century.
Debates on the first sense of the phrase have many different points of view, from crypto anarchists who want to create a completely decentralized and anonymous banking system, to others who support enhancing the power of the government to find financial information in order to fight terrorism.
However, the majority of the debate in the United States involves the second sense of the phrase. The same anger against telemarketers which led to the United States National Do Not Call Registry also was focused on what some alleged to be the source of many of the telemarketers leads: financial institutions selling things like balances and transaction information to telemarketers. Financial services companies, those that offer both banking, insurance, and investment products however say that the issue and attempted legislation on the topic was brought on by smaller financial institutions who simply focused on one type of product or business. The reason for this is that combining all those products with one company creates a Walmart style economies of scale and other synergies which are difficult to compete against as a single product line company. By putting forth legislation which forbids financial institutions from sharing information with other companies, single-
Bank secrecy (or bank privacy) is a legal principle in some jurisdictions under which banks are not allowed to provide to authorities personal and account information about their customers unless certain conditions apply (for example, a criminal complaint has been filed). In some cases, additional privacy is provided to beneficial owners through the use of numbered bank accounts or otherwise. Bank secrecy is prevalent in certain countries such as Switzerland, Lebanon, Singapore and Luxembourg, as well as offshore banks and other tax havens under voluntary or statutory privacy provisions.
Privacy is a fundamental right to any citizen, especially in money related matters. Secrecy is the most important reason for Switzerland’s success as a center of international finance.
Swiss banks and their staff are obligated to keep all data, documents, all sorts of relationships between bank and client, strictly private and confidential and are bound to respect clients private matters. The obligation to maintain banking secrecy applies to all those who are employed by or are members of any part of a bank, as well as to its auditors and the members of its board of directors. It continues even after termination of their employment (Federal Law on Banks and Savings Banks of 8 November 1934, Article 47). Any banker who divulges the private records of his client, or a third party, may face a jail sentence or be fined. Confidentiality is not, and has never been, absolute because it does not protect criminals as Swiss banks consider it to be of paramount importance for their financial center to be free of criminal activities. Article 47 of the Federal Law on Banks and Savings Banks, was enacted on 8 November 1934. This article prohibits anyone who functions as an officer, employee, mandatory, liquidator or commissioner of a bank, as a representative of the Federal Banking Commission, or as an officer or employee of a recognized auditing company, from disclosing any information that a bank customer entrusts to them in this capacity. Article 273 of Swiss Criminal Code punishes responsible persons of breaking the law. The convicted persons may face a jail sentence or fine up to CHF 30'000 or both.
Art. 273 2. Espionnage / Code pénal suisse
Celui qui aura cherché à découvrir un secret de fabrication ou d’affaires pour le rendre accessible à un organisme officiel ou privé étranger, ou à une entreprise privée étrangère, ou à leurs agents,
celui qui aura rendu accessible un secret de fabrication ou d’affaires à un organisme officiel ou privé étranger, ou à une entreprise privée étrangère, ou à leurs agents,
sera puni de l’emprisonnement ou, dans les cas graves, de la réclusion. Le juge pourra en outre prononcer l’amende.
[ Source : Swiss Federal Administration ]
Purpose of Bank Secrecy
Protect the bank customer's privacy in their financial matters.
Protect a customer's civil rights under the Swiss Civil Code.
Offer no protection for criminals or illegally gained money.
Consequences of violating customer confidentiality
Anyone violating bank customer confidentiality, or who tries to induce others to violate it, faces imprisonment for not more that six months or a fine of not more than SFr. 50,000. If the violation has been committed by negligence, the penalty is a fine not exceeding SFr. 30,000. The violation of bank customer confidentiality remains punishable even after the termination of the official or employment relationship or the exercise of the profession (Art. 47, Federal Law on Banks and Savings Banks).
Bank Secrecy is waived
In criminal investigations (suspicion of money laundering, membership of a criminal organization, theft, tax fraud, blackmail etc.)
When providing international legal assistance (criminal investigations conducted abroad);
Civil proceedings (inheritance and divorce, for example)*
*In case of foreigners, the bankruptcy, inheritance, divorce proceedings involve a complex set of procedures according to the laws in Switzerland, and hardly been any outcome of success.
Swiss Banks operate on 'know your customer' basis, and it a must for all banks to verify their clients. In accordance with the Due Diligence Agreement (CDB 03), the bank verifies the identity of the contracting partner by obtaining a certified copy of an official identification document (passport, identity card, driving license, etc.) issued by a public notary or public office that customarily issues such authentications. The bank also checks the mailing address of the new customer through an exchange of correspondence. If you are visiting Switzerland, you can directly ensure your identity by visiting the concerned bank. The same procedure applies for numbered account holder, and one should bear that in mind that there is no such thing called anonymous accounts in Switzerland. your identity is verified and always known to the bank, governed by bank secrecy laws.
Due Diligence Protocol
Art. 2 Verification of the contracting partner's identity
1. The banks undertake to verify the identity of the contracting partner when establishing business relations with said partner.
2. This regulation applies to:
Art. 8 Tax evasion and similar acts
Banks shall not provide any assistance to their customers in acts aimed at deceiving Swiss and foreign authorities, particularly tax authorities, by means of incomplete or otherwise misleading attestations.
49.1 It is forbidden to remit to the customer personally or, at his or her request, directly to Swiss or foreign authorities, any incomplete or otherwise misleading attestations.
49.2. Authorities include, in particular, tax, customs, currency and bank supervisory authorities as well as prosecution authorities.
50.1 Subject to this prohibition are special attestations requested by the customer for submission to authorities.
50.2 The bank is not permitted to alter routine records, such as statements of account and securities, credit and debit advices, settlement notes for foreign exchange transactions, coupon and stock exchange transactions, for the purpose of deception.
51.1 Attestations are incomplete if significant facts are omitted in order to deceive authorities; for example if the bank, at the given request of the customer, omits certain items from a given attestation or from a statement of account or securities.
51.2 It is not necessary to mention in the statements of account or deposit that the same customer holds other accounts or deposits.
52 Attestations are misleading if the facts are presented in an untruthful manner to deceive the authorities, such as:
a) by showing false dates, false amounts or fictitious rates or by issuing credit and debit advices showing false information about the persons debited or credited;
b) by attesting to fictitious claims or debts (regardless of whether or not the attestation reflects the bank's records).
c) by allowing customers to use the bank's nostro accounts for the purpose of cutting tax duties.
The provisions of this agreement apply without restriction to accounts, passbooks, securities accounts and safe deposits designated by a number or code (Swiss numbered accounts).
Fighting criminal activities and money laundering
Bank secrecy laws cannot be exploited and are not meant to shield criminals and criminal activities. Swiss authorities are increasingly cooperating with other International world countries to combat terrorism, drug trafficking, weapons smuggling, trafficking of women and children etc... Bank secrecy can be easily lifted, without the knowledge of the client by direct judicial orders. The Swiss judge may request the clients records from the respective Swiss bank, if the client is found to be involved in illegal criminal activities. Banking secrecy is not waived in cases of tax evasion (such as the mere non-