Switzerland’s bank secrecy is legendary, but does it apply to any resident, regardless of their nationality?
Much has been written about Switzerland’s famous (and infamous at the same time) banking secrecy, and some of the information is rife with misconceptions.
It is therefore not surprising that foreigners who settle in the country and open accounts in Swiss banks are wondering what their right to this ‘secrecy’ is.
But first…what exactly is this concept?
It’s true that Swiss bankers have a long reputation of being tight-lipped when it comes to divulging details about their clients’ accounts.
But rather than calling this practice ‘banking secrecy’, the Swiss refer to it as ‘client confidentiality,” which has long-standing legal basis.
This legislation “protects the financial privacy of citizens from unauthorised access by third parties or by the State.”
This is how the government explains it: “Banking secrecy arises from civil law, especially the contractual obligation of the banker to keep the personal information of his or her client confidential.
“The privacy of the client is also protected by the general provisions of the Swiss Civil Code concerning protection of personality and by the law on data protection.
“Moreover, under civil law, banking legislation considers the confidentiality of the banker to be a professional obligation, the violation of which is punishable.”
READ ALSO: What you should know about Switzerland’s banking secrecy
Advertisement
What does this mean in practice?
This right mostly applies to Swiss citizens in good standing, though it can be waved in cases of wrongdoing.
For instance, according to Moneyland consumer platform, if banks suspect money laundering, “they are allowed to share customer information with the money laundering reporting office.”
Another example: “when assets are being seized in a debt collection case, banks are required to provide information to debt collection and bankruptcy offices about the debtor’s account balances.”
In other words, there are specific situations when banks are not only allowed, but actually obligated, to wave their confidentiality vis-à-vis a Swiss client.
Advertisement
What about foreign residents?
It all depends on the person’s nationality.
That’s because in 2016 Switzerland had signed an automatic exchange of information agreement (AEOI) with around 100 countries, including those within the European Union, as well as the United States. The agreement went into effect in 2017.
Under its terms, “if the account holder has tax residence in a country which is covered by the agreement, Swiss banks automatically submit information related to the customer’s account to the Swiss Federal Tax Administration,” Moneyland explained. “This office then passes it on to the tax authority of the country where the person has tax residence.”
Therefore, “a person who has, for example, their tax residence in France and a bank account in Switzerland will be affected; similarly, a person residing in Switzerland who has an account in Italy,” said Fabrice Welsch, managing director of the Asset Management & Trading Division at BCV bank.
“This includes the following information: name, address, tax residence status, account number, account balance, amount of interest, dividends and other income paid into the account and gross proceeds from the sale of financial assets,” Welsch pointed out.
This is to say that any foreign national with a tax residence in one of the countries subject to the AEOI, cannot count on the banking secrecy to protect them.
Advertisement
The same rule applies to US citizens – even those have obtained Swiss nationality – because Washington taxes its citizens living abroad.
As a result, all Americans living outside the country must declare their accounts, as well as other assets held in foreign banks, to Uncle Sam — an onerous obligation that has driven many US citizens residing abroad to relinquish their American citizenships.
READ ALSO: Why Americans in Switzerland renounced their US passport
