It is generally believed that the ultra-rich in the United States support their president, if only because he is business and tax-friendly. But when it comes to protecting their wealth, they seem to like Switzerland more.
According to Swiss media reports, since Donald Trump’s re-election, requests from American citizens wishing to open a bank account in Switzerland have increased.
This is reportedly because Trump’s “aggressive policies” and unpredictable style are causing uncertainty within the population (and wealthy Americans as well) about the evolution of the US economy.
As a result, since Trump’s inauguration, billions of dollars are believed to have flowed from the United States into Switzerland.
Though most Swiss banks are not confirming this trend — due to their longstanding policy of ‘client confidentiality’ (formerly known as ‘secrecy’) — at least one has.
‘Worried’ Americans
“In recent months, we have seen increased demand and growing interest from US clients in wealth management services,” said Urs Fehr, a spokesperson for Vontobel bank.
Josh Matthews, co-founder of Zurich and Geneva-based wealth manager Maseco, compared the current trend to the 2008 financial crisis, when fears of bank failures were high.
“Today, it’s the geopolitical situation that worries wealthy Americans,” he noted.
“Many clients are acting out of fear,” said Pierre Gabris of the financial advisory firm Alpen Partners.
Those who are moving their assets to Swiss banks “are frankly worried about the future of their wealth.”
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Yes, but why Switzerland?
“US investors are interested in Swiss equities and the Swiss franc as a currency, not least because of Switzerland’s low national debt,” according to Fehr.
Rahul Sahgal, head of the Swiss-American Chamber of Commerce, also confirmed the increase in US clients.
Switzerland is popular among wealthy Americans due to its political stability and know-how, he said.”
“The Swiss simply know how banking works. We have systematically built up this knowledge over more than a century.”
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An obvious question here is: how can these rich Americans just transfer their money to Switzerland, with neither the US tax authorities nor Swiss banks batting an eye?
That’s a pertinent point because for US citizens living in Switzerland opening an account is a major headache.
“I’ve been ‘bank shopping’ here since I arrived eight months ago, but nobody wants to open an account for me once they find out I am American,” Terry, who is married to a French citizen and lives in the suburbs of Geneva, told The Local.
That’s because American law is very strict, especially in terms of foreign accounts.
For example, Swiss banks must report all American account holders to the US tax authorities.
The heavy-handed regulations are part of a wider US government effort to combat tax evasion.
The backlash has been building up since 2008, when Switzerland’s largest financial institution, UBS, helped wealthy Americans hide billions of dollars in undisclosed offshore accounts to evade taxes.
In the aftermath of this major scandal, the US government has created a myriad of requirements for other nations to follow to ensure that no foreign account belonging to an American goes untaxed by Uncle Sam.
The most important among them is the Foreign Account Tax Compliance Act (FATCA), which was passed by Congress in 2010 and went into effect on January 1st, 2014. It requires foreign banks to report to US tax authorities (IRS) all the assets that belong to US citizens – whether living in America or abroad.
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Mandatory compliance
Wealthy individuals (whether American, Swiss, or other nationals) are allowed to put their money in Switzerland, as long as the banks practice what they call ‘due diligence’.
This means that any amount over 10,000 francs must be justified by the client, to make sure the money doesn’t come from illicit sources or criminal activities.
Also, the bank must identify its clients, which means no ‘anonymous’ or ‘ numbered’ accounts are allowed.
Last but not least, they have to comply with US regulations by providing the US tax authority, the Internal Revenue Service (IRS), with their American clients’ financial information.
If they don’t, “an anonymised, aggregated report containing certain information is provided,” according to the Swiss Banking Association website.
“The IRS can use this aggregated report to seek disclosure of specific customer and account information, for example by means of a request for administrative assistance, if this is provided for under the double taxation agreement between Switzerland and the US.”
It is under all these conditions that wealthy Americans are able to transfer their money to Switzerland right now.
READ ALSO: Six Swiss bank myths that need to be busted
