On black money in Swiss banks,Indian Government has been dragging its feet by saying that Swiss banking laws do not allow information to be shared with others on the ground of ‘Client Confidentiality’.
This is absolute non sense.
The Indian Government is to have an agreement with the Swiss Government
If the person has not declared his Swiss account in his Country of origin,
If the Government can declare the person to have amassed wealth by Criminal means.
If the Government brings in a complaint to the Swiss Government and the concerned bank,
then the Bank on receiving the deposit if it is being made after the complaint may notify the Swiss Government to arrest the person when he comes to Switzerland for claiming the amount.
If he refuses to come, then the bank may freeze his assets.
( in case the criminal act for which the person/information is being sought is not punishable under Swiss law, one needs to book the offender under an appropriate offence that would meet with Swiss Law-some times you have to tweak the law to get Justice)
What is needed is the Political will.
Now to the laws on Swiss Banking System.
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The Swiss banker’s requirement of client confidentiality is found in Article 47 of the Federal Law on Banks and Savings Banks, which came into effect on November 8, 1934. The article stipulates that “anyone acting in his/her capacity as member of a banking body, as a bank employee, agent, liquidator or auditor, as an observer of the Swiss Federal Banking Commission (SFBC), or as a member of a body or an employee belonging to an accredited auditing institution, is not permitted to divulge information entrusted to him/her or of which he/she has been apprised because of his/her position.”
Exceptions
In order to sidestep this law, there must be a substantial criminal allegation before a governmental agency, especially a foreign one, can gain access to account information. Tax evasion, for example, is considered a misdemeanor in Switzerland rather than a crime.
According to the Swiss Bankers’ Association Web site, however, there is also a duty for bankers to provide information under the following circumstances:
- Civil proceedings (such as inheritance or divorce)
- Debt recovery and bankruptcies
- Criminal proceedings (money laundering, association with a criminal organization, theft, tax fraud, blackmail, etc.)
- International mutual legal assistance proceedings (explained below)
International mutual assistance in criminal matters
Switzerland is required to assist the authorities of foreign states in criminal matters as a result of the 1983 federal law relating to International Mutual Assistance in Criminal Matters. Assets can be frozen and handed over to the foreign authorities concerned. Assistance in criminal matters follows the principles of dual criminality, specialty and proportionality.
Dual criminality means that Swiss courts don’t lift the requirement of bank/client confidentiality unless the act being investigated by the court is punishable under the law in both Switzerland and the country requesting the information. The specialty rule means that information obtained through the arrangement can only be used for the criminal proceedings for which the assistance is provided. The proportionality rule means the measures taken in conducting the request for assistance must be proportionate to the crime.
International mutual assistance in administrative matters
Under these proceedings, the Swiss Federal Banking Commission (SFBC) may communicate information only to the supervisory authorities in foreign countries subject to three statutory conditions:
- The information given can’t be used for anything other than the direct supervision of the banks or financial intermediaries who are officially authorized and can’t be passed on to tax authorities.
- The requesting foreign authority must itself be bound by official or professional confidentiality and be the intended recipient of the information.
- The requesting authority may not give information to other authorities or to other public supervisory bodies without the prior agreement of the SFBC or without the general authorization of an international treaty. Information can’t be given to criminal authorities in foreign countries if there are no arrangements regarding mutual legal assistance in criminal matters between the states involved.
Taxation
Swiss residents pay 35 percent tax on the interest or dividends their Swiss bank accounts and investments earn. This money is namelessly turned in to the Swiss tax authorities.
For nonresidents of Switzerland there are no taxes levied on those earnings, unless:
Swiss Withholding Tax
There is a 35 percent Swiss withholding tax on interest and dividends paid out by Swiss companies. So, if you invest in a Swiss company such as Nestlé or Novartis, then 35 percent of any dividends will be withheld as a tax regardless of where you live. The same is true if you buy bonds issued by a Swiss company. If you’re a Swiss taxpayer (or if your country has a double taxation agreement with Switzerland) then you can claim the tax back. Double taxation is when income is taxed both in your home country, as well as the country in which the income is earned.
EU Withholding Tax
On July 1, 2005, the European Union Withholding Tax came into effect to prevent residents of EU member countries from avoiding paying tax on interest earned on money deposited in foreign banks with very strong banking secrecy laws. The EU goal had been for all countries to disclose interest earnings to the home countries of their bank clients so that that money could be taxed. Several non-EU countries, Switzerland included, didn’t agree because it went against their banking privacy/secrecy laws. Now, bank clients who live in the European Union pay a withholding tax on the interest made by certain investments. This tax started at 15 percent and is gradually increasing to 35 percent by 2011. No exchange of information or taxes on capital or capital gains is levied.
Inheritance Tax
If you want to pass on your account to your family (and you’re not a Swiss resident) you’re in luck because there is no inheritance tax in Switzerland for nonresidents. Your heirs are responsible for declaring the holdings to their country’s tax authorities, however.
http://money.howstuffworks.com/personal-finance/banking/swiss-bank-account3.htm
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- We recognize the necessity for an exchange of information between reporting offices (Financial Intelligence Units, FIU), as Switzerland would otherwise face the threat of a suspension of its membership in the Egmont Group, which would lead to unnecessary international pressure and reputational damage.
- The exchange of information must, however, be conducted in adherence to strict guidelines. For example, the information can only be exchanged in the instance of a concrete case, but not amongst all group members or beyond a specific case.
- Furthermore, the information may not be passed on to other authorities in the respective country, nor may the normal administrative and legal assistance procedures be circumvented as a result thereof.
- The Swiss Bankers Association will closely examine the proposal and will provide a comprehensive statement of its position on the matter during the course of the consultation process.
http://www.swissbanking.org/en/stellungnahme-20120118
Money laundering is the covert introduction of illegally acquired assets into the legitimate economy with the aim of disguising their true illegal origin.
This may take place in three phases:
| Phase 1: placement |
| In this phase, the assets (primarily cash) are paid into banks and thus turned into bank money, or used to purchase assets that can be liquidated at short notice. |
| Phase 2: layering |
| The goal of this phase is to spread the money placed in phase 1. It often involves complex international transactions using, amongst other things, offshore banks and bogus companies. Another way to spread the money is via a myriad of confusing and seemingly unconnected transfers. |
| Phase 3: integration |
| The integration phase is when the assets are reintroduced into the legal economy, which may involve purchasing assets (e.g. real estate or precious metals) or shareholdings, etc. |
Money laundering is usually associated with drug trafficking or organised crime. However, there are many other crimes which may be predicate offences to money laundering, e.g. embezzlement, corruption, extortion or human trafficking, to name just a few.
What does Switzerland do to against money laundering?
Switzerland’s mechanisms for combating money laundering, which were established with the Agreement on Due Diligence (CDB) in 1977 and have been expanding ever since, today include provisions in the Swiss Penal Code (Art. 305bis and 305ter StGB), the Federal Act on Combating Money Laundering and Terrorist Financing in the Financial Sector (AMLA) and a corresponding Ordinance of the Swiss Financial Market Supervisory Authority (FINMA) on the Prevention of Money Laundering and Terrorist Financing (FINMA Anti-Money Laundering Ordinance, AMLO-FINMA).
Swiss law is therefore broadly in compliance with the international recommendations of the Financial Action Task Force (FATF). The FATF report on the third country evaluation of April 2005 attested that Switzerland has a well functioning network of preventative measures against money laundering and terrorist financing. However, the Federal Department of Finance (FDF) did look into the implementation of individual criticisms that FATF experts had levelled at Switzerland’s anti-money laundering mechanisms. The resulting revised Anti-Money Laundering Act came into force, after the referendum period had expired unused, on 1 February 2009. The Anti-Money Laundering Ordinance was subsequently also revised, with the updated version entering into force on 1 January 2011.
The Agreement on Due Diligence (CDB), which is issued by the Swiss Bankers Association (SBA) as a set of self-regulation guidelines and is revised and updated every five years, has since 1977 laid down the obligations of banks with regard to the identification of clients and beneficial owners. It prohibits active assistance in the flight of capital and tax evasion. The statutory bank auditors are commissioned by the banks and FINMA to verify bank compliance with this Agreement. Special investigators and a CDB Supervisory Board assess breaches of the Agreement, and offences are punishable by fines of up to CHF 10 million.
Related articles
- Swiss banking secrecy: Don’t ask, won’t tell (economist.com)
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