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Bank Secrecy and its limits 

 

 

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 divilges 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 centre 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 upto CHF 30'000 or both.
 

 

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); 
Bankruptcy proceedings; 
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]



Tax Avoidance - Tax Evasion - Tax Fraud

In switzerland, in case of mere tax evasion, just avoiding taxes on their part of personal income/assets cannot be considered as crime, and banks are not obligated to release the customer identity to tax authorities or any third parties as the swiss consider this as their own internal matters. However, the situation is different in case of 'tax fraud' considered as criminal offence in switzerland. Ex. false accounting, false invoices. Inorder to get legal assistance in switzerland, for lifting of bank secrecy, the foreign authorities must have a favourable evidence to address a foreign tax payer liable for criminal offense. 

Tax avoidance occurs when a taxpayer uses legal means to reduce or avoid the payment of taxes.

Tax evasion is when a taxpayer fails to declare income or assets which therefore cannot be taxed; this is a violation of the law. In this manner a tax is avoided when a tax assessment cannot be performed even though it should, or when a tax assessment is performed incompletely. Swiss banks, as third parties, have no obligation to supply information directly to the tax authorities.

Tax fraud is the most serious case, as the taxpayer uses ways and means to mislead the tax authorities, such as presenting falsified evidence, forged or incorrect records such as account books, profit and loss statements, balance sheets, income statements or any other documentary evidence. Fiscal fraud is similar to fraud or forgery. Tax fraud is subject to criminal prosecution and punishable by imprisonment and /or a fine. In the case of tax fraud, the bank is obliged to inform the investigating authorities and, where necessary, may be called to testify.

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.
 

 

 

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