Banking in Switzerland dates to the early 18th century through

Switzerland Switzerland, officially the Swiss Confederation, is a landlocked country located in west-central Europe. It is bordered by Italy to the south, France to the west, Germany to the north, and Austria and Liechtenstein to the east. Switzerland ...

's merchant trade and over the centuries has grown into a complex and regulated international industry. Banking is seen as very emblematic of Switzerland and the country has been one of the largest, if not largest, offshore financial centers and

tax haven A tax haven is a term, often used pejoratively, to describe a place with very low tax rates for Domicile (law), non-domiciled investors, even if the official rates may be higher. In some older definitions, a tax haven also offers Bank secrecy, ...

s in the world since the mid-20th century, with a long history of banking secrecy, security and client confidentiality reaching back to the early 1700s. Starting as a way to protect wealthy European banking interests, Swiss banking secrecy was codified in 1934 with the passage of a landmark federal law, the Federal Act on Banks and Savings Banks. These laws were used to protect assets of persons being persecuted by Nazi authorities but have also been used by people and institutions seeking to illegally evade taxes, hide assets, or to commit other

financial crime Financial crime is crime committed against property, involving the unlawful conversion of the ownership of property (belonging to one person) to one's own personal use and benefit. Financial crimes may involve fraud (cheque fraud, credit card f ...

. Controversial protection of foreign accounts and assets during

World War II World War II or the Second World War (1 September 1939 – 2 September 1945) was a World war, global conflict between two coalitions: the Allies of World War II, Allies and the Axis powers. World War II by country, Nearly all of the wo ...

sparked a series of proposed financial regulations seeking to limit bank secrecy, but with little resulting action. Despite various international efforts to roll back banking secrecy laws in the country which were largely minimized or reverted by Swiss social and political forces, in 2017 Switzerland agreed to "automatic exchange of information" (AEOI) with foreign governments and their revenue services regarding information of depositors not resident in Switzerland. This constituted ''de facto'' the end of Swiss banking secrecy for depositors who were not Swiss residents. Furthermore, after Switzerland ratified the

Foreign Account Tax Compliance Act The Foreign Account Tax Compliance Act (FATCA) is a 2010 U.S. federal law requiring all non-U.S. foreign financial institutions (FFIs) to search their records for customers with indicia of a connection to the U.S., including indications in r ...

agreement with the United States, because of concerns regarding their tax liability (the U.S. taxes its citizens regardless of whether they are resident in the U.S. or not) some Swiss banks have gone so far as to close accounts held by US citizens, and to ban the opening of new accounts by US citizens and by dual US-Swiss citizens, including those deemed lawful permanent Swiss residents. Thus banking secrecy remains in force only for those residing in and solely taxable in Switzerland. Disclosing client information has been considered by Switzerland a criminal offence since the early 1900s. Employees working in Switzerland and at Swiss banks abroad have "long adhered to an unwritten code similar to that observed by doctors or priests". Since 1934 Swiss banking secrecy laws have been violated to a major extent by only four people, namely: Christoph Meili (1997), Bradley Birkenfeld (2007), Rudolf Elmer (2011) and Hervé Falciani (2014). The Swiss Bankers Association (SBA) estimated in 2018 that Swiss banks held

US$ The United States dollar (Currency symbol, symbol: Dollar sign, $; ISO 4217, currency code: USD) is the official currency of the United States and International use of the U.S. dollar, several other countries. The Coinage Act of 1792 introdu ...

6.5 trillion in assets or 25% of all global cross-border assets. Switzerland's main lingual hubs,

Geneva Geneva ( , ; ) ; ; . is the List of cities in Switzerland, second-most populous city in Switzerland and the most populous in French-speaking Romandy. Situated in the southwest of the country, where the Rhône exits Lake Geneva, it is the ca ...

(for French),

Lugano Lugano ( , , ; ) is a city and municipality within the Lugano District in the canton of Ticino, Switzerland. It is the largest city in both Ticino and the Italian-speaking region of southern Switzerland. Lugano has a population () of , and an u ...

(for Italian), and

Zürich Zurich (; ) is the list of cities in Switzerland, largest city in Switzerland and the capital of the canton of Zurich. It is in north-central Switzerland, at the northwestern tip of Lake Zurich. , the municipality had 448,664 inhabitants. The ...

(for German) service the different geographical markets. It currently ranks number two behind the United States and on par with

Singapore Singapore, officially the Republic of Singapore, is an island country and city-state in Southeast Asia. The country's territory comprises one main island, 63 satellite islands and islets, and one outlying islet. It is about one degree ...

in the Financial Secrecy Index. The banks are regulated by the Swiss Financial Market Supervisory Authority (FINMA) and the Swiss National Bank (SNB) which derives its authority from a series of federal statutes. Banking in Switzerland has historically played, and still continues to play, a dominant role in the Swiss economy and society. According to the Organization for Economic Cooperation and Development (OECD), total banking assets amount to 467% of total gross domestic product. Financial Secrecy Index: Narrative Report on Switzerland (2018), p. 2 Banking in Switzerland has been portrayed, with varying degrees of accuracy, in overall popular culture and television shows. In 2023 Switzerland lost a lot of credibility as a banking centre after the collapse of

Credit Suisse Credit Suisse Group AG (, ) was a global Investment banking, investment bank and financial services firm founded and based in Switzerland. According to UBS, eventually Credit Suisse was to be fully integrated into UBS. While the integration ...

, one of the largest Swiss banks, subsequently acquired by its Swiss competitor UBS, and due to the way the affair was handled by the Swiss National Bank.

History

Bank secrecy Banking secrecy, alternatively known as financial privacy, banking discretion, or bank safety,Guex (2000), p. 240 is a Non-disclosure agreement, conditional agreement between a bank and its clients that all foregoing activities remain secure, Con ...

in the Swiss region can be traced to the Great Council of Geneva, which outlawed the disclosure of information about the European upper class in 1713. During the 1780s, Swiss bank accounts began insuring deposits, which contributed to their reputation for financial security. In 1815, the

Congress of Vienna The Congress of Vienna of 1814–1815 was a series of international diplomatic meetings to discuss and agree upon a possible new layout of the European political and constitutional order after the downfall of the French Emperor Napoleon, Napol ...

formally established Switzerland's international neutrality, which led to a large capital influx. The wealthy, landlocked Switzerland saw banking secrecy as a way to build an empire similar to that of

France France, officially the French Republic, is a country located primarily in Western Europe. Overseas France, Its overseas regions and territories include French Guiana in South America, Saint Pierre and Miquelon in the Atlantic Ocean#North Atlan ...

Spain Spain, or the Kingdom of Spain, is a country in Southern Europe, Southern and Western Europe with territories in North Africa. Featuring the Punta de Tarifa, southernmost point of continental Europe, it is the largest country in Southern Eur ...

, and

the United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...

. Swiss historian Sébastian Guex notes in ''The Origins of Secret Swiss Bank Accounts'': After a small scale civil war in the 1840s between the Swiss cantons, the Swiss Federation was founded in 1848. The formation of the state, through a

direct democracy Direct democracy or pure democracy is a form of democracy in which the Election#Electorate, electorate directly decides on policy initiatives, without legislator, elected representatives as proxies, as opposed to the representative democracy m ...

, contributed to the political stability needed for banking secrecy. The mountainous terrain of Switzerland provided a natural environment in which to excavate underground vaults for storage of gold and diamonds. In the 1910s, during

World War I World War I or the First World War (28 July 1914 – 11 November 1918), also known as the Great War, was a World war, global conflict between two coalitions: the Allies of World War I, Allies (or Entente) and the Central Powers. Fighting to ...

, Swiss bankers traveled to France to advertise the country's banking secrecy. According to Sébastien Guex, the banks printed "brochures, circulars, personalised letters, and advertising in newspapers, and sent representatives who approached their clientele in person". The war's contribution to political and economic instability sparked a rapid capital movement into Switzerland. As France and Germany introduced progressive income and inheritance taxes for the first time, taxing greater wealth at higher rates to finance the war, wealthy clients moved their holdings into Swiss accounts to avoid taxation. The French banked in Geneva, the Italians in

, and the Germans in

. The Federal Act on Banks and Savings Banks, colloquially known as the Banking Law of 1934, made the violation of banking secrecy a federal criminal offence. That major step beyond the prior enforcement of banking secrecy under civil law resulted from several developments of the early 1930s, including the introduction in the same legislation of an embryonic form of banking supervision, which Swiss bankers argued could endanger secrecy; evolving jurisprudence of the Federal Supreme Court; and a 1932 campaign against tax evasion in France led by Édouard Herriot's government, following a financial scandal that erupted in France in that year, involving thousands of wealthy French citizens and the Commercial Bank of Basel (Banque commerciale de Bâle–BCB). In a hotel apartment in Paris, the police discovered that the director and other officials of the aforementioned Swiss bank were providing information to important members of the French financial elite on how to transfer their money to Switzerland, in order to obtain untaxed returns. Alleged wealthy French tax evaders included military generals and

Catholic bishops In the Catholic Church, a bishop is an Holy orders in the Catholic Church, ordained Minister (Catholic Church), minister who holds the fullness of the Sacraments of the Catholic Church, sacrament of holy orders and is responsible for teachin ...

. An additional provision, Article 47(b), was drafted before its ratification to protect Jewish assets from the Nazi party. Landscape Arnisee-region

During

, Switzerland remained diplomatically neutral but its economy and financial system served the

Axis powers The Axis powers, originally called the Rome–Berlin Axis and also Rome–Berlin–Tokyo Axis, was the military coalition which initiated World War II and fought against the Allies of World War II, Allies. Its principal members were Nazi Ge ...

by storing gold and cash balances in underground vaults, buying gold from the Nazi German state, and lending to both Germany and Italy, thus supporting their aggressive endeavors.

Adolf Hitler Adolf Hitler (20 April 1889 – 30 April 1945) was an Austrian-born German politician who was the dictator of Nazi Germany from 1933 until Death of Adolf Hitler, his suicide in 1945. Adolf Hitler's rise to power, He rose to power as the lea ...

maintained an account at the Union Bank of Switzerland (UBS) estimated at . After the United States formally asked the bank to transfer the money in the 1990s, UBS wired

400 to 700 million worth of Reichsmarks to U.S. authorities. Banking regulations in Switzerland limit the amount of orphaned assets allowed to leave a bank's custody. UBS, with consent from the Swiss government, froze the account containing Hitler's assets indefinitely, and clipped the Reichsmarks, stripping the currency of value. During

, UBS also maintained accounts for hundreds of

German Jewish The history of the Jews in Germany goes back at least to the year 321 CE, and continued through the Early Middle Ages (5th to 10th centuries CE) and High Middle Ages (c. 1000–1299 CE) when Jewish immigrants founded the Ashkenazi Jewish commu ...

businesspeople and households. After the Banking Law of 1934 was passed, the bank aggressively protected assets of the " enemies of Nazi Germany". When Hitler announced an (aborted) invasion of Switzerland in 1940, UBS contracted the Swiss Armed Forces to blockade their retail banks and transport Jewish assets to underground military bunkers. The

Swiss Bank Corporation Swiss Bank Corporation (French language, French: ''Société de banque suisse''; German language, German: ''Schweizerischer Bankverein'') was a Swiss Investment banking, investment bank and financial services company located in Switzerland. Prio ...

(SBC) and

, did likewise.

World War II and beyond

After the end of

, Switzerland and its financial system benefited greatly from having remained unharmed while all the neighbouring economies were devastated, but had to face the reputational damage from its support to the Axis powers, which also led to threats to banking secrecy as the Allied victors sought to expropriate Nazi assets held under Swiss custody. By and large, the Swiss banking sector was able to successfully deflect the threat to its secrecy practices, not least as it supported France and the United Kingdom with significant lending. When British politician George Brown blamed " gnomes of Zurich" for a weak pound sterling in 1964, Swiss bankers began using the title as proof of their financial skill and adherence to secrecy. Throughout the 1980s and 1990s, numerous international proposals for bank secrecy rollbacks were made by foreign states with little success. Telldenkmal

After the

2008 financial crisis The 2008 financial crisis, also known as the global financial crisis (GFC), was a major worldwide financial crisis centered in the United States. The causes of the 2008 crisis included excessive speculation on housing values by both homeowners ...

, Switzerland signed the European Union Savings Directive (EUSD) which obliges Swiss banks to report to 43 European countries non-identifying annual tax statistics. Financial Secrecy Index: Narrative Report on Switzerland (2018), p. 5 On December 3, 2008, the Federal Assembly increased the prison sentence for violations of banking secrecy from a maximum of six months to five years. In late 2008, after an international, multi-state investigation into Switzerland's role in U.S. tax evasion, UBS entered into a limited, deferred prosecution agreement (DPA) with the U.S. Department of Justice. Financial Secrecy Index: Narrative Report on Switzerland (2018), p. 4 The agreement initiated the landmark Birkenfeld Disclosure of information on more than 4,000 clients. In November 2013, the Zürcher Kantonalbank was classified as a systemically important bank in Switzerland by order of the Swiss National Bank (SNB), alongside UBS,

, Raiffeisen (Switzerland) and PostFinance, and must meet stricter capital requirements and prepare contingency plans for times of crisis. In another step toward loosening banking secrecy, Switzerland signed the U.S.

(FATCA), after rejecting it twice in parliament. The FATCA requires Swiss banks to disclose non-identifying U.S. client information annually to the

Internal Revenue Service The Internal Revenue Service (IRS) is the revenue service for the Federal government of the United States, United States federal government, which is responsible for collecting Taxation in the United States, U.S. federal taxes and administerin ...

. The agreement does not guarantee the semi-automatic information transfers, which remain at the discretion of Swiss government authorities. If a client does not consent to having their information shared with the IRS, Swiss law prohibits the disclosure. If a client does consent, Swiss banks send the IRS tax-related information about the account holder but are prohibited from disclosing identities pursuant to Article 47 of the Banking Law of 1934. The 2018 Financial Secrecy Index stated: "this oesnot mean that Swiss banking secrecy was finished, as some excitable news reports suggest... the breach was a partial ent.Financial Secrecy Index: Narrative Report on Switzerland (2018), p. 4 In March 2015, the Swiss government entered into bilateral "Rubik Agreements" with Germany, Austria, and the United Kingdom allowing foreign holders of Swiss bank accounts to retain their anonymity in exchange for paying predetermined back taxes. Switzerland adopted the International Convention on the Automatic Exchange of Banking Information ( AEOI) in 2017, agreeing to automatically release limited financial information to certain countries for the sole purpose of tax auditing. This agreement includes the

Common Reporting Standard The Common Reporting Standard (CRS) is an information standard for the Automatic Exchange Of Information (AEOI) regarding financial accounts on a global level, between tax authorities, which the Organisation for Economic Co-operation and Develo ...

(CRS) which obliges Swiss banks to automatically send foreign tax authorities the client's name, address, domicile, tax number, date of birth, account number, account balance at years end, and the gross investment income. The CRS does not, however, override the Swiss Banking Law of 1934, so the client's expenses (withdrawals) and investments are not disclosed. Thus tax authorities cannot "go fishing" for tax evaders, they must directly link a financial crime to the client's account. The disclosed information can ''only'' be used for tax auditing and Swiss authorities may prevent disclosure. In December 2017, the Swiss parliament launched a standing initiative and expressed an interest in formally embedding banking secrecy within the Swiss Constitution, making it a federally-protected

constitutional right A constitutional right can be a prerogative or a duty, a power or a restraint of power, recognized and established by a sovereign state or union of states. Constitutional rights may be expressly stipulated in a national constitution, or they may ...

. In January 2018, a U.S. district court ruled that Swiss bankers "

ave is a Latin word, used by the Roman Empire, Romans as a salutation (greeting), salutation and greeting, meaning 'wikt:hail, hail'. It is the singular imperative mood, imperative form of the verb , which meant 'Well-being, to be well'; thus on ...

nothing to do with the choice that an American taxpayer makes to not declare offshore assets", later clarifying they should not be seen as facilitating tax evasion but rather provide a legal service that is made illegal by the client. The Swiss Justice Ministry announced in March 2018 that disclosure of client information in a pending court case involving a Swiss bank is subject to federal

espionage Espionage, spying, or intelligence gathering, as a subfield of the intelligence field, is the act of obtaining secret or confidential information ( intelligence). A person who commits espionage on a mission-specific contract is called an ...

and

extortion Extortion is the practice of obtaining benefit (e.g., money or goods) through coercion. In most jurisdictions it is likely to constitute a criminal offence. Robbery is the simplest and most common form of extortion, although making unfounded ...

charges in addition to charges relating to banking secrecy laws. In 2023, Switzerland lost credibility as a banking system after the collapse of

, acquired by the Swiss competitor UBS, and the way the affair was handled by the Swiss National Bank.

Banking and the Swiss economy

Switzerland is a prosperous nation with a per capita gross domestic product higher than that of most Western European nations. The value of the

Swiss franc The Swiss franc, or simply the franc, is the currency and legal tender of Switzerland and Liechtenstein. It is also legal tender in the Italian exclave of Campione d'Italia which is surrounded by Swiss territory. The Swiss National Bank (SNB) iss ...

(CHF) has been relatively stable compared with that of many others. Swiss neutrality and

national sovereignty A nation state, or nation-state, is a political entity in which the state (a centralized political organization ruling over a population within a territory) and the nation (a community based on a common identity) are (broadly or ideally) co ...

, long recognized by foreign nations, have fostered a stable environment for the banking sector to develop and thrive. Switzerland maintained neutrality through both

World War A world war is an international War, conflict that involves most or all of the world's major powers. Conventionally, the term is reserved for two major international conflicts that occurred during the first half of the 20th century, World War I ...

s, is not a member of the

European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are Geography of the European Union, located primarily in Europe. The u ...

NATO The North Atlantic Treaty Organization (NATO ; , OTAN), also called the North Atlantic Alliance, is an intergovernmental organization, intergovernmental Transnationalism, transnational military alliance of 32 Member states of NATO, member s ...

, and did not join the

United Nations The United Nations (UN) is the Earth, global intergovernmental organization established by the signing of the Charter of the United Nations, UN Charter on 26 June 1945 with the stated purpose of maintaining international peace and internationa ...

until 2002. The Bank of International Settlements (BIS), an organization that facilitates cooperation among the world's

central bank A central bank, reserve bank, national bank, or monetary authority is an institution that manages the monetary policy of a country or monetary union. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the mo ...

s, is headquartered in

Basel Basel ( ; ), also known as Basle ( ), ; ; ; . is a city in northwestern Switzerland on the river Rhine (at the transition from the High Rhine, High to the Upper Rhine). Basel is Switzerland's List of cities in Switzerland, third-most-populo ...

. Founded in 1930, the BIS chose to locate in Switzerland because of the country's neutrality, which was important to the organization founded by countries that had been enemies in World War I. Banking has played a dominant role in the Swiss economy for two centuries. According to the Organization for Economic Co-operation and Development (OECD), total banking assets amount to 467% of total gross domestic product. Swiss banks managed $2.4 trillion (CHF2.1 trillion) of assets belonging to wealthy foreigners in 2022, more than any other country and before Hong Kong ($2.2T) or Singapore ($1.5T) who are ranked 2nd and 3rd respectively, according to the study conducted by the

Boston Consulting Group Boston Consulting Group, Inc. (BCG) is an American global management consulting firm founded in 1963 and headquartered in Boston, Massachusetts. It is one of the "Big Three (management consultancies), Big Three" (or MBB, the world's three large ...

Origin of funds

Most of the wealth from overseas in Switzerland originates in

Germany Germany, officially the Federal Republic of Germany, is a country in Central Europe. It lies between the Baltic Sea and the North Sea to the north and the Alps to the south. Its sixteen States of Germany, constituent states have a total popu ...

and

Saudi Arabia Saudi Arabia, officially the Kingdom of Saudi Arabia (KSA), is a country in West Asia. Located in the centre of the Middle East, it covers the bulk of the Arabian Peninsula and has a land area of about , making it the List of Asian countries ...

(2018). According to the Swiss Bankers Association in 2022, the amount held by Russian clients in Swiss banks is between CHF150 and CHF200 billion ($160 and $214 billion).

Regulation

The Swiss Financial Market Supervisory Authority (FINMA) is a public law institution that supervises most banking-related activities as well as

securities market Security market is a component of the wider financial market where securities can be bought and sold between subjects of the economy, on the basis of demand and supply. Security markets encompasses stock markets, bond markets and derivatives ma ...

s and

investment fund An investment fund is a way of investment, investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage. These ad ...

s. Regulatory authority is derived from the Swiss Financial Market Supervision Act (FINMASA) and Article 98 of the Swiss Federal Constitution. The office of the Swiss Banking

Ombudsman An ombudsman ( , also ) is a government employee who investigates and tries to resolve complaints, usually through recommendations (binding or not) or mediation. They are usually appointed by the government or by parliament (often with a sign ...

, founded in 1993, is sponsored by the Swiss Banking Ombudsman Foundation, which was established by the Swiss Bankers Association. The ombudsman's services, which are offered free of charge, include

mediation Mediation is a structured, voluntary process for resolving disputes, facilitated by a neutral third party known as the mediator. It is a structured, interactive process where an independent third party, the mediator, assists disputing parties ...

and assistance to persons searching for dormant assets. The ombudsman handles about 1,500 complaints raised against banks yearly. Generally speaking, lawyers will not work against the banks and regulators are "too weak" to act in case of a problem, according to the ''

Financial Times The ''Financial Times'' (''FT'') is a British daily newspaper printed in broadsheet and also published digitally that focuses on business and economic Current affairs (news format), current affairs. Based in London, the paper is owned by a Jap ...

'' of London.

Automatic exchange of tax information

In February 2013, the

Swiss Federal Council The Federal Council is the federal cabinet of the Swiss Confederation. Its seven members also serve as the collective head of state and government of Switzerland. Since World War II, the Federal Council is by convention a permanent grand co ...

allowed the signing of the

(FATCA) with the US. These agreements force all Swiss banks to inform the

of undeclared, offshore accounts. These new regulations are applicable from 2014, and in turn assure Swiss banks of continued operations within the US. In July 2019, the

US Senate The United States Senate is a chamber of the bicameral United States Congress; it is the upper house, with the U.S. House of Representatives being the lower house. Together, the Senate and House have the authority under Article One of the ...

approved the Double Taxation Treaty (DTA) with Switzerland, which had already been accepted by the Swiss parliament in 2010. The new agreement, applicable to accounts from September 23, 1999, onward, amends the tax treaty of 1996 and regulates requests for information on financial accounts by US authorities, as well as exemptions for retirement savings by US persons. Starting in 2019, Switzerland began to share (with the country of origin or residence) the details of 3.1 million bank accounts held by foreigners, as part of the agreed automatic exchange of information. Swiss banks, insurance companies and trusts have a legal obligation to comply but charitable Swiss foundations are so far exempt. As of 2019, Switzerland received financial data from 75 countries and shared data with 63 (over 100 countries starting in 2023) representing 3.6 million accounts as of 2023. Around 9000 banks, insurers, trusts and other financial institutions in Switzerland provide this information to the Swiss authorities.

Loopholes

Swiss banks are obliged to reject or terminate business relationships if there are doubts about the real identity of the owner of the account. Swiss banks have a legal obligation to record the ultimate

beneficial owner Beneficial may refer to: Organizations * Beneficial Corporation, a consumer finance company founded in 1914 that was ultimately bought by HSBC Corporation ** Beneficial Loan Society, the former name of Beneficial Corporation ** Beneficial Finance, ...

s of all assets they handle worldwide, but doing so accurately can be tricky in jurisdictions where it is easy for third parties to mask who the owners are. Thus, loopholes exist through the use of shell companies, trust funds, and proxy directors signing the paperwork without owning the assets. Similarly, the use of a " straw man" or a family member is a way also to hide the true beneficial ownership in some cases. Loopholes exist also with people with multiple nationalities who only declare one citizenship to the authorities for the purpose of tax reporting. Another loophole consists (for US citizens) in setting up shell companies abroad and registering them with the

IRS The Internal Revenue Service (IRS) is the revenue service for the Federal government of the United States, United States federal government, which is responsible for collecting Taxation in the United States, U.S. federal taxes and administerin ...

as "offshore financial institutions". The IRS issues the entities unique Global Intermediary Identification Numbers, or GIINs, which relieve the banks of FATCA's requirement to investigate whether they're held by Americans. This loophole was allegedly used by billionaire Robert Brockman to avoid taxation. The banking systems of Switzerland and

Liechtenstein Liechtenstein (, ; ; ), officially the Principality of Liechtenstein ( ), is a Landlocked country#Doubly landlocked, doubly landlocked Swiss Standard German, German-speaking microstate in the Central European Alps, between Austria in the east ...

have close ties. Liechtenstein's trust companies are clients of Swiss banks. Liechtenstein does not require trust companies to identify people with signatory powers, and does not prosecute

tax evasion Tax evasion or tax fraud is an illegal attempt to defeat the imposition of taxes by individuals, corporations, trusts, and others. Tax evasion often entails the deliberate misrepresentation of the taxpayer's affairs to the tax authorities to red ...

tax fraud Tax evasion or tax fraud is an illegal attempt to defeat the imposition of taxes by individuals, corporations, trust (property), trusts, and others. Tax evasion often entails the deliberate misrepresentation of the taxpayer's affairs to the tax au ...

(2000). To improve the tracking down and freezing of assets, Swiss NGO Public Eye has called for a national task force, a register of the

s of front companies and a reporting obligation for lawyers. The Tax Justice Network and FATF made similar recommendations in 2018, including breaking up the

Big Four accounting firms The Big Four are the four largest professional services networks in the world: Deloitte, Ernst & Young, EY, KPMG, and PwC. They are the four largest global accounting networks as measured by revenue. The four are often grouped because they ar ...

. As of 2022, the Swiss government is following up on some of those recommendations. In addition,

Transparency International Transparency International e.V. (TI) is a German registered association founded in 1993 by former employees of the World Bank. Based in Berlin, its nonprofit and non-governmental purpose is to take action to combat global corruption with civil s ...

is demanding that lawyers, financial advisors plus real estate and art transactions be subject to the same exacting anti-money laundering measures as banks.

Enabling industry

The "enabling industry" refers to lawyers, fiduciaries, notaries, and real estate agents who assist criminals in investing or hiding their ill-gotten wealth. Their activity is not covered by the Swiss Anti-Money Laundering Act as long as they are only advising clients to place money in a particular financial institution or country. Furthermore, lawyers in Switzerland can refuse to disclose almost anything to the authorities about their clients. Under the Swiss Anti-Money Laundering Act, banks must report suspicious clients and transactions to the authorities. Lawyers and other advisors have no such obligation if they simply create trusts and other constructs rather than handle assets. According to the Money Laundering Reporting Office Switzerland in 2017, official " suspicious activity reports" reached nearly 4,700 (worth $16.2 billion) up from 2,909 reported cases in 2016. The Swiss Financial Services Act of 2020 (FinSA) requires

financial adviser A financial adviser or financial advisor is a professional who provides financial services to clients based on their financial situation. In many countries, financial advisors must complete specific training and be registered with a regulatory ...

s to obtain a licence (950 firms advising on nearly $200 billion have been approved by FINMA). The law also requires any "retrocession" paid by the bank to the advisor to be disclosed publicly.

Assets seizure

Under current rules, banking institutions and cantonal authorities can only report what is in their registers; looking into the origins of assets or connections between individuals is not permitted. For example, in 2022, a Russian oligarch reportedly handed his Swiss company over to his wife to avoid the sanctions against Russia. Swiss authorities can ''freeze'' assets if the law requires them to. However, ''seizing'' assets is only permitted in cases involving crime or for destituted potentates. At least a dozen destitute autocrats have had their assets frozen or seized by the Swiss government over the years. The amounts can be counted in billions of dollars. According to the Swiss media, some of the amounts have not yet been restituted to the people of the countries of origin to whom it properly belongs.

Protections

Breaches of banking secrecy laws in Switzerland are automatically processed pursuant to Article 47 of the Banking Law of 1934: those who disclose client information are subject to a maximum of five years'

imprisonment Imprisonment or incarceration is the restraint of a person's liberty for any cause whatsoever, whether by authority of the government, or by a person acting without such authority. In the latter case it is considered " false imprisonment". Impri ...

and 250,000

francs The franc is any of various units of currency. One franc is typically divided into 100 centimes. The name is said to derive from the Latin inscription ''francorum rex'' ( King of the Franks) used on early French coins and until the 18th centur ...

( €215,000 or

250,000) in fines.

Whistleblower Whistleblowing (also whistle-blowing or whistle blowing) is the activity of a person, often an employee, revealing information about activity within a private or public organization that is deemed illegal, immoral, illicit, unsafe, unethical or ...

s and leakers of client information often face hostility from the public and sustain professional setbacks. Denounced as a criminal in Switzerland, a federal

arrest warrant An arrest warrant is a warrant issued by a judge or magistrate on behalf of the state which authorizes the arrest and detention of an individual or the search and seizure of an individual's property. Canada Arrest warrants are issued by a jud ...

has been in place for Bradley Birkenfeld since 2008, after he disclosed UBS client information to the U.S.

in 2007. After the

, the Swiss Parliament initiated a series of international

tax treaties A tax treaty, also called double tax agreement (DTA) or double tax avoidance agreement (DTAA), is an agreement between two countries to avoid or mitigate double taxation. Such treaties may cover a range of taxes including income taxes, inheritance ...

that rolled back banking secrecy protections for foreign clients in response to pressure from the

, United States, and

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...

Major banks

, there are more than 400 securities dealers and banking institutions in Switzerland, ranging from the "Two Big Banks" down to small banks serving the needs of a single community or a few special clients. The largest and second largest Swiss banks are UBS Group AG and Credit Suisse Group AG, respectively. They account for over 50% of all deposits in Switzerland; each has extensive branch networks throughout the country and most international centers. Due to their size and complexity, UBS and Credit Suisse are subject to an extra degree of supervision from the Federal Banking Commission. only one in five Swiss people banks with either UBS or Credit Suisse, but most Swiss prefer one or the other. Credit Suisse was historically the bank of

Protestant Protestantism is a branch of Christianity that emphasizes Justification (theology), justification of sinners Sola fide, through faith alone, the teaching that Salvation in Christianity, salvation comes by unmerited Grace in Christianity, divin ...

Zürich; UBS originated in

Catholic The Catholic Church (), also known as the Roman Catholic Church, is the List of Christian denominations by number of members, largest Christian church, with 1.27 to 1.41 billion baptized Catholics Catholic Church by country, worldwid ...

Basel, near France.

Swiss National Bank

The Swiss National Bank (SNB) serves as the country's

. Founded by the Federal Act on the Swiss National Bank (16 January 1906), it began conducting business on 20 June 1907. Its shares are publicly traded, and are held by the

cantons A canton is a type of administrative division of a country. In general, cantons are relatively small in terms of area and population when compared with other administrative divisions such as counties, departments, or provinces. Internationally, th ...

, cantonal banks, and individual investors; the federal government does not hold any shares. Although a central bank often has regulatory authority over the country's banking system, the SNB does not; regulation is solely the role of the Federal Banking Commission. Raiffeisen Banks "assumes the role of central bank" in providing treasury services, and is the third largest group consisting of 328 banks in 2011, 390 in 2012 with 1,155 branches. According to the bank in 2012 non-U.S. businesses of Wegelin & Co, the oldest Swiss bank, would be bought by the Raiffeisen group. The group has 3 million plus clients within Switzerland.

UBS

UBS Group AG came into existence in June 1998, when Union Bank of Switzerland, founded in 1862, and

, founded in 1872,

merged Mergers and acquisitions (M&A) are business transactions in which the ownership of a company, business organization, or one of their operating units is transferred to or consolidated with another entity. They may happen through direct absorpt ...

. Headquartered in

and

, it is Switzerland's largest bank. It maintains seven main offices around the world (four in the

United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...

and one each in London, Tokyo, and Hong Kong) and branches on five continents. UBS has been at the center of various tax evasion investigations and other

criminal investigation Criminal investigation is an applied science that involves the study of facts that are then used to inform criminal trials. A complete criminal investigation can include Search and seizure, searching, interviews, interrogations, Evidence (law), ...

s since its founding. UBS was fined $100 million by the

Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of ...

in 2004 for trading in

dollar Dollar is the name of more than 25 currencies. The United States dollar, named after the international currency known as the Spanish dollar, was established in 1792 and is the first so named that still survives. Others include the Australian d ...

s with

Iran Iran, officially the Islamic Republic of Iran (IRI) and also known as Persia, is a country in West Asia. It borders Iraq to the west, Turkey, Azerbaijan, and Armenia to the northwest, the Caspian Sea to the north, Turkmenistan to the nort ...

and other sanctioned countries.

Credit Suisse

Credit Suisse Group was the second-largest Swiss bank. Based in Zürich and founded in 1856, Credit Suisse offers private banking, investment banking and asset management services. It acquired the First Boston Corporation in 1988 and merged with the

Winterthur Winterthur (; ) is a city in the canton of Zurich in northern Switzerland. With over 120,000 residents, it is the country's List of cities in Switzerland, sixth-largest city by population, as well as its ninth-largest agglomeration with about 14 ...

insurance company in 1997; the latter was sold to

AXA Axa S.A. is a French multinational insurance corporation headquartered in the 8th arrondissement of Paris. It also provides investment management and other financial services via its subsidiaries. As of 2024, it is the fourth largest financi ...

in 2006. The asset management services were sold to Aberdeen Asset Management during the

. Credit Suisse has been at the center of various tax evasion investigations or

money laundering Money laundering is the process of illegally concealing the origin of money obtained from illicit activities (often known as dirty money) such as drug trafficking, sex work, terrorism, corruption, and embezzlement, and converting the funds i ...

activities since its founding. Credit Suisse collapsed in 2023 and it was acquired by UBS the same year.

Private banks

The term private bank refers to a bank that offers

private banking Private banking is a general description for banking, investment and other financial services provided by banks and financial institutions primarily serving high-net-worth individuals (HNWIs) – those with very high income or substantial asset ...

services and in its legal form is a partnership. The first private banks were created in St. Gallen in the mid-18th century and in Geneva in the late 18th century as partnerships, and some are still in the hands of the original families such as Hottinger and Mirabaud. In Switzerland, such private banks are called "private bankers" (in the local languages, a protected term) to distinguish them from the other private banks which are typically shared corporations. Historically in Switzerland a minimum of CHF1 million was required to open an account, however, over the last years many private banks have lowered their entry hurdles to CHF250,000 for private investors.

Cantonal banks

There are, as of 2006, 24 cantonal banks; these banks are state-guaranteed semi-governmental organizations controlled by one of Switzerland's 26 cantons that engage in all banking businesses. Together the cantonal banks account for about 30% of the banking sector in Switzerland, with a network of over 800 branches and 16 000 employees in Switzerland. In 2014 consolidated total assets of all cantonal banks accounted around 500 bln CHF, which is comparable with those of one the "Big Banks", UBS and Credit Suisse. The largest cantonal bank, the Zurich Cantonal Bank, has approximately 5 000 employees had a 2005 net income of CHF810 million.

Controversies

Banking secrecy

Switzerland, considered the "grandfather of bank secrecy", has been one of the largest offshore financial centers and

s in the world since the mid-20th century. Financial Secrecy Index: Narrative Report on Switzerland (2018), p. 1 Despite an international push to meaningfully roll back banking secrecy laws in the country, Swiss political forces have minimized and reverted many of the proposed rollbacks. Disclosing client information has been considered a serious social and criminal offense since the early 1900s.

s, despite legal protections, often face professional setbacks in Switzerland. Swiss bankers who maintain offices ''exclusively'' in Switzerland are shielded from a foreign state's lawsuits,

extradition In an extradition, one Jurisdiction (area), jurisdiction delivers a person Suspect, accused or Conviction, convicted of committing a crime in another jurisdiction, into the custody of the other's law enforcement. It is a cooperative law enforc ...

requests, and criminal charges, as long as they remain ''within'' the country's legal jurisdiction. In spite of minor adjustments to bank secrecy, bankers working in Switzerland and abroad at Swiss banks have long adhered to an unwritten code similar to that observed by doctors or priests. Switzerland's main lingual hubs,

(for French),

(for Italian), and

(for German) service the different geographical markets. It consistently ranks in the top three states on the Financial Secrecy Index and was named first many times, most recently in 2018. The Swiss Bankers Association estimated in 2018 that Swiss banks held US$6.5 trillion in assets or 25% of all global cross-border assets. These secrecy laws have linked the Swiss banking system with individuals and institutions seeking to illegally evade taxes, hide assets, or generally commit

. Secrecy laws have been violated by four people since 1934: Christoph Meili (1997), Bradley Birkenfeld (2007), Rudolf Elmer (2011), and Hervé Falciani (2014). In all four cases, the

whistleblower Whistleblowing (also whistle-blowing or whistle blowing) is the activity of a person, often an employee, revealing information about activity within a private or public organization that is deemed illegal, immoral, illicit, unsafe, unethical or ...

s were served with federal arrest warrants, fined, and sustained professional setbacks in Switzerland. As of 2015, Swiss banking secrecy was considered "dead" because of FATCA, but according to the Tax Justice Network in 2018, these schemes are " full of loopholes and shortcomings" which can still be exploited by lawyers to hide the assets of their clients. Besides, some autocratic or developing countries don't have any automatic exchange of tax information with Switzerland. In 2022, the Helsinki Commission of the

U.S. Congress The United States Congress is the legislative branch of the federal government of the United States. It is a bicameral legislature, including a lower body, the U.S. House of Representatives, and an upper body, the U.S. Senate. They both ...

stated:

Freedom of the press

Since leaking financial data is a criminal offense in Switzerland (even if it is in the public interest) punishable with up to five years in jail, Swiss media argued in February 2022 that the banking secrecy law runs contrary to

freedom of speech Freedom of speech is a principle that supports the freedom of an individual or a community to articulate their opinions and ideas without fear of retaliation, censorship, or legal sanction. The rights, right to freedom of expression has been r ...

and

freedom of the press Freedom of the press or freedom of the media is the fundamental principle that communication and expression through various media, including printed and electronic Media (communication), media, especially publication, published materials, shoul ...

in some cases. In 2022, the

United Nations Human Rights Council The United Nations Human Rights Council (UNHRC) is a United Nations body whose mission is to promote and protect human rights around the world. The Council has 47 members elected for staggered three-year terms on a United Nations Regional Gro ...

asked for a better protection of journalists and whistleblowers in this regard.

Bank vaults and bunkers

A handful of larger Swiss banks operate undisclosed or otherwise secretive bank vaults, storage facilities or underground bunkers for

gold bar A gold bar, also known as gold bullion or a gold ingot, is a quantity of refined metallic gold that can be shaped in various forms, produced under standardized conditions of manufacture, labeling, and record-keeping. Larger varieties of gold ...

diamond Diamond is a Allotropes of carbon, solid form of the element carbon with its atoms arranged in a crystal structure called diamond cubic. Diamond is tasteless, odourless, strong, brittle solid, colourless in pure form, a poor conductor of e ...

s, or other valuable physical assets. Most of these underground bunkers are located near or at the foothills of the mountainous regions of the

Swiss Alps The Alps, Alpine region of Switzerland, conventionally referred to as the Swiss Alps, represents a major natural feature of the country and is, along with the Swiss Plateau and the Swiss portion of the Jura Mountains, one of its three main Physica ...

. These facilities are not subject to the same banking regulations as banks in Switzerland and do not have to report holdings to regulatory agencies. The Swiss defense department estimates that of the ten former military

bunker A bunker is a defensive military fortification designed to protect people and valued materials from falling bombs, artillery, or other attacks. Bunkers are almost always underground, in contrast to blockhouses which are mostly above ground. T ...

s available for sale, six of them were sold to Swiss banks to house assets during the 1980s and 1990s. Storage in these underground bunkers and bank vaults is typically reserved for clients that pass a multi-stage

security clearance A security clearance is a status granted to individuals allowing them access to classified information (state or organizational secrets) or to restricted areas, after completion of a thorough background check. The term "security clearance" is ...

. Some of these bunkers are not accessible by road or foot and require aircraft transportation.

Numbered bank accounts

Many banks in Switzerland offer clients numbered bank accounts, accounts where the identity of the holder is replaced with a multi-digit number known only to the client and select private bankers. Although these accounts do add another layer of banking secrecy, they are not completely anonymous as the name of the client is still recorded by the bank and subject to limited, warranted disclosure. Some Swiss banks supplement the number with a

code name A code name, codename, call sign, or cryptonym is a code word or name used, sometimes clandestinely, to refer to another name, word, project, or person. Code names are often used for military purposes, or in espionage. They may also be used in ...

such as "Cardinal", "Octopussy" or "Cello" that provide an alternative means of identifying the client. However, to open this type of account in Switzerland, clients must pass a multi-stage clearance procedure and prove to the bank the lawful origins of their assets.

Connection to illegal activities

Swiss banks have served as safe havens for the wealth of dictators, despots,

mobster A gangster (informally gangsta) is a criminal who is a member of a gang. Most gangs are considered to be part of organized crime. Gangsters are also called mobsters, a term derived from '' mob'' and the suffix '' -ster''. Gangs provide a level ...

s, arms dealers, corrupt officials, and tax cheats of all kinds. Historically, mobster Meyer Lansky, Vatican-linked banker Licio Gelli of the lodge " P2" in Italy, Mexican president Carlos Salinas's family amongst others, have reportedly used Swiss banks to

launder money Money laundering is the process of illegally concealing the origin of money obtained from illicit activities (often known as dirty money) such as drug trafficking, sex work, terrorism, corruption, and embezzlement, and converting the funds in ...

over the years."Leader of Italian Scandal Arrested Trying to Get Cash in Swiss Bank," ''

The Miami Herald The ''Miami Herald'' is an American daily newspaper owned by The McClatchy Company and headquartered in Miami-Dade County, Florida. Founded in 1903, it is the fifth-largest newspaper in Florida, serving Miami-Dade, Broward, and Monroe countie ...

'', September 15, 1982 Swiss banks have been commonly identified as holding ill-gotten Nazi gold. The Swiss National Bank, the largest gold distribution centre in continental Europe before the war, was the logical venue through which

Nazi Germany Nazi Germany, officially known as the German Reich and later the Greater German Reich, was the German Reich, German state between 1933 and 1945, when Adolf Hitler and the Nazi Party controlled the country, transforming it into a Totalit ...

could dispose of its gold.Eizenstat Special Briefing on Nazi Gold
. Stuart Eizenstat, US State Department, 2 June 1998. Retrieved on 5 July 2006. ''Time'' magazine reported that throughout 1981 and 1982, the Israelis reportedly set up Swiss bank accounts to handle the financial end of the annual multi-million dollars arms deals between Iran and Israel during the

Iran–Iraq War The Iran–Iraq War, also known as the First Gulf War, was an armed conflict between Iran and Iraq that lasted from September 1980 to August 1988. Active hostilities began with the Iraqi invasion of Iran and lasted for nearly eight years, unti ...

. According to the Swiss Federal Prosecutor's office and

media Media may refer to: Communication * Means of communication, tools and channels used to deliver information or data ** Advertising media, various media, content, buying and placement for advertising ** Interactive media, media that is inter ...

, during the 1990s and early 2000s

Al Qaeda , image = Flag of Jihad.svg , caption = Jihadist flag, Flag used by various al-Qaeda factions , founder = Osama bin Laden{{Assassinated, Killing of Osama bin Laden , leaders = {{Plainlist, * Osama bin Lad ...

members had accounts at Swiss banks, including at UBS. Switzerland finally released a total of $683 million in Marcos funds to the Philippines Treasury in 2004. Mark Pieth, a Swiss professor of criminal law, said Mobutu of

Zaire Zaire, officially the Republic of Zaire, was the name of the Democratic Republic of the Congo from 1971 to 18 May 1997. Located in Central Africa, it was, by area, the third-largest country in Africa after Sudan and Algeria, and the 11th-la ...

had stolen US$30 billion over his 30 years in power but much of it he used to oil the wheels of power and pay off political and military allies. Billions were hidden in Swiss bank accounts illegally. According to Haitian authorities, Jean Claude Duvalier had nearly $300 million of Haitian people's money hidden in Swiss bank accounts. Then-Nigerian President

Sani Abacha Sani Abacha (; (20 September 1943 – 8 June 1998) was a Nigerian military dictator and statesman who ruled Nigeria with an iron fist as military head of state from 1993 following a palace coup d'état until his death in 1998. Abacha's seiz ...

is said to have stolen over a billion dollars in the 90's from his country, some of it hidden in Swiss bank accounts. In 2013, the

International Consortium of Investigative Journalists The International Consortium of Investigative Journalists, Inc. (ICIJ), is an independent global network of 280 investigative journalists and over 140 media organizations spanning more than 100 countries. It is based in Washington, D.C., with ...

(ICIJ), a

Washington, D.C. Washington, D.C., formally the District of Columbia and commonly known as Washington or D.C., is the capital city and federal district of the United States. The city is on the Potomac River, across from Virginia, and shares land borders with ...

–based

nonprofit A nonprofit organization (NPO), also known as a nonbusiness entity, nonprofit institution, not-for-profit organization, or simply a nonprofit, is a non-governmental (private) legal entity organized and operated for a collective, public, or so ...

news organization, obtained records of companies and trusts created by two offshore companies. These included information on at least 23 companies linked to an alleged $230 million tax fraud in Russia, a case that was being investigated by Sergei Magnitsky. The ICIJ investigation also revealed that the husband of one of the Russian tax officials deposited millions in a Swiss bank account set up by one of the offshore companies. Over the past 20 years, Switzerland has returned about $2 billion of ill-gotten money in at least ten cases, including to Tunisia, Egypt, Brazil, Nigeria, Malaysia and Uzbekistan (2022). Swiss bank accounts were utilised by the perpetrators of the 1Malaysia Development Berhad corruption and money laundering scandal. More recent studies show that

alone held assets worth $100 billion over several decades which were linked to corruption and bribery to drug and human trafficking for more than 30,000 clients. Apart from the 2022 " Suisse secrets" revelations, Credit Suisse had several other cases of scandals reported by the media over the last decades. In 2018,

London London is the Capital city, capital and List of urban areas in the United Kingdom, largest city of both England and the United Kingdom, with a population of in . London metropolitan area, Its wider metropolitan area is the largest in Wester ...

-based Tax Justice Network ranks Switzerland's banking sector as the "most corrupt" in the world due to a large offshore banking industry and very strict secrecy laws. The ranking attempts to measure how much assistance the country's legal systems provide to

, and to protecting corruptly obtained wealth. As of 2019, key criminal probes involving Swiss banks were the

Petrobras Petróleo Brasileiro S.A., better known by and Trade name, trading as the portmanteau Petrobras (), is a Brazilian state-owned enterprise, majority state-owned multinational corporation in the petroleum industry headquartered in Rio de Janeiro. ...

bribery case, the

Mozambique Mozambique, officially the Republic of Mozambique, is a country located in Southeast Africa bordered by the Indian Ocean to the east, Tanzania to the north, Malawi and Zambia to the northwest, Zimbabwe to the west, and Eswatini and South Afr ...

"tuna bonds",

"spygate" affair, Raiffeisen insider trading and UBS tax evasion in France. In 2021, the

Swiss Broadcasting Corporation The Swiss Broadcasting Corporation (; ; ; ; SRG SSR) is the Swiss public broadcasting association, founded in 1931, the holding company of 24 radio and television channels. Headquartered in Bern, the Swiss Broadcasting Corporation is a non-pro ...

reported that the Zürich police are investigating CHF 9 billion from

Venezuela Venezuela, officially the Bolivarian Republic of Venezuela, is a country on the northern coast of South America, consisting of a continental landmass and many Federal Dependencies of Venezuela, islands and islets in the Caribbean Sea. It com ...

that has been received by 30 Swiss banks. A Swiss bank account was used to bribe a Venezuelan minister. Other major cases involving the

case for drug-traffickers in Bulgaria, Falcon Bank, 1MBD,

Glencore Glencore plc is an Anglo-Swiss Multinational corporation, multinational commodity trading and mining company with headquarters in Baar, Switzerland, Baar, Switzerland. Glencore's oil and gas headquarters are in London, London, England as well a ...

, SICPA, SBM Offshore, PKB, J. Safra Sarasin, Cramer Bank and Lombard Odier Bank. In 2021, Swiss firm Allied Finance Trust AG and five Swiss bankers were charged with

conspiracy in New York. In 2021, UBS was criminally convicted by an appeals court in France for

the proceeds of

by French citizens and fined €1.8 billion. In 2023, Switzerland returned $138 million to Taiwan in connection with a corruption scandal relating to the sale of French frigates to Taiwan in 1991.

Tax evasion

Switzerland has been ranked among the top three

tax havens A tax haven is a term, often used pejoratively, to describe a place with very low tax rates for non-domiciled investors, even if the official rates may be higher. In some older definitions, a tax haven also offers financial secrecy. However, ...

in the world every single year since the

, most recently in 2018. In 2021, U.S. President Joe Biden also called Switzerland a "

" during his speech to a joint session of Congress. Money placed in tax havens, by definition, evades taxation and therefore diminishes tax revenues in the government's budget of the country of origin to whom it properly belongs, substantially, including for development purposes.

Background

According to the 2018 Financial Secrecy Index, Switzerland's banking secrecy laws have rendered it a premier

since the 1900s. It also noted that this status has been frequently abused by criminals to illegally evade paying taxes in their home country. One of the most prominent attractions of the disclosure protection laws is the distinction between

(non-reporting of income) and tax

fraud In law, fraud is intent (law), intentional deception to deprive a victim of a legal right or to gain from a victim unlawfully or unfairly. Fraud can violate Civil law (common law), civil law (e.g., a fraud victim may sue the fraud perpetrato ...

(active deception). Akin to the distinction between legal

tax avoidance Tax avoidance is the legal usage of the tax regime in a single territory to one's own advantage to reduce the amount of tax that is payable. A tax shelter is one type of tax avoidance, and tax havens are jurisdictions that facilitate reduced taxe ...

and illegal tax evasion in the U.S., the non-reporting of income is only a civil offense in Switzerland while tax fraud is a financial crime. When foreign clients deposit holdings into a Swiss bank account, the bank is legally prohibited from disclosing balances or client information to tax authorities. This prohibition can only be waived if the client has produced a written statement of consent or a

has been directly linked to the bank account. More often than not, clients do not consent to foreign tax authorities, which leaves only the latter (financial crime) provision available. Many client services available in Switzerland (e.g. numbered bank accounts) are used to shield client data from tax authorities. Many

sovereign state A sovereign state is a State (polity), state that has the highest authority over a territory. It is commonly understood that Sovereignty#Sovereignty and independence, a sovereign state is independent. When referring to a specific polity, the ter ...

s do not legally require private bankers to confirm whether or not a client has paid their taxes, in any capacity. On top of this, Switzerland's banking secrecy laws prohibit the disclosure of client information under a variety of federal, cantonal, and civil policies. Many foreign nationals open Swiss bank accounts to take advantage of these laws and tax distinctions. While citizens of Switzerland retain the full force of banking secrecy protections, foreign clients are afforded some of the most stringent bank–client confidentiality protections in the world. In exchange for banking services, the Swiss government charges "a low, lump-sum option on the money they bank", after which Swiss tax authorities consider client tax burdens "settled". After the Banking Law of 1934 was passed, Swiss bankers traveled across Europe to advertise the country's banking secrecy during

. As European countries began to increase taxes to finance the war, wealthy clients moved their holdings into Swiss accounts to avoid taxation.

Fines

Swiss banks have collectively paid more than $12 billion in fines in recent years to the tax authorities in France, Germany, Italy, the United States and other countries for helping with tax evasion. Starting in 2022, fines on Swiss banks abroad will be tax deductible (unless crime is involved). In recent years, Swiss banks have also been fined by various international regulators billions of dollars for

FOREX The foreign exchange market (forex, FX, or currency market) is a global decentralization, decentralized or Over-the-counter (finance), over-the-counter (OTC) Market (economics), market for the trading of currency, currencies. This market det ...

and LIBOR rates manipulations.

In popular culture

Banking in Switzerland, in particular Swiss banking secrecy practices, has been detailed in global

popular culture Popular culture (also called pop culture or mass culture) is generally recognized by members of a society as a set of cultural practice, practices, beliefs, artistic output (also known as popular art

f. pop art F is the sixth letter of the Latin alphabet. F may also refer to: Science and technology Mathematics * F or f, the number 15 (number), 15 in hexadecimal and higher positional systems * ''p'F'q'', the hypergeometric function * F-distributi ...

or mass art, sometimes contraste ...

to varying degrees of accuracy. According to official statements from the Swiss National Film Archives, inaccurate or exaggerated portrayals negatively impact Switzerland by reducing bankers to unflattering "

caricature A caricature is a rendered image showing the features of its subject in a simplified or exaggerated way through sketching, pencil strokes, or other artistic drawings (compare to: cartoon). Caricatures can be either insulting or complimentary, ...

s" that are "ever disposed to accept funds from questionable sources". In 2014, Sindy Schmiegel, a spokeswoman for the Swiss Bankers Association (SBA), stressed that financial regulation in Switzerland is dramatically more strict than portrayed fictionally. ''

The Economic Times ''The Economic Times'' is an Indian English-language business-focused daily newspaper. Owned by The Times Group, ''The Economic Times'' began publication in 1961 and it is sold in all major cities in India. As of 2012, it is the world's secon ...

'' noted that popular culture portrays Swiss bank accounts as "completely anonymous", later adding "this is simply not true." Swiss banking is prominently featured in the following films and

television show A television show, TV program (), or simply a TV show, is the general reference to any content produced for viewing on a television set that is broadcast via over-the-air, satellite, and cable, or distributed digitally on streaming platf ...

References

Bibliography

* *

External links

The Swiss Financial Center
fro
swissworld.org
{{Portal bar, Companies, Switzerland Law of Switzerland Privacy