|Bank client confidentiality|
The Swiss banker’s professional duty of client
confidentiality is rooted in Article 47 of the Federal Law on Banks and Savings Banks, which came into force on 8 November 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.
Although the Federal Law refers to “banking secrecy”, it is
important to note that this duty of discretion is not intended to protect the bank but the client. In that sense, the
terms “bank client confidentiality” or “financial privacy” are much more appropriate.
legislation also guarantees respect for privacy in other areas of professional activity, e.g. for doctors or lawyers. It
is a question of protecting personal privacy, a basic right established under the Swiss constitution (Art. 13).
a desire for privacy can play an important part in an investor’s decision to deposit his/her assets in a Swiss bank,
it is not the sole factor in the decision. One should not forget that Switzerland’s political and monetary stability,
its excellent infrastructure and the professional know-how and experience of its bankers are also attractive factors.
of Swiss bank client confidentiality
A banker’s obligation to respect his clients’ privacy is not absolute
and no protection is afforded to criminals. In particular, there is a duty to provide information under the following
- civil proceedings (inheritance or divorce, for example);
- debt recovery and bankruptcies;
criminal proceedings (money laundering, association with a criminal organisation, theft, tax fraud, blackmail, etc.).
If circumstantial evidence gives rise to a suspicion that the financial assets are the proceeds of a crime, then financial
institutions have the right to inform the authorities without thereby breaching bank client confidentiality (Art. 30ter, Par.
2 of the Criminal Code); if the suspicion is well-founded, they must inform the Money Laundering Reporting Office (Money Laundering
Act, Art. 9).
-International mutual legal assistance proceedings
Bank client confidentiality and the
Swiss tax system
The Swiss tax system is based on the principle that the taxpayer bears sole responsibility for
meeting his/her tax obligations via the income tax return. As a result, the bank is under no obligation to provide information
to the tax authorities in connection with tax proceedings or an appeal. On the other hand, the bank must provide information
or supply documents in a case of tax evasion or for an appeal if asked to do so by the client.
Withholding tax is an
effective means of fighting tax evasion. Most income from Swiss capital investments is subject to this 35% tax, deducted
at source. The existence of a withholding tax prompts the person receiving taxable gains to declare them as the law
requires, given that investors domiciled in Switzerland and those with tax credits can demand a refund of the tax in full.
This also applies to creditors domiciled abroad, on condition that a double taxation treaty provides for full or partial
Where tax fraud is involved, the offences are dealt with by ordinary criminal proceedings; a banker cannot
therefore hide behind bank client confidentiality. Tax fraud occurs when a taxpayer deliberately uses forged or falsified
documents in order to deceive the tax authorities and obtain undue tax advantages.
International mutual assistance
in criminal matters
Switzerland assists the authorities of foreign states in criminal matters in accordance with
the 1983 Federal Law relating to International Mutual Assistance in Criminal Matters. The arrangements allow assets
to be frozen and if necessary handed over to the foreign authorities concerned.
International mutual assistance in criminal
matters is based essentially on the principles of dual criminality, speciality and proportionality.
Under the dual criminality
rule, Swiss courts do not use coercive measures – lifting the requirement of bank client confidentiality for example
– unless the act being investigated by the court is punishable under the law of both the requesting state and Switzerland.
Under the speciality rule, information obtained through the mutual assistance arrangement can only be used for the purposes
of the criminal proceedings for which the assistance is provided. According to the proportionality rule, the measures
sought in conducting the request for assistance must be proportionate to the crime, and discretion must be exercised if the
proceedings may adversely affect the interests of persons not directly involved.
International mutual assistance
in administrative matters
The Swiss Federal Banking Commission (SFBC) may communicate information not available
to the public to the supervisory authorities in foreign countries. However, the communication of such information is
subject to three statutory conditions:
•The information given may not be used for a purpose other than the direct
supervision of banks or other financial intermediaries who are subject to official authorisation. No information may
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
authorisation of an international treaty. Information cannot be given to criminal authorities in foreign countries if
there are no arrangements regarding mutual legal assistance in criminal matters between the states involved. This policy
is designed to prevent states from bypassing the rules governing mutual legal assistance in criminal matters.
information to be communicated to a foreign supervisory authority concerns specific clients, the Federal Act on Administrative
Proceedings applies. The client may challenge any decision of the SFBC by bringing an appeal under administrative law
before the Swiss Federal Supreme Court. Both the SFBC and the Swiss Federal Supreme Court must guarantee the client’s
right to be heard and his/her right to examine the case file.
Consequences of violating bank client confidentiality
violation of bank client confidentiality, whether through negligence or intentionally, is punishable by a prison sentence
(maximum 6 months) or by a fine of up to CHF 50,000 (CHF 30,000 in case of negligence). Violating bank client confidentiality
remains a punishable offence even after the relationship with the client has come to an end or the banker has ceased his/her
professional activity (Art. 47, Federal Law on Banks and Savings Banks).