If you have ever wanted to benefit from the advantages of offshore accounts, or hide your money well, Switzerland has been the place to go. The Swiss are so intrinsically linked with banking that it’s almost impossible to separate them from it. The country is seen as one of the greats global tax havens in the world, but, due to a new precedent, all of this could be about to change.
See, 2017 looks set to be the year that the Swiss wave goodbye to banking secrecy. What is this, and why has the new law come about? Well, in order to understand this we need to understand the banking regulations in Switzerland. It’s also pertinent to know about what banking secrecy is and how it benefits people.
Bank privacy is something that people regard highly, and those with a lot of money see it as invaluable. It is a legal requirement that prevents banks from providing information about their clients to authorities. This is beneficial for those wanting to put a lot of money in offshore accounts, or people seeking tax havens. There are, as you might imagine, problems with this concept. Things like tax evasion and money laundering were believed to have been prominent in the wake of bank privacy laws.
The Swiss Banking Act of 1934 brought in laws that made it a legal requirement to grant privacy to those opening bank accounts. It limited the banks from sharing their clients’ information with third parties, but the accounts were not anonymous. It is easier than people may realize to trace an account back to a particular individual. Unless there are criminal complaints, that person’s anonymity is protected under the act.
However, there has been a change to the law that was introduced in January of this year. On New Year’s Day, a law came into effect that brought Switzerland in line with all the other banking regulations in the world. The Multicultural Convention on Mutual Administrative Assistance in Tax Matters brought in the rule. It now means that over one hundred states, including Switzerland, must share private financial information on bank accounts annually. The nation will have to begin collecting this data this year and start sharing it with other countries as of next year.
This has been approved by the Swiss government, albeit begrudgingly! As a global financial hub, they were left with no real choice other than to comply. But, as a result of this law change the country could lose a big part of what has given it identity over the years.
It is also not good news for those attempting to hide from the long arm of the law. See, in previous years Switzerland would only provide this information and data with a country that had a signed agreement with, and even then cooperation doesn’t always happen. Also, the other country must produce evidence of tax evasion in order to secure the information and data they want. Furthermore, the country had also been in a position where it was allowed to refuse cooperation if there was stolen information that proved tax evasion.
But we look set for a new era in the world of finance with this change to the rules. Now nations don’t need to request details from Switzerland, or sign agreements. Instead, the information will have to be handed over on an annual basis. This will be done to allow the nation’s to collect data for tax collection purposes. It looks set to cut down on the number of allegations of tax dodging that have plagued the world of Swiss banking for such a long time.
As you would imagine, developed nations with wealthy citizens will be the ones that are the focal point of this. Countries with citizens who own Swiss bank accounts will have access to the information they need pertaining to tax. But many of the world’s poorer nations will not be included in this agreement, and will not receive the same information. This is likely due to the fact that they lack to resources for an acceptable exchange of information.
It will be interesting to see how much this changes the way the financial and banking worlds are run. There’s no question that in the past Swiss banks may have gotten caught up in criminal goings on, even unwittingly. But, with the new laws that have come in it’s going to be a lot harder for people to use and abuse the banking system that is in place as they had done before. It might set a precedent for global banking that could very well affect world economies for years to come.