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Switzerland Abandons Banking Secrecy: What You Need to Know

For decades, Switzerland was synonymous with bank secrecy. However, a major overhaul in 2017 saw the country abandon its strict banking privacy laws and agree to automatically share bank customer information with governments worldwide.

What is Bank Secrecy?

The term “bank secrecy” is often bandied about, but Swiss banks prefer to refer to it as “bank customer secrecy”. This means that it’s illegal for bank employees to disclose information about their customers to third parties. This includes specific details about individual accounts, account balances, and transactions, as well as information about bank-client relationships.

Consequences of Non-Compliance

Failure by a bank to comply with these laws can result in up to five years in prison, a financial penalty, and a fine of up to 250,000 Swiss francs.

Impact on Tax Authorities

It depends on the country where the customer resides. For those fully tax resident in Switzerland:

• If a resident fails to declare bank accounts and custody accounts at Swiss banks in their tax returns, the tax office will not receive any information from the banks.
• However, if a resident submits forged documents to the tax office, the authorities can prosecute for tax fraud. In such cases, banks may be given permission to share information that could aid in solving the case.

For those who are tax resident in a country other than Switzerland:

• Swiss banks will automatically submit account information to the Swiss Federal Tax Administration, which then passes it on to the tax authority of the person’s country of residence.

Exceptions to Bank Secrecy

There are certain situations where bank secrecy does not apply. These include:

• When banks suspect money laundering, they may share customer information with the money laundering reporting office.
• A Swiss court may request that a bank act as a witness and share customer information related to a case.
• In debt collection or bankruptcy cases, banks must provide information about account balances.

The Future of Swiss Banking

The Swiss banking system has undergone significant changes in recent years. With its new automatic exchange of information agreement, Switzerland is no longer the secrecy haven it once was. However, Swiss banks still offer competitive services and products, making them an attractive option for those looking to manage their finances.

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