

                             Swiss Secrecy: Not A Legend

                    Swiss banking is often identified in America with
               banking secrecy.  Popular media stories have created
               two contradictory pictures: that Swiss secrecy hinders
               law enforcement officers from prosecuting criminals,
               while others claim that Swiss secrecy does not exist
               anymore and is as full of holes as a Swiss cheese.
               Neither is true.
                    The basic position in Swiss civil law is that the
               information concerning a customer and the customer's
               financial dealings is protected as part of the
               individual's legal right to privacy.  In Switzerland,
               this has been made part of Article 28 of the Swiss
               Civil Code, and not only protects the information, but
               makes the person violating the secrecy liable to pay
               damages to the customer.  In addition, the banking law
               makes it a criminal offense in Switzerland for a banker
               to divulge information about a customer in violation of
               the law, punishable by fine or imprisonment.  Both the
               bank and the bank employee may be subject to various
               penalties if a violation occurs.
                    A bank can only disclose information when
               authorized to do so under existing statutory provisions
               or by a Swiss court order, which must be founded on
               law.  Secrecy is interpreted so broadly that it is
               illegal for a bank to say whether or not a person is a
               customer, since if the bank failed to do so it would be
               implying that the person was a customer.
                    The right of secrecy is a right belonging to the
               customer, not the bank.  It is the customer's privacy
               that is protected by law.  The customer can waive the
               secrecy, but the bank cannot.  For example, the
               customer may waive secrecy and ask the bank to give a
               credit reference to a specific creditor.  But such a
               waiver is only valid if the customer acts voluntarily
               and not under duress.  Therefore, waivers that were
               signed pursuant to foreign court orders compelling a
               customer to sign a waiver may well be invalid.    A
               financial institution cannot ask the government for an
               order waiving secrecy.  Only the customer can waive the
               secrecy.
                    Contrary to an opinion current in America, Swiss
               secrecy is not absolute.  It can be overridden by
               statutory provisions which compel the giving of
               information.
                    Such rules requiring disclosure of information --
               usually with a limited scope -- can be found in Swiss
               inheritance law (you really wouldn't want your
               legitimate heir going into the insurance company with
               your death certificate to be told they can't tell him
               anything), in enforcement of judgments from creditors,
               in bankruptcy or in divorce.
                    The most widely known limitation on secrecy is in
               treaties concerning Swiss cooperation in foreign
               criminal matters.
                    In a criminal investigation conducted in
               Switzerland, of a Swiss crime committed by a Swiss
               citizen, secrecy can be lifted by court order.  The
               treaties extend this possibility to foreign crimes by
               foreign citizens in foreign investigations, but only in
               the limited circumstances spelled out in the treaties.
                    Before a foreign legal assistance request for
               Swiss financial records can be honored the following
               conditions must be met:
                    1)  Compulsory disclosure is only possible if the
               offense that is being prosecuted is punishable as a
               criminal offense in both countries (the requesting
               state and Switzerland).
                    2)  In tax cases assistance is available to
               foreign prosecutors only if the investigated violation
               of foreign tax laws would be qualified under Swiss law
               as a tax fraud and not merely as tax evasion.  Tax
               evasion is simply the failure to declare income or
               assets for taxation.  Tax fraud is distinguished by the
               fact that "fraudulent conduct" is involved.  Normally
               "fraudulent conduct" can only be assumed if forged
               documents are used.
                    There is a special provision of the Swiss-United
               States Treaty on Mutual Assistance in Criminal Matters
               that provides Swiss legal assistance to U. S.
               prosecutors even in tax evasion cases if they are
               conducting an investigation against an organized crime
               group.
                    3)  As a general rule, the information obtained in
               Switzerland through a legal assistance procedure may
               not be used for investigative purposes nor be
               introduced into evidence in the requesting state in any
               proceeding relating to an offense other than the
               offense for which assistance has been granted.
                    It must be emphasized that foreign authorities or
               foreign courts cannot directly ask a Swiss financial
               institution for information. Even in cases in which
               legal assistance can be granted and therefore secrecy
               is lifted, only a Swiss court order - which in these
               cases is based upon a foreign request for legal
               assistance - can validly lift secrecy.
                    Considering this, it can be said that secrecy is
               strict and is only put aside in case clearly defined by
               Swiss law and pursuant to Swiss rules.  Secrecy is,
               however, not absolute and does therefore not protect
               criminals.
                    Switzerland has long served as a magnet for the
               money of wealthy foreigners who perceive the world as
               buffeted by over-taxation, over-regulation and
               political turmoil. They are attracted, of course, by
               the confidentiality and discretion that have been a
               hallmark of Swiss bankers since the French Revolution,
               when they offered financial refuge to French
               aristocrats. In 1934 secrecy was enshrined into law.


