Understanding Banking Secrecy

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Banking privacy pertains to the basic responsibility of banks to desist from divulging sensitive information about their customers to third parties. By extension, the term sometimes relates to practices that enable individuals and organizations to hold bank accounts in a private and confidential manner.

The concept of institutional privacy, and consequently bank privacy may be viewed and practiced in various ways in different countries.

The basic principle constitutes a legal responsibility for bankers to uphold the confidentiality of information received from their customers while executing  their normal bank functions. The divergences between applicable laws rests chiefly in the practices of information disclosure.

The world’s favorite offshore accounts destination, Switzerland handles bank secrecy issues through regulation such as the Article 47 of the Federal Law on Banks and Savings Banks.

The regulation inherited in the yester-year (November 8, 1934), has went through several changes,  permits for the incarceration of perpetrators who breach the bank confidentiality law either through negligence or intentional.

In the event of fraud or tax fraud, the European country may interchange selective information with other nations via two discrete channels. On the other hand, information can be exchanged between tax offices, as specified in bilateral agreements to avert repeat taxation.

Anonymous bank accounts have since ceased to exist in Switzerland since the early 1990’s and is therefore achievable to pursue the holder of an account in the event of a waiver on bank secrecy. But in some cases dubious accounts may still be established through a financial intermediary (who is also subject to confidentiality) without the latter revealing the identity of his client.

The issue of banking confidentiality has also sparked a great deal of debate and contention as some regard it a hindrance to further probing of anonymous accounts.

Frankly, it is undeniable that banking privacy appropriates among other things, the laundering of dirty money by shady characters. Laundering money entails insufficient verification of the source of funds deposited in a bank account, particularly into offshore accounts.

It is fairly simple to launder money in a country with no strict banking privacy regulations. The verification of the origin of funds is aimed at controlling the movement of funds and other financial evils that go with it such as tax evasion and more seriously funding terrorism.

In some countries, banking privacy is a privilege that works with special set of rules for qualification. While authorities regularly enjoy automatic access to information they need, that is the tax administration, customs officials, etc.

 

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