OK, so the money managers out there may skip over this post knowing all about the subject, but we do get a number of mails on the subject so I thought I would write a definitive take.So first let look at the history and then I will get to the meat:
Secrecy in the Swiss banking system is enshrined in law, both civil and criminal, and has been protecting the accounts of the wealthy for over 300 years.
Initially bankers to the Kings of France, the Swiss reputation for service and discretion has grown to legendary proportions and it is estimated that one third of the worlds private fortunes are based in Swiss banks.
The admiration for the Swiss banking system has been tainted by the accusations of hiding laundered money and of aiding tax evasion. Ever the cautious, the Swiss authorities mulled over this situation for many years and created regulation and systems that allow freedom for bankers to do business, protection for account holders and disincentives for the criminally minded. This flexible and affective approach to regulation is seen to be more affective than the draconian systems in the UK or US, for example.
Atop of the pile of regulators is the Swiss Banking Federation who regulate and monitor Swiss Banks and Securities Dealers. There are several regulatory organisations overseeing Asset Managers who have to join one of the organisations to practice. These regulatory organisations combined with Swiss criminal and civil law would impose harsh penalties to asset managers, banks or securities dealers who decided to aid any criminals in laundering their funds. The affect has been that Swiss financial professional will politely decline any business that looks like trouble.
However, for those who are seeking a home for legal funds away from the prying eye of tax authorities the banking secrecy remains in place. A banker who reveals information, even that an individual has an account, will suffer severe penalties which could included custodial sentences. These penalties can be imposed, uniquely in Switzerland, without the client even complaining.
The Swiss Federal Act on Banks and Savings Banks was enacted in 1934 in the wake of the rise of Nazi Germany. Its Article 47 is directed primarily against espionage in banking. Nazi agents began bribing bank employees to crack the secrecy of accounts. Once a depositor was known, the agents demanded his assets under threat of reprisals against relatives living in Germany. In those circumstances, to many, the existence of a secret secured bank account made a lot of difference.
Article 47 reads thus: "1. Whoever wilfully divulges a secret which has been entrusted to him in his capacity as a representative, officer, employee, authorised agent, liquidator or commissioner of a bank, as an observer of the banking commission, as an officer or employee of a recognised chartered accountant, or which secret he learned about in such capacity and whoever incites to such divulging of professional secrecy, shall be punished with imprisonment of up to six months or with a fine of up to 50,000 Swiss francs.
2. If the offender has acted negligently, the punishment shall be a fine of up to 30,000 Swiss francs.
3. Breach of professional secrecy remains punishable even after dissolution of the official or private mandate or work contract.
Basically, don't ask a Swiss banker about his clients...
Swiss banks will divulge information on an account if it is a criminal investigation for drug money, proceeds of other crimes and money laundering, of course. The system will allow enquiries concerning divorce, tax evasion, bankruptcy etc but these will need to be heard by a Swiss Judge (who are the only ones who can lift the secrecy laws) and the judiciary are extremely unlikely to lift the secrecy laws for anything other than crime.
Opening an Account
If you would like to open an account just for the sake of having an account then you should look to have a deposit for at least CHF25,000 for one of the major commercial banks or much more if you are keen to have an account with a niche private bank. Basically the private banks make money from investing your funds and therefore will only entertain your account if it substantial and they get to earn fees from it.
For a commercial bank there are ways of applying for an account online, however, we would suggest flying to Switzerland in person and setting up the account yourself. The fees that are charged online are better spent on the flight and meeting the banker in person.
By far the easiest way is to open an investment account with a company such as ours. It can be opened for no fees, a minimal deposit and all over the phone or online, however, we are a commercial operation so if there are no fees to be earned from managing funds then like other organisations we would decline to open the account.
Services Provided
A commercial account with a major bank (such as the ones we open for the majority of clients with funds under management) will give you access to services beyond what you will be used to with other accounts. The online systems for reporting, investing in products and transferring funds are second to none, in our opinion. Couple this with having the ear of a personal banker (something that a number of clients have commented is the best part of all) then there is no reason, if you have the funds to invest with a manager, that you shouldn't open an account.
Myths
The myths surrounding Swiss Bank Accounts have been perpetuated by spy novels and movies and have reached silly proportions. You will see on most movies these days that a villain will stand over a computer and watch as the funds are drained from one account and immediately received in another. Although the Swiss banking system is good, I have not seen any system like this...ever.. See 'Swordfish' the movie for an example.
Drug dealers and dictators are always referred to as salting away money in their Swiss Bank accounts. In reality, these days these types of criminal are more likely to avoid Switzerland like the plague. While we suspect there may be some small bankers who still handle these type of funds, the Swiss regulators have gone out of their way to outlaw this type of business. Lets face it, there is a lot more legitimate money in the world these days and the Swiss are keen to get their hands on it. They are also very, very keen to show that their banking and regulation system is still the best in the world.
Problems
Opening an account as a US citizen is not difficult, however, there are various forms and disclaimers that need to be signed. The US government is very keen on not allowing its public to have offshore accounts or employ tax efficient plans. As such it has imprisoned a number of people seen to be 'promoting' such schemes which has bankers and advisers all over the world running for the hills when a US client comes knocking. Having said that, there are a number of ways of assisting US clients to obtain accounts but you need to be speaking with a specialist. If we can't help, we know of companies that can. It sounds a little subversive, buts its not. It is just setting things up correctly and making sure you have double checked the structure of the account and any other vehicles employed so that the IRS are happy (OK, maybe not happy...but at least not 'angry' at a blatant tax dodge).
The UK have recently 'unleashed elite tax inspectors' to seek and destroy offshore tax schemes and tax undeclared offshore bank accounts, so you can be certain that some time, someday they will find an unprotected offshore account.
Basically what you should know, is that banking in Switzerland is very good indeed, opening an account is straight forward if you are prepared to have a manager invest some of your money and can be very tax efficient if you are prepared to spend the time and inevitable funds to do it properly.
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