The protection of privacy and the prevention of financial crime
| Date | 01 October 2004 |
| Published date | 01 October 2004 |
| Pages | 397-398 |
| DOI | https://doi.org/10.1108/13590790410809347 |
| Author | William Frei |
| Subject Matter | Accounting & finance |
The Protection of Privacy and the Prevention of
Financial Crime
William Frei
INTRODUCTION
In Switzerland, the ®nancial sector contributes 14 per
cent to GDP. In 2002, some 195 insurance and rein-
surance companies and 356 banks, including 147
foreign banks, are established in Switzerland. Secur-
ity assets held in customer accounts with domestic
banks amounted to CHF 2,945bn.
In fact, Swiss banks are considered to be the global
leaders in cross-border asset management with an
approximate world market share of 33 per cent.
According to certain estimates, more than one
fourth of the world's private wealth managed
outside of the country of residence is managed in
Switzerland. The Swiss franc is one of the world's
great safe-haven currencies and is the ®fth most fre-
quently traded currency after the dollar, the euro,
the yen and sterling. Switzerland also has the
world's ®fth largest bond market and accounts for
more than one quarter of all the money ¯owing
into the global hedge fund industry.
With the globalisation of the world's ®nancial
markets and the liberalisation of capital movements,
Switzerland Ð as well as other ®nancial centres Ð
is exposed to international turbulence, to the current
shake-up of the world markets, and of course to the
risk of its ®nancial institutions being misused by
criminals.
FINANCIAL PRIVACY AND ITS LIMITS
Among the various characteristics of Switzerland's
®nancial centre, one of the best known abroad is
probably ®nancial privacy. The protection of the
private sphere, which includes that of bank clients,
is traditionally a matter of great importance in Swit-
zerland. This professional secrecy Ð comparable to
that applicable to lawyers, for example Ð is subject
to speci®c regulations and is protected by provisions
of the law. To amend these laws would require the
approval of the Swiss Parliament and most probably
of the Swiss people through a referendum.
Banking secrecy gives rise to a variety of mis-
understandings and criticisms that require some
clari®cation. The obligation of discretion on the part
of bankers towards their clients, which is anchored in
a number of provisions of Swiss law, is not and has
never been absolute. Swiss banks have the legal obliga-
tion to provide information of every kind relating to
criminal investigations if requested to do so by judicial
authorities. To put it simply: Switzerland's banking
secrecy does not protect terrorists, nor does it protect
criminal organisations or criminal activities of any
kind whatsoever. Switzerland cooperates eciently
with other countries in the ®ght against organised
crime, and banking secrecy is lifted within the scope
of judicial assistance in criminal cases.
The purpose of the ®nancial privacy is not to safe-
guard the interests of the banks, but to protect the
private sphere of their clients. This obligation has
already greatly assisted countless people who for
example have become the victims of pressures of
various kinds, such as despoliation by totalitarian
regimes.
However, as there is a risk that ®nancial privacy
may be abused in the context of criminal activities,
the legislator, the government and the ®nancial
sector have introduced strong measures, especially
in relation to `due diligence' and the `know-your-
customer' rule, aimed at preventing the unlawful
use of Switzerland's ®nancial centre. On several occa-
sions, Switzerland has already received good marks
for its anti-money laundering measures from those
international commissions and organisations which
deal with the ®ght against money laundering, as,
for example, in 1998 from the Financial Action
Task Force (FATF), and in June 2002 from the Inter-
national Monetary Fund (IMF) within the scope of
its participation in the Financial Sector Assessment
Programme.
THE FIGHT AGAINST TAX CRIMES
In this important and complex area, namely interna-
tional cooperation with respect to taxation, Swit-
zerland is actively contributing to eorts being
undertaken at an international level. To date 69
double taxation agreements have been concluded.
Switzerland cooperates actively in the ®ght against
tax fraud, providing judicial assistance and lifting
banking secrecy. To prevent and combat tax evasion,
Page 397
Journal of Financial Crime Ð Vol. 11 No. 4
Journal of Financial Crime
Vol.11,No. 4,2004,pp. 397 ±398
Henry Stewart Publications
ISSN 1359-0790
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