Switzerland

A NUMBER OF BOOKS and movies have depicted Swiss banks as the ideal place to hide money[Page 780] from inquisitive Internal Revenue Service agents, criminal prosecutors, or rightful owners of stolen funds. In common with other tax havens, Switzerland levies minimal taxes and encourages large investments by foreign interests. Switzerland has the additional advantage of strict laws on banking security. Swiss law establishes criminal penalties for those who irresponsibly, either through direct action or negligence, violate banking secrecy.

While it is possible to place money in bank accounts in Switzerland that are known to most bank employees only through numbers or passwords, bank officials have always known the names of account holders. In order to provide some protection for themselves, Swiss banks are restricted to opening numbered accounts only for those foreigners who are already customers of Swiss banks or who have passed a rigorous screening process of interviews and reference checks. Because of its banking laws, Switzerland has become one of the leading financial powers in the world.

On January 1, 1983, International Mutual Assistance in Criminal Matters (IMAC) took effect in Switzerland. The law extended the rights of foreign investigators and gave foreign prosecutors the same powers as Swiss prosecutors within Switzerland. IMAC also made it easier for foreign countries to pursue income-tax evaders. Switzerland has historically been the recipient of funds garnered through a number of means used to avoid paying taxes: under-invoicing, which allows firms to hide profits from sales by underreporting them; compensation, which depends on the practice of using third parties in over-invoicing schemes; transferring negotiable assets directly to Swiss banks; and fraudulent accounting, which allows firms to claim losses while depositing hidden profits in Swiss banks. Switzerland has cooperated with other nations in preventing Swiss banks from being used in illegal activities.

Beginning in 1998, Swiss law has considered it a criminal offense for Swiss bankers to refuse to name the sources of wealth behind numbered accounts and has forced bankers to identify any “end beneficiaries” connected to accounts opened by other parties. In addition to Swiss bankers, Switzerland also forces attorneys, stockbrokers, and employees of other financial institutions to comply with the requirement to report suspicions of money laundering. Changes in Swiss banking laws in 1998 arose partly from a banking scandal concerning the Nigerian dictator Sani Abacha in which banks all over the world had been involved in the deposit of approximately $3 billion of Nigerian funds. Both the Abacha family and Nigeria claimed the funds. Nineteen Swiss banks had accepted more than $660 million from Abacha. Even though the banks had suspected money laundering, they did accept the money. The Swiss Federal Banking Commission particularly criticized Crédit Suisse, Crédit Agricole Indosuez, Union Bancaire Privée, and MM Warburg for failing to run sufficient checks on the Abacha accounts. In 2001, the commission ruled that Swiss banks could not justify their actions by claiming that the money had come from reputable intermediaries, or by insisting that the Abacha family had provided “glowing references.”