What does bank client confidentiality mean?

A high regard for personal privacy

In Switzerland there is a high regard for personal privacy and confidentiality even in the new transparent environment. Bank client confidentiality means that the banks have a duty to keep confidential all facts that involve their clients. At the same time, it is a right of the client, for it is the clients not the banks who are entitled to the protected data. The right to privacy is a mainstay of the Swiss legal system, and is laid down in the Federal Constitution (section 13).

Does bank client confidentiality shield criminals?

No. Bank client confidentiality has never been absolute. Swiss banks are obliged, for example, to disclose information in criminal proceedings against their clients.

This is an absolute obligation, regardless of whether the offence was committed in Switzerland or abroad. Compared with other countries Switzerland has always been very successful at combating organized crime and money laundering. Switzerland is one of the cleanest financial centers in the world.

Can accounts be opened anonymously in Switzerland?

No, that is not possible. Banks follow so-called "know-your-client" rules which require staff to identify the person opening an account and, where necessary, to establish the identity of the beneficial owner. Incidentally, it was the banks themselves who drew up the extremely strict, internationally-recognized rules for verifying the identity of their clients as a deterrent to money of criminal origin.

But numbered accounts are anonymous aren't they?

No. Contrary to what one might gather from thrillers and the media, there is no such thing as an anonymous account in Switzerland. The name of the holder of a numbered account is known, though only to a small group of people inside the bank. As far as bank client confidentiality is concerned there is no difference between numbered accounts and any other sort of account.

How compatible is the cross-border information exchange between tax authorities that everyone is now talking about (often in its 'automatic' form), with Swiss bank client confidentiality?

How compatible is the cross-border information exchange between tax authorities that everyone is now talking about with Swiss bank-client confidentiality?

Having one’s privacy protected is a human desire. Bank clients wish freedom for personal development, without interference from others and without being exposed publicly. It is doubtful that anyone should want to live in a reality such as the one described in George Orwell’s novel "1984", which was published in 1949. As a result, personal privacy enjoys constitutional protection, just as does, for example, personal freedom, freedom of religion and conscience, or freedom of speech.

This protection is, however, not absolute. It ends where the law places limits on it. This manifests itself whenever personal privacy is specified in more detail, such as in the case of data protection or bank-client confidentiality. When bank-client confidentiality was introduced by lawmakers in 1934, the intention was not to facilitate tax evasion; this has always been considered an offence in Switzerland. The limitations that have been placed on bank-client confidentiality in recent years – for example the cross-border information exchange between tax authorities – never aimed to 'abolish' personal privacy, but rather to put a stop to the abuse thereof.

From bank-client confidentiality ...

Bank-client confidentiality establishes professional confidentiality comparable to that of doctors, lawyers or priests. Its aim is always to protect personal privacy – not to protect assets from the tax authorities. Furthermore, bank-client confidentiality is not the primary reason for the success of Swiss banks. This lies instead with their know-how in wealth management, the stability of the Swiss legal system, an outstanding infrastructure and regulation which to date has been business-friendly.

... to the exchange of information ...

Criminals in particular do not enjoy protection under bank-client confidentiality, as banks have always been under obligation to disclose client information (not only in cases of unlawful conduct), such as for example:

  • in civil proceedings (inheritance or divorce, for example),
  • in debt recovery and bankruptcy proceedings,
  • in criminal proceedings (also in cases of tax fraud),
  • in financial-market authority proceedings,
  • in cross-border information-exchange proceedings.


... in particular in tax legislation

International standards are taking on an increasingly important role with regard to when a Swiss bank is required to disclose client information to tax authorities. These standards are developed by organisations such as the OECD, of which Switzerland is a member. Switzerland is taking part in these developments for the very reason that tax evasion was never legal in our country. Since 2009, administrative assistance in the case of tax evasion has been part of Swiss double-taxation agreements in accordance with the OECD standard. Further to this, on October 9, 2013, our Government resolved to sign the Council of Europe and OECD’s convention on administrative assistance in tax matters. In addition to the exchange of information – which as an international standard in future may also be 'automatic' – there are other means for the prevention of tax evasion. These include:

  • the Swiss withholding tax on income from capital from domestic sources (interest and dividends),
  • the agreement with the EU on savings taxation,
  • the flat-rate withholding tax agreements with Great Britain and Austria,
  • the FATCA agreement with the US.

A look to the future

Bank-client confidentiality will not disappear, but it is undergoing far reaching-changes, particularly in tax-related issues. Taking an active role in this change is part of our Association’s and the Swiss Government’s financial-centre strategies and will continue to be an area of focus for us in the near-term. One element of this is that the Swiss banks continue to resolutely implement their strategy of tax compliancy. 

However, the legislator has recently sharpened the sanction for violation of bank-client confidentiality, which now includes cases in which somebody passes “stolen” bank-client data on or sells it to a third party. This amendment entered into force on July 1, 2015. 

What is AEIO?

The automatic exchange of information with other countries is implemented by Swiss banks . The Swiss Bankers Association provides you with an overview of what AEOI is, how it works, and why the Swiss banks are in favor of it, despite the fact that it is not perfect. Learn more here.

Text and picture source: swissbanking.org Swiss Bankers Association 

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