By D. Tasche

Switzerland is a Central European country that is renowned for its impeccable Alpine mountains, lakes, watches and chocolate. The country is also famous for being a global financial capital with a long history of great secrecy, influence and wealth. Learn how you may be able to turn your Swiss bank account fantasy into a reality, as long as you play by the rules.

How did the Swiss banking industry get started?

During the late 15th and early 16th centuries, many Reformation Protestants (Christians) moved to Switzerland to find refuge from the Catholic Church. They didn’t view collecting interest on money as a sin, so that was the time modern banking started. For example, you could deposit your gold in the bank, as opposed to just doing barter with the money you have in my bank, you could receive credit from the other business classes, and you could start generating money. Whatever you didn’t need I could charge interest on it or I could start lending it out for other purposes and other business ventures.

The next step after charging interest was the management or investment portion of banking. That was the start of wealth management. The Swiss started this business in large part because of the their commercial privilege of being located on the best trading routes between Western, Central, and Eastern Europe, as well as being able to control the passageways through the Alps, which provided access into Italy and Southern France. 

Geneva is primarily where most of the private banking started. As a result of these large businesses wanting to do something other than just deposit money with an institution. They began using their gold and money to finance ships to the New World, build new train stations, etc. That is how some of the companies became universal banks, where they provided services for checking, credit, private banking, as well as financing on what we now view as merchant banking, or investment banking businesses.

As a result of the French Revolution and some of the other events in the 1700’s, the Swiss realized that a lot of people wanted to deposit their money in Switzerland. The Swiss made a point to not ask clients where their money came from, so they enacted the Banking Law of 1934 that made it illegal for a Swiss bank to reveal the name of an account holder.

Why did the Swiss government practice non-disclosure banking and political neutrality?

Switzerland’s economy is extremely tiny, but the amount of financial deposits that it has is tremendous. They created an industry critical mass of tax advisors, accountants, structures, money managers, etc. Switzerland is also a landlocked country in the Alps, so the majority of the global trading companies that buy and sell coal, iron, gold, steel, platinum, bananas and commodities in general, remained in Switzerland. These companies were based in Zurich, Basel and Geneva because they paid very low taxes. 

Around 1850, the big private financial capital of the world was Belgium because it was a crossroads for commerce due to its access to the North Sea and close proximity to the Netherlands, Germany, France. It also remained neutral during war time, but could get in on the financial action of war on different sides, by taking their money and managing and financing their wars for them. Switzerland is also a politically neutral country. The Swiss and Belgians have a permanent interest in their permanent interest, which is money. That is why a lot of companies are so comfortable with having their money in Switzerland.

Can the average person open a Swiss bank account?

You can open a checking account almost anywhere, however the Swiss no longer accept accounts from certain nationalities, primarily the United States. After the 9/11 terrorist attacks and some newly enacted legislation, the U.S. has forced other countries to comply with American laws and divulge who their financial clients are. The cost of compliance is very expensive and that’s why a lot of banks are opting out of handling certain nationalities.

Previously, the responsibility was for the individual U.S. taxpayer (resident or citizen) to divulge what they had to the U.S. government.  It was called the Citizen Account Report (the FBAR form). Now, the shoe is flipped on the other side and the foreign financial institution has to report to Uncle Sam and the IRS and say, “Mr Smith from Delaware has an account with us in Zurich and here is the reportable income.”  What gets you in trouble in the United States is a failure to report, not having assets overseas. You will get a penalty for not having declared the assets and you will have to pay back taxes. If the taxes are very high you may have to go to jail. Those are all the rules. 

Also, the Foreign Asset Tax and Corruption Act and the Office of Foreign Asset Control, works to make sure that the foreign account is not from a terrorist, money launderer, drug dealer, or a nefarious person trying to clean money through the financial system, so it appears to be legal. 

Are there any major Swiss bank account scandals?

Raul Salinas de Gortari, the brother of the President of Mexico (1988 - 1994), was taking bribes from drug dealers and other bad people, and he ended up depositing all of the money in a Swiss private bank that was a branch of Citigroup. At the time, every bank had a branch in Switzerland because it was a business that until the government says that something is illegal, everybody does it. When it became news that Raul was doing the President’s dirty work, he had to turn over his account with 150 million dollars in it and go to jail. 

Rules of the Road

Here is a quick list of Swiss Banks:

• Alternative Bank Schweiz ABS
• Banque Bonhôte & Cie SA
• Banque Cantonale de Genève
• Bank Coop
• Bordier & Cie
• Credit Suisse
• Gutzwiller & Cie, Banquiers
• Graubündner Kantonalbank
• Hinduja Bank (Switzerland) Ltd
• ICB Financial Group Holdings AG
• Julius Baer Group
• Landolt & Cie
• Lienhardt & Partner Privatbank Zurich
• Migros Bank
• Rahn+Bodmer Co.
• Reichmuth & Co.
• SIX SIS AG
• UBS AG
• Union Bancaire Privee
• Vontobel
• WIR Bank
• Zurich Cantonal Bank

Photos courtesy Switzerland Tourism, Chateau De Chillon, Francois Dubois, Banques Suisses