The first Swiss laws protecting customer identities were codified in 1713 AD by authorities in Geneva – a city that by then had become a haven for the wealth of French royalty and European elites.
Since then, the notion of secrecy has always been at the center of all banking laws formed in Switzerland, a small European country nestled between the snow-capped Alps.
And about 80 years ago, in 1934, a law made it a criminal offense to share customer information with foreign countries.
Article 47 of the Swiss banking law states that without the customer’s consent and in the absence of a criminal complaint, revealing customer details to almost anyone, including the government, would be a crime. A violation could land the person in question in prison for up to five years.
And, over the years, the country has become a magnet for tax evaders from around the world. They parked their money to evade taxes in their countries – undermining their government’s finances.
But something of a turning point came in May 2014 when more than 50 countries signed a declaration prepared by the Organization for Economic Co-operation and Development. The countries, for the first time, agreed to a global exchange of information on the financial information of their respective taxpayers. Switzerland has also promised to share information on customers’ bank accounts.
But earlier this year, a data leak from Credit Suisse once again sparked a debate over the Alpine country’s banking laws. The alleged leak revealed that the bank’s customers were involved in torture, drug trafficking and money laundering.
Meanwhile, back home in India, the hunt for black money continues. Prime Minister Narendra Modi came to power in 2014, promising to bring him back. But in July 2021, a news agency reported that Minister of State for Finance Pankaj Chaudhary had told the Lok Sabha that the government had no official estimate of the black money kept in Swiss banks over the past 10 years. years.
Since 2018, India and Switzerland have had a system for the automatic exchange of tax information. In this context, in September 2019, for the first time, detailed financial information on all Indian residents with accounts in Swiss financial institutions was provided to the Indian authorities.
But most experts believe that the official data given by the Swiss banks is that of the legal wealth parked by the Indians there. Black money reaches Swiss banks after passing through 5-6 tax havens, such as Jersey Island To Havana. This process is called stratification, which makes it very difficult for authorities to trace the trail.
Meanwhile, India has passed a black money law that arms its tax officials to pursue citizens with bank accounts and secret foreign assets.
Citing lawyers, a daily financial report said nearly half a dozen appeals were due to be heard in Swiss courts. The petitions want to prevent Swiss authorities from sharing information with India.
The grounds for appeal are that Indian law can be applied retroactively and can be used to impose criminal penalties that would be more severe than those that would have applied at the time the offenses were originally committed.
Data from the Swiss National Bank shows that in 2020, funds held by Indian individuals and companies in Swiss banks reached their highest level in 13 years. Obviously, despite all the negative connotations, Swiss banks continue to be popular.