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Switzerland is the offshore financial centre par excellence.
An independent, neutral, politically stable community with a sound, freely convertible currency and a favourable location in the heart of Europe, the Swiss have been managing money for wealthy people for longer than two centuries.
It is often assumed that bank secrecy - the prime feature, at least for the novice, of Swiss banking - was a Swiss invention. Not so. The first written reference to mandatory bank secrecy is to be found in the statutes of the Banco Ambrosiano, dated 1593. In 1693 Louis the Xlll of France issued a Royal Decree insisting that bank secrecy is "absolument necessaire dans la negotiation de banque". What the Swiss have done is to equate bank secrecy with individual freedom, placing this at the heart of their legal system.
1. Personal Banking in Switzerland
2. Swiss Bank Secrecy Regulations
Personal Banking in Switzerland
With bank secrecy so deeply embedded in law, statistics as to what two centuries of money
management represent today in figures is a matter of conjecture. However, in 2004 the Swiss National Bank estimated that private funds under Swiss management totalled about CHF 3'546 billion - equivalent to between a third and a half the world's off-shore private banking market. The assumption is that the figure has now risen to over US$ 3’900 billion of which about two thirds is to the account of non-residents.
Some 35% of the world's private funds under foreign management are managed from Switzerland, compared with 21% from the United Kingdom and 12% from the United States.
While about one half is reputed to be held by the big 3 - Union Banks of Switzerland, Credit Suisse and CS First Boston - there are some 600 different banks, 4400 banking offices with 126’000 employees and 4’000 money managers to handle the balance.
What does this all mean to the private investor who prefers his investment portfolio to be cared for outside his domestic banking environment, and starts to think Swiss?
He can certainly consider that if so much has been managed for so long, then the track record and the facilities available must be of a largely acceptable standard. He will also remark that in many respects Swiss banking has become more open and easier to understand in recent years with the new balance sheet rules requiring greater disclosure; a more selective approach to secrecy; and more flexibility in the charges.
However, when it comes to finding his way through the maze of money managers and bankers to seek out a sympathetic ear, the private investor is faced with an "embarass de richesse" in more than one way.
Which way shall he turn? To the first UBS branch he sees in St. Moritz; to the imposing Credit Suisse headquarters off the Bahnhofstrasse in Zurich; or should he try to find a password to the discreet and carefully guarded portals of one of the senior private banks?
And then, will he be welcome? Will what he wants to do really gain the consideration he believes it deserves? After all, a prominent Swiss banker has published that he won't accept an account under SWF 2 million and that someone with US$ 2-3 million no longer qualifies as a High Worth Individual, who can expect special attention.
These are disconcerting words, particularly to those, will not wish to go too far too soon and need the reassurance of a warm reception and the promise of continuity in the management of their affairs.
A solution which has appealed to many is the service of a Swiss Bank with a solid capital structure.
The bank should carries out retail banking, especially in its residential area, Canton Ticino, but its particular strengths - and its main focus for the future - are in assets management and selected capital market activities.
As such it has developed and it retains qualities which in today’s international money centers are both rare and of real value to the private investor, namely:
o the tradition of the house, by which the clients remain faithful to the Bank from generation to generation,
o the Bank's profound experience in depository account accumulated and handed down over the years
o the carefully selected staff, whose fidelity is essential to client and our company
The Bank is a very important element of the Swiss Banking scene. In a peculiarly Swiss way they represent that emphasis on reliability, honesty, local character and regional independence which is such an essential feature of the country’s political and economic health.
With the signature of a management mandate you confer the management of your capital, without power of substitution, to P.d.P.Portatrice di Prosperità SA in order to manage and administer in his name and on his behalf all your property registered at the Gotthard Bank under the account mentioned in the said mandate.
Together with Gotthard Bank we provide a sound and solid home for the private or corporate account which is looking for:
o flexibility and diversification in the investment,
o the assurance that we will never make a speculative investment unless instructed to do so,
o personal warmth and engagement,
o the emphasis placed on the individuality of each account.
o absolute discretion and confidentiality.
You can have a look at an example of management mandate of P.d.P.Portatrice di Prosperità SA, which contains the investment directives. The client decides about the mix of the following four objectives and their proportional risk reward ratio.
o Maintenance of capital : based on fiduciary deposits with very low risk reward
o Yield (bonds) : based on bond with high rating with low risk reward
o Growth (equity) : based on equity from solid company with medium risk reward
o Speculative (futures, options) : based on futures and options high risk reward
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Swiss Bank Secrecy Regulations
For 700 years the Swiss Confederation has fiercely defended the right to freedom and privacy. As an integral part of this protective shield, individual liberty and private property are considered indivisible under the Swiss Constitution. Equal protection of the law is extended to both Swiss and foreign nationals. It is therefore natural for the Swiss Law to recognise a banker's obligation to maintain the strictest confidence in respect to his client's affairs - an attitude adopted in varying degrees throughout the world.
Where Switzerland is probably unique, is in the Swiss Banking Law of 1934, reinforced by a 3:1 referendum majority in 1984 and by a more recent Federal Council Declaration, which makes disclosure of a banking secret a criminal offence. Bank officers, employees, agents and advisors are liable throughout their lives to automatic prosecution and stiff penalties of imprisonment and fine in the event of disclosure. Similar penalties apply to those who incite others to break secrecy.
Consistent with the concept of "irreproachable conduct" which underlies the Swiss banking law and practice, Swiss Banks are bound by law (notably an amendment to the Swiss Penal Code dated 23.3.1990) and by their own self-imposed Code of Conduct (dated 1.7.1987) to exercise extreme care in the performance of the due diligence when opening a new account.
Serious cases of non-observance, which include the shielding of criminal activities or the facilitating of money laundering, carry personal penalties for the bankers involved, reaching to disqualification and imprisonment.
Before opening an account it is therefore necessary for the banker to know his client (performing whatever due diligence he feels appropriate); and for the client to complete a Declaration of Diligence which evidences his understanding of the limitations of the Swiss Bank Secrecy, and identifies the true beneficiary of the account. If the account is opened by a legal entity (say a Company, an Anstalt or a Trust) the beneficiary of that entity must be disclosed.
However, having established his bona fide, a Swiss account holder can be sure that his banker is strictly bound by law to ensure that secrecy in respect of his account which will be lard aside only if:
o an action is brought against the supposed beneficiary under an international judicial assistance convention governed by the 1983 Swiss IMAC (International Mutual Assistance in Criminal Matters) Act, or by treaties with similar effect with the US and some other countries, and
o in respect to crimes which form part of the Swiss Penal Code.
Although Swiss Bankers are debarred by their Code of Conduct from providing active assistance in the flight of capital or in tax evasion, it is to be noted that matters of taxation are not criminal but administrative offences in Switzerland, and that Switzerland has no exchange control regulations. The Swiss Government takes the view that each country has to devise its own means of ensuring that its citizens meet their obligations to the state, and that these are outside the competence of Switzerland.
This attitude should be compared with that which will seemingly rule elsewhere in Europe should the Multi-National Convention on Mutual Administrative Assistance in Tax Matters, launched by the OECD and the Council of Europe, come into effect.
Its scope is extremely wide, covering inter alia:
o Exchange of information on personal tax matters; simultaneous tax examinations; assistance in recovery; and service of documents - whether the person affected is a resident of the country concerned or not, in respect to all forms of taxation including taxes on income, profits, capital, inheritance, gifts, property, etc.
o Joint prosecutions, and investigations to acquire information not available on tax files,
o The provision of information without request if there are grounds for supposing that there may be a tax loss elsewhere; that tax reductions in one place may give rise to tax losses in another; that business dealings through various jurisdictions may create tax savings; or that transfers between related parties may be artificial,
o Transfer of information between countries in respect to apparent anomalies in the tax information received; recovery of tax claims by one state on behalf of another as if the tax were due to the first state; publication of information in court proceedings and judgements; and use of information received for purposes other than tax matters.
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