

                        SWISS SECRECY: NOT A LEGEND

               Swiss banking is often identified in America with
          banking secrecy.  Popular media stories have created
          two contradictory pictures: that Swiss secrecy hinders
          law enforcement officers from prosecuting criminals,
          while others claim that Swiss secrecy does not exist
          anymore and is as full of holes as a Swiss cheese.
          Neither is true.
               The basic position in Swiss civil law is that the
          information concerning a customer and the customer's
          financial dealings is protected as part of the
          individual's legal right to privacy.  In Switzerland,
          this has been made part of Article 28 of the Swiss
          Civil Code, and not only protects the information, but
          makes the person violating the secrecy liable to pay
          damages to the customer.  In addition, the banking law
          makes it a criminal offense in Switzerland for a banker
          to divulge information about a customer in violation of
          the law, punishable by fine or imprisonment.  Both the
          bank and the bank employee may be subject to various
          penalties if a violation occurs.
               A bank can only disclose information when
          authorized to do so under existing statutory provisions
          or by a Swiss court order, which must be founded on
          law.  Secrecy is interpreted so broadly that it is
          illegal for a bank to say whether or not a person is a
          customer, since if the bank failed to do so it would be
          implying that the person was a customer.
               The right of secrecy is a right belonging to the
          customer, not the bank.  It is the customer's privacy
          that is protected by law.  The customer can waive the
          secrecy, but the bank cannot.  For example, the
          customer may waive secrecy and ask the bank to give a
          credit reference to a specific creditor.  But such a
          waiver is only valid if the customer acts voluntarily
          and not under duress.  Therefore, waivers that were
          signed pursuant to foreign court orders compelling a
          customer to sign a waiver may well be invalid.    A
          financial institution cannot ask the government for an
          order waiving secrecy.  Only the customer can waive the
          secrecy.
               Contrary to an opinion current in America, Swiss
          secrecy is not absolute.  It can be overridden by
          statutory provisions which compel the giving of
          information.
               Such rules requiring disclosure of information --
          usually with a limited scope -- can be found in Swiss
          inheritance law (you really wouldn't want your
          legitimate heir going into the insurance company with
          your death certificate to be told they can't tell him
          anything), in enforcement of judgments from creditors,
          in bankruptcy or in divorce.
               The most widely known limitation on secrecy is in
          treaties concerning Swiss cooperation in foreign
          criminal matters.
               In a criminal investigation conducted in
          Switzerland, of a Swiss crime committed by a Swiss
          citizen, secrecy can be lifted by court order.  The
          treaties extend this possibility to foreign crimes by
          foreign citizens in foreign investigations, but only in
          the limited circumstances spelled out in the treaties.
               Before a foreign legal assistance request for
          Swiss financial records can be honored the following
          conditions must be met:
               1)  Compulsory disclosure is only possible if the
          offense that is being prosecuted is punishable as a
          criminal offense in both countries (the requesting
          state and Switzerland).
               2)  In tax cases assistance is available to
          foreign prosecutors only if the investigated violation
          of foreign tax laws would be qualified under Swiss law
          as a tax fraud and not merely as tax evasion.  Tax
          evasion is simply the failure to declare income or
          assets for taxation.  Tax fraud is distinguished by the
          fact that "fraudulent conduct" is involved.  Normally
          "fraudulent conduct" can only be assumed if forged
          documents are used.
               There is a special provision of the Swiss-United
          States Treaty on Mutual Assistance in Criminal Matters
          that provides Swiss legal assistance to U. S.
          prosecutors even in tax evasion cases if they are
          conducting an investigation against an organized crime
          group.
               3)  As a general rule, the information obtained in
          Switzerland through a legal assistance procedure may
          not be used for investigative purposes nor be
          introduced into evidence in the requesting state in any
          proceeding relating to an offense other than the
          offense for which assistance has been granted.
               It must be emphasized that foreign authorities or
          foreign courts cannot directly ask a Swiss financial
          institution for information. Even in cases in which
          legal assistance can be granted and therefore secrecy
          is lifted, only a Swiss court order - which in these
          cases is based upon a foreign request for legal
          assistance - can validly lift secrecy.
               Considering this, it can be said that secrecy is
          strict and is only put aside in case clearly defined by
          Swiss law and pursuant to Swiss rules.  Secrecy is,
          however, not absolute and does therefore not protect
          criminals.
               Switzerland has long served as a magnet for the
          money of wealthy foreigners who perceive the world as
          buffeted by over-taxation, over-regulation and
          political turmoil. They are attracted, of course, by
          the confidentiality and discretion that have been a
          hallmark of Swiss bankers since the French Revolution,
          when they offered financial refuge to French
          aristocrats. In 1934 secrecy was enshrined into law.


