The Awful Truth About Swiss Bank Accounts
There is an “awful truth” about Swiss bank accounts. Awful in that their reality pales in comparison with Hollywood’s and the mass media’s depiction of these financial instruments. CNBC’s Mark Koba wrote back on August 20:
Mention the words Swiss bank account and it can bring to mind corrupt politicians hiding vast sums of money, drug lords laundering ill gotten gains or filthy rich American citizens trying to avoid paying taxes. The reality, however, is quite different from the myths.
“Swiss banks must verify your identity and won’t accept your business if they think it is illegal, says Ken Wassell, CEO of Los Angeles, California-based Offshore Company, a firm that aids its customers in overseas financial services. “About five percent of applications a year are turned down because of possible fraud,” says Wassell.
It doesn’t stop there. James Nason, spokesman for the Swiss Bankers Association, adds that Swiss banks must not only verify your identity but also verify the source of the funds you are putting in the bank. “And besides that,” says Nason, “the beneficiary of the funds must also be positively identified.”
Screening process? Background checks? How boring. Lie to me, Tom Clancy. Lie to me, Ian Fleming. Nevertheless, there is some truth behind the myth of the Swiss bank account. Koba explained:
That’s not to say there isn’t secrecy in having a Swiss bank account. Any Swiss banker today who reveals your information without your consent risks prison time by law. And there is secrecy when it comes to issues like inheritance or divorce. It’s up to plaintiffs to prove someone has a bank account in Switzerland, if they want access to it through a lawsuit.
But, there is a limit to the extent of that secrecy. From the CNBC piece:
There are, of course, exceptions to the secrecy rule, especially concerning crimes such as gun running and drug trafficking. Swiss banks are forbidden by law to accept money which they know might be as a result of a crime.
And when it comes to names, the so-called secret numbered accounts in Swiss banks are not completely secret.
“Yes, banks can set up an account by number only,” says Nason, “but you will have to go through the same process to open the account as a named account—at greater expense. Your name will be known to several upper management types in the bank and there are records of ownership.”
Another common myth of Swiss bank accounts is that Americans use them for the purpose of tax evasion. Koba noted:
Any American Swiss bank account holder does not pay taxes to Switzerland. But if an American is looking to hide money from the IRS, a Swiss bank account won’t do much good. As of January 1, 2001, unless a foreign bank obtained a status of QI or “qualified intermediary,” the bank must report to the IRS all earnings received from the U.S. and the names of the beneficial owners. If the bank does have a QI, which keeps a bank’s secrecy if it follows strict regulations, U.S. citizens can only have money in the bank if they are willing to disclose their identity to the IRS.
Finally, there are misconceptions about the cost of opening up one of these accounts, as well as their true purpose. According to CNBC’s Koba:
If you still want to open an account, it’s not complicated but it does take some time, effort and of course, money. A search on the Internet for Swiss bank accounts suggests that you don’t need much money to open an account, but that is one of the myths about how the system works.
Nason says that while the deposit amount varies for each of the more than 400 banks in Switzerland, most of them are looking to invest the money for a depositor, and not just hold it to generate a minimal amount of interest.
“I get letters nearly once a month from Americans asking about Swiss banks,” says Nason. “I recently got one from a man in Virginia, asking for help in finding a bank to hold his retirement savings account for him and his wife. But that’s not what Swiss banks really do. They are into professional asset management. A six-figure sum is usually the starting point for opening an account.”
Wassel says it’s more like $250,000.
Source:
“Swiss Bank Accounts: Separating Fact From Fiction”
Mark Koba
CNBC, August 20, 2008
October 3rd, 2008 at 9:26 am
The Awful Truth about U.S. Shell Companies:
Check out this invitation from “Harvard Business Services” in Delaware to attend a seminar entitled “Delaware: Better Than Offshore”:
“In today’s shrinking world the European private client, who once would have looked to offshore jurisdictions for anonymity, security and tax-free solutions, is now compelled to look toward the USA for the winning combination.”
And the FATF’s (world’s leading anti-money laundering authority) June 2006 Mutual Evaluation report of the U.S. said:
“In many respects, registered agents in Delaware are in competition for business with trust & company service providers operating in traditional offshore centres. The style of advertising by many tends to portray an image that the standards of secrecy offered are greater than those in most offshore financial centres.”
and later in the same report:
“The FBI believes that U.S. shell companies and bank accounts arranged by certain nominee incorporation services firms are being used to launder as much as USD 36 billion a year from the former Soviet Union.”
Conclusion: If you want real secrecy and asset protection forget Switzerland and just incorporate an LLC in Delaware, Nevada or Montana.
October 5th, 2008 at 10:07 am
Thanks for the comment William Tell.
On the topic of shell companies, how about this awful example of an American firm using overseas shell companies for tax evasion purposes? From the Boston Globe on March 6 (full article here):
Hey, the Defense Department had to save money somewhere in order to recoup the costs for those $640 toilet seats and $436 hammers, right?