Running head: BANK SECRECY
Bank secrecy is a legal principle in parts of the world that provides for the secrecy of a bank and its customers. Banks under the protection of secrecy are not allowed to provide information about the accounts of their customers to the authorities unless there are special circumstances, such as filed criminal complaints about the customers (Kingsbury, 2009). The main features of banks that provide bank secrecy include personalized customer care and more advanced security systems to safeguard both identity and capital of the customer. For these reasons, their services are more expensive than similar services by regular banks (Cartwright, 2005). Authorities in many parts of the globe have expressed their concern with bank secrecy. Provisions in European countries such as Switzerland, Austria, and Luxembourg and so on encourage tax evasion by citizens of bordering nations such as Germany and France. In 2009 growing tensions became a source of concern among many members of the European community prompting complains to the G20 and OECD. This led to the imposition of sanctions and pressuring of affected countries to change their banking procedures. The result was the implementation of tax treaties in most countries and a relaxation of the rules. In Switzerland, this led to the removal of a distinction between tax fraud and tax evasion for non-citizens. The lack of a distinction was previously a source of concern because the Swiss banking system did not consider tax evasion complains. The pressure is also expected to result in relaxation of tax rules in Austria and Luxembourg.
In Switzerland, Bank secrecy was created by the Swiss-banking act in 1934 and resulted in the formation of the world famous Swiss bank. Bank secrecy is one of the fundamental principles of private banking. Creation of private banking is Switzerland saw the emergence of Swiss banks as the most reputable banks in the world. Literature and films portray them model-banking systems where all the influential persons, celebrities and leading politicians have accounts. In the list of people in the list of prominent Frenchmen with Swiss accounts included the richest men in France in the day, including the Peugeot brother among other wealthy families. Following a public scandal involving a member of parliament in France denouncing the increasing tendencies of tax evasion by politicians, imminent French personalities including public figures such as judges, the Swiss government responded by providing a forum for private banking in the country (Kingsbury, 2009). The politician, Fabien Alberty called the people who stored their money in Switzerland traitor and accused them of not having the best interests of their country at heart because they stashed their money in Switzerland. Alberty went as far as accuse the Swiss of lending money to Germans. In this period, the Germans and the French were enemies and foes; they fought the Franco- Prussian war, in which France lost a rich province and later the First World War. The Second World War was to come in later years. Since the scandal and the subsequent act providing for privacy of account holders, Swiss banks acquired their high stature owing to their numbered bank accounts. This is a system of banking where the account number is known only the account holder and a few top ranking bank officials. This creates privacy from scrutiny for the banker (Kingsbury, 2009).
The main strength of private banking is that the account holder is free from the prying eyes (Cartwright, 2005). This system is ideal for people who crave privacy, for example, rich people who do not want to disclose real figures of their net worth due to concerns that upon realizing their true value, the public sees that as extortionist and the consequently lose large amounts of their business to rivals. However, people...
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