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Encyclopedia > Bank Secrecy

Bank secrecy (or bank privacy) is a legal principle under which banks are allowed to protect personal information about their customers, through the use of numbered bank accounts or otherwise. Effective bank secrecy is better achieved in certain countries, such as Switzerland or in tax havens, where offshore banks adhere to voluntary or statutory levels of privacy. Advances in financial cryptography (e.g. public-key cryptography) make it possible to use anonymous electronic money and anonymous digital bearer certificates to achieve financial privacy and anonymous internet banking. Created by the 1934 Swiss Banking Act which led to the famous Swiss banks, the principle of bank secrecy is sometimes considered one of the main aspects of private banking. It has also been accused by NGOs and governments of being one of the main instrument of underground economy and organized crime, in particular following the Class action suit against the Vatican Bank in the 1990s, the Clearstream scandal and September 11, 2001. A bank is an institution that provides financial service, particularly taking deposits and extending credit. ... Numbered bank accounts are offered by Swiss banks to the majority of their clients. ... A tax haven is a place where certain taxes are levied at a low rate or not at all. ... An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (aka tax haven) that provides financial and legal advantages. ... Privacy is the ability of an individual or group to stop information about themselves from becoming known to people other than those they choose to give the information to. ... Financial cryptography (FC) is the use of cryptography in applications with strong financial motivation. ... Public key cryptography is a form of cryptography which generally allows users to communicate securely without having prior access to a shared secret key. ... Electronic money (also known as digital money, electronic currency, digital currency or internet money) refers to money which is only exchanged electronically. ... Financial Privacy is a blanket term for a multitude of issues: Financial Institutions ensuring that their customers information remains private to those outside the institution. ... The introduction of this article does not provide enough context for readers unfamiliar with the subject. ... 1934 (MCMXXXIV) was a common year starting on Monday (link will take you to calendar). ... Swiss banks are world-renowned for their stability, privacy and protection of clients. ... Private banking is a term which covers both of the services which banks give to individuals usually with liquid wealth of above 1 million dollars, and also the division of that entity which does checking, savings, and loans for that clientele. ... The underground economy consists of all trade that occurs without detection by government so that commerce and income are not taxed. ... Organized crime is crime carried out systematically by formal criminal organizations. ... The class action suit against the Vatican Bank and others was raised by attorneys Tom Easton and Jonathan H. Levy in San Francisco, California on November 15, 1999. ... Clearstream Banking S.A. (CB) is the clearing division of Deutsche Börse, based in Luxembourg. ... A huge plume of smoke and fire can be seen emerging from the North Tower. ...

Contents


Reasons to use bank secrecy

There are a number of reasons to use banking privacy:

  1. To hide it from someone such as a wife or other family members.
  2. To hide it from the employer. (Many employers restrict the ability of their staff to trade shares to prevent conflicts of interest).
  3. To store embezzled money.
  4. To launder money.
  5. To prevent confiscation of money, e.g. in the case of potential bankruptcy.
  6. Tax evasion (banking secrecy extends to tax agencies being refused permission to examine accounts).
  7. Tax resistance (by libertarians, or others, who oppose the institution collecting the tax).
  8. For any other reason which requires no-one being able to identify the amount of money you have or have earned/acquired.
  9. Privacy from press or publicity. Many newspapers annually publish "rich lists", which are list of the richest people in a country or an area. Many factors including the size of an individual's bank balance can be taken into account in drawing conclusîons as to the size of his wealth.
  10. Protection from criminals. In some countries, criminal gangs can access information on bank customers. This might interest criminals, such as kidnappers, extortionists, or identity thieves.
  11. Protection from spongers. This might include charities, venture capitalists seeking seed money, family members, beggars, or investment salesmen.
  12. Simply for privacy. The possession of liquid wealth attracts many types of people who believe that they should have a share of that wealth. but can also include honest people who have a particular financial need and see someone with wealth as a target. Being visibly wealthy also attracts publicity, which is not always welcome.

Embezzlement is the fraudulent conversion of property from a property owner. ... Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source and destination of the money in question. ... This article contrasts tax evasion, tax avoidance, tax resistance and tax mitigation. ... A tax resister resists or refuses payment of a tax because of opposition to the institution collecting the tax. ... This article is about the classical liberal individualist philosophy that strongly emphasizes private property rights conjoined with civil liberties. ... Privacy is the ability of an individual or group to stop information about themselves from becoming known to people other than those they choose to give the information to. ...

The 1934 Swiss Banking Act

Bank secrecy was invented by the 1934 Swiss Banking Act following a public scandal in France, when MP Fabien Alberty denounced tax evasion by eminent French personalities, including politicans, judges, industrialists, church dignitaries and directors of newspapers, who were hiding their money in Switzerland. He called these men of "a particularly ticklish patriotism", who "probably are unaware that the money they deposit abroad is lent by Switzerland to Germany". The Peugeot brothers and François Coty, of the famous perfume family, were on his list. Since then, Swiss banks have acquired world-wide celebrity due to their anonymous numbered bank accounts, which critics such as ATTAC NGO alleged only help legalized tax evasion, money laundering and more generally the underground economy. [1]. This article contrasts tax evasion, tax avoidance, tax resistance and tax mitigation. ... Defense of the homeland is a commonplace of military patriotism: commemorating the students at the École Polytechnique, Paris, 1814 // Introduction Patriotism denotes positive attitudes by individuals to their own civic or political community, and to actions towards other countries, or to non-civic groups, are not generally described as patriotic... Peugeot is a major French car brand which is today part of PSA Peugeot Citroën. ... François Coty (May 3, 1874 – July 25, 1934) was a French perfume manufacturer and the founder of the right-wing paramilitary group Solidarité Française. ... Swiss banks are world-renowned for their stability, privacy and protection of clients. ... Numbered bank accounts are offered by Swiss banks to the majority of their clients. ... Association for the Taxation of Financial Transactions for the Aid of Citizens (ATTAC - Association pour la Taxation des Transactions pour lAide aux Citoyens) is an activist organization for the establishment of a tax on exchange transactions. ... Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source and destination of the money in question. ... The underground economy consists of all trade that occurs without detection by government so that commerce and income are not taxed. ...


Under the principle of bank secrecy, privacy is statutorily enforced, with Swiss law strictly limiting any information shared with third parties, including tax authorities, foreign governments or even Swiss authorities, except when requested by a Swiss judge's subpoena [citation needed]. However anonymous banking is not strictly true as a term as all Swiss bank accounts, including numbered bank accounts, are linked to an identified individual under Swiss banking law. This law only permits a bank to share information with others in cases of severe criminal acts, such as identifying a terrorist's bank account [citation needed]. Any bank employee violating a client's privacy is punished quite severely by law. Many offshore banks, located in tax havens such as in the Cayman Islands and Panama, also have strict privacy laws. Privacy is the ability of an individual or group to stop information about themselves from becoming known to people other than those they choose to give the information to. ... A subpoena is a writ commanding a person to appear under penalty (from Latin). ... Numbered bank accounts are offered by Swiss banks to the majority of their clients. ... An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (aka tax haven) that provides financial and legal advantages. ... A tax haven is a place where certain taxes are levied at a low rate or not at all. ...


1970 US Bank Secrecy Act

Main article: Bank Secrecy Act

The Bank Secrecy Act (or BSA) was passed by the Congress of the United States in 1970. ...

Criticisms

Numbered bank accounts, used by Swiss banks and other offshore banks located in tax havens, have been accused by NGOs such as ATTAC of being a major instrument of the underground economy, facilitating tax evasion and money laundering. After Al Capone's 1931 condemnation for tax evasion, "mobster Meyer Lansky took money from New Orleans slot machines and shifted it to accounts overseas. The Swiss secrecy law two years later assured him of a G-man-proof-banking. Later, he bought a Swiss bank and for years deposited his Havana casino take in Miami accounts, then wired the funds to Switzerland via a network of shell and holding companies and offshore accounts", according to journalist Lucy Komisar. Joseph Stiglitz, 2001 Nobel laureate for economics, told to Komisar: Association for the Taxation of Financial Transactions for the Aid of Citizens (ATTAC - Association pour la Taxation des Transactions pour lAide aux Citoyens) is an activist organization for the establishment of a tax on exchange transactions. ... FBI mugshot of Capone, 1931 Alphonse Gabriel Capone (January 17, 1899 – January 25, 1947), popularly known as Alfonso Scarface Capone, was an infamous American gangster in the 1920s and 1930s, although his business card reportedly described him as a used furniture dealer. ... Lanskys mugshot (see also the full image with profile) Meyer Lansky (born Majer Suchowliński, July 4, 1902 – January 15, 1983), was a gangster born in Grodno, then part of Polish-Lithuanian Commonwealth occupied by the Russian Empire but now in Belarus. ... This page meets Wikipedias criteria for speedy deletion. ... Lucy Komisar is an investigative journalist. ... Joseph Stiglitz (born February 9, 1943) is an American economist, author and winner of Nobel Prize for economics ( 2001). ... Nobel, (Swedish pronunciation: nou´bell ), can mean: Nobel Prize - awarded annually since 1901, from the request of Swedish inventor Alfred Nobel Nobel Prize in Physics Nobel Prize in Chemistry Nobel Prize in Physiology or Medicine Nobel Prize for Literature Nobel Peace Prize Laureates/Winners of the Nobel Prize By Country...

"You ask why, if there's an important role for a regulated banking system, do you allow a non-regulated banking system to continue? It's in the interest of some of the moneyed interests to allow this to occur. It's not an accident; it could have been shut down at any time. If you said the US, the UK, the major G7 banks will not deal with offshore bank centers that don't comply with G7 banks regulations, these banks could not exist. They only exist because they engage in transactions with standard banks." [1]

In 1999, a class action suit against the Vatican Bank criticized the role of Switzerland during World War II and its financial support of Hitler. Governments of developing countries accused Swiss banks of detaining most of the money stolen by corrupt dictators, which Oxfam International estimate to about $50 billion a year deposited in offshore tax havens, nearly the size of the $57 billion annual global aid budget. 1983 G-7 Economic Summit in Williamsburg, Virginia (left to right) Pierre Trudeau, Gaston Thorn, Helmut Kohl, François Mitterrand, Ronald Reagan, Yasuhiro Nakasone, Margaret Thatcher, Amintore Fanfani. ... 1999 (MCMXCIX) was a common year starting on Friday, and was designated the International Year of Older Persons by the United Nations. ... The class action suit against the Vatican Bank and others was raised by attorneys Tom Easton and Jonathan H. Levy in San Francisco, California on November 15, 1999. ... Combatants Allies: • Poland •UK & Commonwealth • France/Free France • Soviet Union • United States • China . ... Adolf Hitler Adolf Hitler (April 20, 1889 – April 30, 1945, standard German pronunciation in the IPA) was the Führer (leader) of the National Socialist German Workers Party (Nazi Party) and of Nazi Germany from 1933 to 1945. ... Development has meaning in several contexts: // Science and Engineering Biological development of embryos in the context of developmental biology Child development (physical emphasis) or post-natal human development (pediatrics, etc) Software engineering, the methodology and process of development of computer software Technology development in industry, as in Software development New... Oxfam International, founded in 1995, is a confederation of 12 independent, not-for-profit, secular, community-based aid and development organisations who work with local partners in over 100 countries worldwide to reduce poverty, suffering, and injustice. ...


Also in 1999, according to Lucy Komisar, banks "orchestrated a successful e-mail campaign to Congress" to "sink a 'know your customer' regulation proposed by the Federal Deposit Insurance Corporation". The Federal Deposit Insurance Corporation (FDIC) is an independent federal agency created by the Glass-Steagall Act of 1933. ...


In 2001, the United States learn that the Swiss had protected the bank that handled finances for Osama Ben Laden. One of them, the Bahrain International Bank, had funds transiting through non-published accounts of Clearstream, which has been qualified as a "bank of banks" and was involved in one of Luxembourg's major financial scandal. 2001: A Space Odyssey. ... Clearstream Banking S.A. (CB) is the clearing division of Deutsche Börse, based in Luxembourg. ... A scandal is a widely publicized incident involving allegations of wrong-doing, disgrace, or moral outrage. ...


The 2001 USA Patriot Act has created many new rules for U.S. Banks in an attempt to defeat bank secrecy. A list of such banks or shell banks are given to the U.S. banks who are not allowed to wire money to them. All new customers to a US bank must now be asked if they are a U.S. citizen, and if not, if they are a foreign political figure or related to one in any way. They must also give their occupation and state if they expect foreign money to be wired to them. President George W. Bush signing the USA PATRIOT Act in the White Houses East Room on October 26, 2001. ... A shell corporation is defined in Barrons Finance & Investment Handbook as a company that is incorporated but has no significant assets or operations. ...


Endnotes

  1.  a “Offshore banking, the secret threat to America”, Hound Dogs, 2003.

See also

An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (aka tax haven) that provides financial and legal advantages. ... Numbered bank accounts are offered by Swiss banks to the majority of their clients. ... Private banking is a term which covers both of the services which banks give to individuals usually with liquid wealth of above 1 million dollars, and also the division of that entity which does checking, savings, and loans for that clientele. ... Swiss banks are world-renowned for their stability, privacy and protection of clients. ... A safe deposit box (or safety deposit box) is a type of safe usually located in groups inside a vault or in the back of a bank or post office. ... The underground economy consists of all trade that occurs without detection by government so that commerce and income are not taxed. ... The introduction to this article provides insufficient context for those unfamiliar with the subject matter. ... The introduction of this article does not provide enough context for readers unfamiliar with the subject. ...

External links

  • J. Orlin Grabbe homepage, DMT network
  • End of ordinary money, part 1
  • End of ordinary money, part 2

 
 

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