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Current Affairs

Swiss Banks

Date: 24 February 2022 Tags: Miscellaneous

Issue

Whistleblower information related to more than $100 billion held illegally in 30,000 accounts of Zurich-headquartered Credit Suisse has leaked.

 

Background

Credit Suisse is one of the world’s most iconic banks and there were issues related to using the bank to park dirty money.

 

Details

  • The report says that dirty money of human rights abusers, fraudsters, and businesspersons who are under international sanctions are illegally stored here.

  • Swiss banks are already infamous for century-old culture of secrecy, which have allowed them to become magnets for money laundering activities across the globe.

  • International pressure had forced Swiss banks to forego some of its secrecy traditions and provide details of individuals hiding taxable income.

 

Secrecy in Swiss banks

  • Geneva, the most famous banking destination, was used by French royalty to stash their wealth from historic times.

  • A law made by Swiss authorities in 1713 made it compulsory for Swiss bankers to hide information about their customers. 

  • The silence and secrecy remained intact and was a trademark of Swiss banking. It was the main reason for its attraction.

  • A law made in 1934 made it a crime to reveal details or information of customers to almost anyone — including the government. Violators can get a 5-year term.

 

Reasons for popularity

  • The banks are located in a peaceful, politically neutral country which has high regard for its privacy laws.

  • The banks are fairly stable with low risk of collapse. They run at very high levels of professionalism.

  • The economy of Switzerland is stable and opening a bank account is very easy. Any adult in the world can open an account in a Swiss bank.

 

Importance to economy

  • More than of half of assets under management in Switzerland belong to foreign clients. The industry provides one tenth to the country’s GDP.

  • Apart from wealth, it creates thousands of jobs in banking and wealth management sector.

 

Black money of India

  • Black or illegal money stored by Indian nationals in Swiss bank is a political issue and politicians have used it as an issue during elections.

  • India and Switzerland have an automatic exchange of information in tax since 2018 that provides data of Indian residents storing money in Swiss banks.