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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.


 


Created by the Swiss Banking Act of 1934, which led to the famous Swiss bank, 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.


 


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.


Reasons to use bank secrecy

There are a number of reasons to use banking privacy:


 


* To hide it from friends, spouse or other family members.


* To hide it from the employer. (Many employers restrict the ability of their staff to trade shares to prevent conflicts of interest).


* To store embezzled money.


* To launder money.


* To prevent confiscation of money, e.g. in the case of potential bankruptcy.


* Tax evasion (banking secrecy extends to tax agencies being refused permission to examine accounts).


* Tax resistance (by libertarians, or others, who oppose the institution collecting the tax).


* Protection from over-bearing or corrupt local government agencies.


* For any other reason which requires no-one being able to identify the amount of money you have or have earned/acquired.


* 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.


* 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.


* Protection from spongers. This might include charities, venture capitalists seeking seed money, family members, beggars, or investment salesmen.


* Simply for privacy. The possession of liquid wealth attracts publicity, which is not always welcome.

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