For many decades, Switzerland was famous for its strict banking privacy laws. These are still celebrated in Hollywood and pop culture to this day. But Swiss banking secrecy experienced drastic changes in 2017, when Switzerland entered into an agreement to automatically share bank customer information with the governments of numerous countries.
The term bank secrecy is often used in everyday speech, but Swiss banks normally refer to the practice as bank customer secrecy.
What does bank secrecy mean?
It is illegal for bank employees to share information about their customers with third parties. On the one hand, this applies to concrete information about individual accounts, account balances, and transactions. On the other hand, bank customer secrecy laws also forbid banks from informing third parties about bank-client relationships.
Failure by a bank to comply with bank customer secrecy laws is punishable by up to five years in prison, a financial penalty, and a fine of up to 250,000 Swiss francs.
Do Swiss banks share information with tax authorities?
That depends on where the customer lives – or more specifically, which countries they have tax residence in.
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For bank customers who are tax resident in a country other than Switzerland:
- If the account holder has tax residence in a country which is covered by the agreement for the automatic exchange of information, Swiss banks automatically submit information related to the customer’s account to the Swiss Federal Tax Administration. This office then passes it on to the tax authority of the country where the person has tax residence.
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