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Swiss Banks' Involvement In Hiding Black Money: Biggest Controversies Around The World

Published Tue Jun 11 2019 By Dibas Pratap Basnet
Swiss Banks' Involvement In Hiding Black Money: Biggest Controversies Around The World

The Swiss Bank is simultaneously one of the most esteemed and one of the most notorious banks in the world at the same time.   

Considered by many as a haven for black money and corrupt people to hold their illicit money, the bank’s reputation as a secretive sanctuary for the money from all over the world no matter the nature of the money or the way in which it was acquired has been spread all over the world by films like the biopic of Jordan Belfort, The Wolf of Wall Street.     

It is estimated that Swiss banks hold at least 30% of the trillions of dollars of personal wealth hidden in the world’s tax havens.

The Swiss bank has become the first name to pop up in people’s heads when black money or illicit money is mentioned. Once one of the most secretive and protective bank accounts in the world, the bank protected its client’s accounts even if they were tax or corrupt politicians.  

We have listed the reasons why Swiss Banks, in general, are more popular for tax evaders and people who have earned money illicitly along with some controversies all around the world.  

Reasons Why Swiss Banks Are Preferred By Black Money Holders And Tax Evaders  

Client And Banking Confidentiality  

Banking secrecy is the most prominent and well-known feature of Swiss banks but banking secrecy is stated in Swiss law. A federal act passed by the Swiss Government in 1934 works in favor of banking confidentiality.

Black money from corruption is a burning issue in the world
Black money from corruption is a burning issue in the world

The most noteworthy article of the act, called Article 47, in particular, enforces secrecy and also criminalized revealing the identities of their clients.    

However, not all the bank accounts in the Swiss Bank belong to corrupted politicians or criminals as the bank also holds legal white money as opposed to the popular belief. After the Panama Paper leaks of the bank made its policies a little looser and the USA, as well as the EU, can go after undeclared and secret bank accounts.

International Appeal 

Foreign money in the Swiss Bank in 2017 was a total of CHF 1.46 trillion ($1,474,965,000,000) held by the citizens of the country. According to a report from International Investment in June 2018, UK has the most amount of money in Swiss Banks. UK holds around CHF 403 billion ($407,194,021,000) and US coming in second with CHF 166 billion ($167,701,500,000).  

Similarly, Canadians also seem to hold a substantial amount of money in Swiss accounts. In 2010 Canada found $33 million in undeclared funds in Swiss Banks. In 2015 the Canadian government encouraged Canadians to come clean about any and all assets, money, or income sources they may have hidden offshore especially in Swiss Banks terming the initiative as a voluntary disclosure.

Controversies From All Over The World

India

The 2nd most populous country in the world, India went after Indian Swiss Bank Account holders and demanded information from the Swiss Banks.

India has clamped down on black money in Swiss Banks
India has clamped down on black money in Swiss Banks

Data showed that Indians had over CHF 1.01 billion ($1,020,195,950) in 2017. The Indian government clamped down on black money holders.

The Swiss Bank also gave the Indian government information about 2 firms Geodesic Ltd and Aadhi Enterprises Private Ltd along with 3 people associated with Geodesic Ltd, Pankajkumar Onkar Srivastava, Prashant Sharad Mulekar and Kiran Kulkarni.

Malaysia

One of the world’s most shocking and controversial financial scandals was when there were billions of dollars missing from the state-run development fund 1MDB and it was found that former prime minister, Najib Razak had $681m transferred to his personal bank account.

Razak being escorted to the Kuala Lumpur Court
Razak being escorted to the Kuala Lumpur Court 

Razak was escorted by the military and military police to the Kuala Lumpur court to face charges of corruption. The final day of the trial will be on June 21, 2019, with a final verdict still not reached. 

World Jewish Congress Controversy 

The Holocaust and Nazi prosecution of Jews during the Hitler era is one of the most gruesome parts of human history. Among its many repercussions, it also resulted in many Jews losing the money stored in their bank accounts. 

The World Jewish filed a lawsuit against the Swiss Bank. As of June 2015, more than 457,100 claimants have received more than $1.28 billion. Initially, the WJC wanted a deal which had a payout of $1.8 billion to settle the lawsuit but later the negotiations led to $1.28 billion.

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