Offshore banking privacy

When speaking about offshore banking privacy, perhaps Swiss banking standards are the first what comes to mind because this offshore banking jurisdiction has the longest history. The 1934 Swiss Banking Law was introduced in order to guarantee privacy when Switzerland was under pressure from the neighboring France and Germany in the run-up to the Second World War. In accordance with the legislation introduced in 1934, no information could be divulged by Swiss offshore banks to a third party or even a foreign government. In case of violating this legislation, criminal charges are brought against the bank and its employees. Swiss bankers have a fiduciary obligation to their customers, so anyone sharing privileged information is to be tried of a criminal offense and put in prison.

The only exception when information can be disclosed is the case of a serious criminal offense. But a foreign government should be able to prove such criminality before the information is released. Important nuance: according to Swiss law, a serious criminal offense would not constitute tax evasion – tax evasion is seen as a misdemeanour because the possibility of a genuine error is too big.

Another interesting feature of Swiss offshore banking system is numbered accounts. In many offshore jurisdictions there is no such term as “numbered account”, but in Switzerland it is possible to open the offshore bank account where the account name is a combination of digits and letters instead of the customer’s name.

Another top offshore banking jurisdiction is the Cayman Islands. It is much younger than Switzerland, but it is an offshore banking centre with more than 350 offshore banks and almost USD 1.8 trillion worth deposits on these accounts. Offshore banking main legislative act in this jurisdiction is Banks and Trust Companies Law (2007 Revision), but offshore banks are supervised by the Cayman Islands Monetary Authority (CIMA). In 2000, many international claims that disapproved not satisfactory regulatory regime regarding private “shell” banks registered in some other jurisdiction where they are not subject to strong regulation were addressed to Cayman. As a result, the Cayman Islands strengthened due diligence requirements and customer details reportable to the Cayman authorities have been extended since 2004.