।। Chinmay Prasun Biswas ।।
In today’s world, bank is a well known word to all people. Even school going children also know it but what is a bank? Almost in every country of the world there are different types of banks viz central bank, commercial (nationalised and private) bank, specialised bank, development bank, co-operative bank, land mortgage bank, etc. Literally and practically a bank is an organisaton that provides financial services i.e. collecting, depositing, preserving, withdrawing or lending money or jewellery or valuable documents, issuing instruments that are used as money, etc. A central bank is the controlling bank of a country.
Banks of Switzerland are known as Swiss bank. As Swiss watches are world famous for aristocracy, tradition, design and durability, Swiss banks are also popular in the world due to different reasons. According to Worldometer (a statistical website owned and operated by Dadax) population of Switzerland is 8658190 in July 2020 and the number of banks is 254, i.e. one bank for every 34087.36 persons. It may sound unbelievable but this is the reality. Question may be raised – are Swiss citizens only the clients of Swiss banks?
The answer is normally no. Rich people all over the world deposit their money with Swiss banks and for this reason Swiss banks are so popular and widely discussed in global banking. The Swiss National Bank is the central bank of Switzerland. Union Bank of Switzerland, established in 1862 and Swiss Bank Corporation, established in 1872 were merged in 1998. Renamed as UBS it started functioning as the largest bank in Switzerland with seven principal offices across the world. UBS Group AG and Credit Suisse Group AG jointly hold more than 50% of total deposit in Switzerland with branch network home and abroad.
The question naturally arises as to why Swiss banks are so popular around the world? The main advantages of Swiss banks are minimum financial risk and maximum secrecy. Accounts in Swiss banks are fully fortified. Moreover, Swiss law requires that banks have high capital requirements and provides strong protection of depositors which practically ensures safety of deposit during any financial crisis or conflict. According to the Swiss Banking Law of 1934, disclosing the name of a depositor is a criminal act. As information of patients and clients are protected by physicians and lawyers, similarly protection of information is the main reason that makes Swiss banks so popular around the world. Unless any criminal activity is suspected under Swiss law, Swiss banks never disclose any information regarding an account, even its existence, without the depositor’s permission. However, if any government agency claims that a depositor is involved in a serious criminal act or is involved in some other financial issues like bankruptcy, divorce or inheritance cases, then information may be disclosed.
The system of opening an account in a Swiss bank is almost similar to that of our country. The age of a non-resident of Switzerland must be minimum 18 years and that’s the only restriction. One needs to fill up forms and submit documents to prove one’s identity and professional status but in some particular cases or special circumstances security measures are more strict. For instance, if a driving licence is sufficient in the United States, then passport may be required in Switzerland. As provided in Swiss anti money laundering law, documents like passport, professional licence, tax return, company papers, proof of source of fund are required to open an account. Account holders can choose their currency. Most of them choose Swiss francs, US dollars, Euro, or British Pound Sterling. Depending on nature of account and policy of that bank, minimum amount of initial deposit and balance varies from several thousand dollars to million dollars.
It is said that Swiss banks are the best overseas banks to hide money illegally earned all over the world. According to the latest statistics of the Swiss National Bank (SNB), at the end of June 2020 amount of Indian black money in Swiss banks is around Rs. 300 lakh crores or US $ 1500 billion keeping India at the 77th position. The Swiss government started collecting details of dormant accounts in 2015 to allow their claimants to submit necessary evidence to get information about those accounts which included at least 10 Indian accounts. A few of those are from the British rule in India but ironically not even a single dormant account has been properly claimed during last six years. There is apprehension that money lying in these accounts may be transferred to the Swiss exchequer.
Amount of deposit of Bangladeshi nationals with Swiss banks covers a small proportion of total deposit. Referring to the Swiss National Bank, the Daily Star reported on 28-6-2019 that Bangladeshis’ deposits in Swiss banks increased by 28.33% year-on-year in 2018 to Tk 5,367 crore which is equal to total paid up capital of 12 private banks in Bangladesh. Experts think that uncertainty is a reason for this capital flight. Khondkar Ibrahim Khaled, a noted banker and a former deputy governor of Bangladesh Bank, pointed out that in two main situations when money laundering from Bangladesh increases and when non-resident Bangladeshis including businessmen deposit money in those banks, this happens. Usually, illegal earnings and untaxed money are deposited in Swiss banks, although a few non-resident Bangladeshis could have also deposited money in the Swiss banks.
Is the entire amount in Swiss banks illegal money? As reported in the Prothom Alo (27-6–2020), Abu Hena Mohammad Razi Hasan, Head of Financial Intelligence Unit of Bangladesh Bank, said, “Many of our expatriates working abroad also deposit it in Swiss banks. There is no reason to think that all the money is left in the country.” On the other hand, Iftekharuzzaman, Executive Director of Transparency International Bangladesh, said, “Lion’s share of this money is illegally transferred. Switzerland is a signatory of the United Nations anti-corruption convention. It releases information about Bangladeshi nationals’ deposits in the Swiss banks but government, agencies and institutions involved in anti-corruption and anti money laundering activities took no initiative in this regard. So, other than Swiss banks, capital flight to offshore destinations and island states is also rising.” Some experts think that amount disclosed by Swiss authority is just the top of an iceberg, actual amount lying beneath is far beyond imagination because taka one lakh crore is being smuggled out of the country every year (Prothom Alo, 17-02-2020) which is certainly deposited or invested elsewhere.
Due to many reasons local banks are not always considered safe for ill money. That is why other places are preferred. Except Switzerland some island states are also attractive hubs for depositing black money but as an outcome of age-old tradition and certainty of protection of information, Swiss banks are still sweet to illegal earners.
The writer is a former Commissioner of Taxes
