A PROJECT ON

SWISS BANK

In The Subject
CBM
Submitted By
Dhwani Rajyaguru
A038
M.Com Part-I (Banking and Finance)

Under The Guidance of

Prof. OBEROI SIR
To
University Of Mumbai
For
Master of Commerce Programme (Semester-I)
In
Banking and Finance
Year: 2015-16
SVKMS
NARSEE MONJEE COLLEGE OF COMMERCE AND ECONOMICS
VILE PARLE (W),MUMBAI-400056

EVALUATION CERTIFICATE

This is to certify that the undersigned have assessed and evaluated the project
on Swiss Bank submitted by Dhwani s Rajyaguru student of M.Com part-I (SemesterI) In Banking And Finance for academic year 2015-16. This Project is Original to the best
of our knowledge and has been accepted for internal Assessment
Name and signature of internal examiner:

Name and signature of external examiner:

Principal

DECLARATION BY THE STUDENT

I, Dhwani Rajyaguru student of M.Com( part-I) I n Banking and Finance, RollNo:A038,

hereby declare that the project titled Swiss Bank for the subject Financial Services
submitted by me for semester-I of the academic year2015-16, is based on actual work carried
out by me under the guidance and supervision of Prof. Oberoi sir. I further state that this work
is original and not submitted anywhere else for any examination.

Place: Mumbai
Date: 28th September,2015
Name: Dhwani Rajyaguru

Signature:

Acknowledgment

Project has always been fun learning experience, but with the growing age, at this master
level, it surely demands corporate and depth approach.
I would like to thanks Mr.Oberoi-Prof of financial CBM
I would also thank the M.Com department of narsee Monjee College of commerce and
economics who gave me the opportunity to work on this project which provided me with lot
of insight and knowledge of my current curriculum and industry as well as practical
knowledge
Would sincerely thank our coordinator Mr.Harish sharma for constant guidance over the
project
I would also like to thank the library staff of narsee monjee college of commerce and
economics for equipping me with books, journals and magazines for this project
Would also like to thank my friend and fellow students who helped me in the cause of
project.

INDEX:
Sr. no.
1
2
3
4
5
6
7
8
9
10
11

Topics
Executive summary
Swiss national bank
Responsibility of SNB
Other Major banks of Switzerland
Acquisition and merger
Swiss banking act 1964
Off-shore taxation
Swiss of shore private banking
Swiss bank account advantage
Case study : black money
List of black money holder

Page no

EXECUTIVE SUMMARY
Governments around the world, especially in Europe and the USA, have stepped
Up their efforts to reclaim their citizens money from what they perceive to be tax
Havens or simply uncooperative jurisdictions. Switzerland is considered to be
One of them and will have to accept new OECD model tax rules allowing foreign
Tax authorities to gain access to information on their clients bank accounts where
They believe that their citizens have placed money in Swiss banks. This is
Particularly worrisome as regards EU clients as we estimate that undeclared
Money from them accounts for around 25% of Swiss private-banking assets. The
Big Two Swiss banks, Credit Suisse and UBS, have invested heavily in extensive
Onshore operations as a precaution against the risk of tax rules being modified.
The banks in our universe of coverage that look most at risk are Julius Baer,
Sarasin and EFG International, but they could alleviate or temper risks by proactively developing onshore strategies or by acquiring even more exposed banks
that might come under greater pressure. We have trimmed our SOTP valuations
And price targets by, on average, 4% for the taxation problems, but have not
Altered our recommendations. We retain our BUY rating on EFG International
(Price target: CHF16.9, reduced from CHF17.9) and a NEUTRAL rating on the
Others.

The Swiss National Bank (SNB ) :

It is the central bank of Switzerland, and so is therefore responsible for the monetary policy
of the nation of Switzerland and also for the issuing of Swiss franc banknotes
The bank formed as a result of the need for a reduction in the number of banks of issue,
which numbered 53 sometime after 1826. In the 1874 revision of the Federal Constitution it
was given the task to oversee laws concerning the issuing of banknotes. Then in 1891 the
Federal Constitution was re-revised again to entrust the Confederation with sole rights to
issue banknotes. The National Bank Law was enforced during 16 January 1906, and the
National bank began business activities during 20 June 1907, and is thought then founded
sometime during either 1906 or 1907, SNB itself states founding was during 1907.
Sometime during World War I (1914-1917), the bank was instructed to release notes of a
small denomination, for the first time, by the Federal Council of Switzerland.
The Bundesrat devalued the Swiss Franc during 1936, and as a result, there was made
available to the National bank, an amount of monies, which the bank subsequently stored in a
Whrungsausgleischsfonds reserve for the future, for usage in situations of emergency.
During 1994 the Bank was described as a joint-stock company acting under the
administration and supervision of the Confederation, had eight branches and twenty subbranches within cantons. The governing board had overall executive management of the
National bank, with supervision entrusted to its shareholders, the banks' council, the banks'
committee, its local committees and auditing committee. There were three members of the
governing board, who together decided the monetary policy of the National bank. Towards
the last months of 1993, the number of employees numbered 566.
With the inception of Article 99 of the Federal Constitution, during May 2004, the National
bank achieved formal independence.
As of 2015 the National bank was privately owned, with the majority of shares belonging to
cantons and banks of cantons, and the smaller remainder in the possession of private
individuals. Shares of the SNB existed within SIX Swiss Exchange from 1907 onward.

Exchange rates :
The National bank made an announcement on 6 September 2011, of its intention to address
changes in the value of the Swiss Franc to the Euro, specifically, of the value of the Franc
falling below 1.2 to the Euro. A cap was placed on exchange-rates

[12]

in order to take

measures to stem the development of a possible recession. The bank stated the 1.2 exchange
value was defendable as the bank could potentially proceed to mint enough banknotes to
control the rate sufficiently.[13]

Responsibilities

The basic governing principles of the National bank are contained within Article 99 of the
Federal Constitution, which deals with matters of monetary policy.[14] There are three
numbered factors concerning principles explicitly mentioning the National bank, of four
altogether shown within the Article. The SNB is therefore obliged by constitutional statute
law to act in accordance with the economic interests of Switzerland,[15] accordingly, the prime
function of the National bank is:to pursue a reliable monetary policy for the benefit of the
Swiss economy and the Swiss people.

Cash supply and distribution

The National Bank is entrusted with the note-issuing privilege. It supplies the economy with
banknotes that meet high standards with respect to quality and security. It is also charged by
the Confederation with the task of coin distribution.

Cashless payment transactions

In the field of cashless payment transactions, the National Bank provides services for
payments between banks. These are settled in the Swiss Interbank Clearing (SIC) system via
sight deposit accounts held with the National Bank.

Investment of currency reserves

The National Bank manages currency reserves. These engender confidence in the Swiss
franc, help to prevent and overcome crises and may be utilized for interventions in the foreign
exchange market.

Financial system stability

The National Bank contributes to the stability of the financial system by acting as an arbiter
over monetary policy. Within the context of this task, it analyses sources of risk to the
financial system, oversees systemically important payment and securities settlement systems
and helps to promote an operational environment for the financial sector.

International monetary cooperation

Together with the federal authorities, the National Bank participates in international monetary
cooperation and provides technical assistance.

Banker to the Confederation

The National Bank acts as banker to the Swiss Confederation. It processes payments on
behalf of the Confederation, issues money market debt register claims and bonds, handles the
safekeeping of securities and carries out money market and foreign exchange transactions.

Statistics
The National Bank compiles statistical data on banks and financial markets, the balance of
payments, the international investment position and the Swiss financial accounts.

Monetary policy

The SNB pursues a monetary policy serving the interests of the country as a whole. It must
ensure price stability, while taking due account of economic developments. Monetary policy
affects production and prices with a considerable time lag. Consequently, it is based on
inflation forecasts rather than current inflation. The SNBs monetary policy strategy consists
of three elements: a definition of price stability (the SNB equates price stability with a rise in
the national consumer price index of less than 2% per year), a medium-term conditional
inflation forecast, and, at operational level, a target range for a reference interest rate, which
is the Libor for three-month investments in Swiss francs.

General Meeting of Shareholders

The General Meeting of Shareholders is held once a year, as a rule in April. Owing to the
SNBs public mandate, the powers of the Shareholders Meeting are not as extensive as in
joint-stock companies under private law.

Bank Council
The Bank Council oversees and controls the conduct of business by the Swiss National Bank
and consists of 11 members. Six members, including the President and Vice President, are
appointed by the Federal Council, and five by the Shareholders Meeting. The Bank Council
sets up four committees from its own ranks: an Audit Committee, a Risk Committee, a
Remuneration Committee and an Appointment Committee.

Governing Board
The Swiss National Banks management and executive body is the Governing Board. The
Governing Board is responsible in particular for monetary policy, asset management strategy,
contributing to the stability of the financial system and international monetary cooperation.

Other major banks of Switzerland

Swiss Bank Corporation is a large integrated financial services company located in
Switzerland. Prior to its merger, the bank was the third largest in Switzerland with over
CHF300 billion of assets and CHF11.7 billion of equity.
Throughout the 1990s, SBC engaged in a large growth initiative, shifting its focus from
traditional commercial banking into investment banking in an effort to match its larger Swiss
rival Credit Suisse. As part of this strategy, SBC acquired US-based investment bank Dillon
Read & Co. as well as London-based merchant bank S.G. Warburg in the mid-1990s. SBC
also acquired Chicago-based Brinson Partners and O'Connor & Associates. These
acquisitions formed the basis for a global investment banking business.
In 1998, SBC merged with Union Bank of Switzerland to form UBS the largest bank in
Europe and the second largest bank in the world. The company's logo, which featured three
keys, symboli5zing "confidence, security, and discretion", was adopted by UBS after the
1998 merger. Although the combination of the two banks was billed as a merger of equals, it
quickly became evident that from a management perspective, it was SBC that was buying
UBS as nearly 80% of the top management positions were filled by legacy Swiss Bank
professionals. Today, what was SBC forms the core of many of UBS's businesses, particularly
UBS Investment Bank.

Aggressive acquisitions (19901998)

The former Swiss Bank Tower off of Fifth Avenue in New York City opened in 1990.
Swiss Bank began the 1990s as the weakest of the "Big Three" Swiss banks but by the end of
1997 would be the driving force behind the merger with Union Bank of Switzerland. SBC
had been impacted by losses on its real estate investments and a series of minor controversies,
despite the bank's historically conservative posture. Beginning in the 1980s, SBC along with
its Swiss peers began to embrace a more aggressive strategy to keep up with competitors in
the US, Japan, Germany and the UK. The bank signaled its new posture in 1990 when it
opened its new US headquarters, Swiss Bank Tower, a 29 floor building on 49th Street,
adjoining Saks Fifth Avenue.
SBC shifted its focus from traditional commercial banking toward investment banking with
an emphasis on building its trading operations. To bolster its trading initiative, in 1992, SBC
acquired O'Connor & Associates, a Chicago-based options trading firm, with an expertise in
financial derivatives. O'Connor was founded in 1977 by mathematician Michael Greenbaum
and was named for Edmund (Ed) and Williams (Bill) O'Connor. The O'Connor brothers had
made a fortune trading grain on the Chicago Board of Trade and founded a First Options, a
clearing house business. The O'Connors provided Greenbaum, who had run risk management
for First Options, with the capital to start his own firm. SBC had established a strategic

relationship with O'Connor, which was the largest market maker in the financial options
exchanges in the US, beginning in 1988. O'Connor had been looking to partner with a larger
financial institution and in 1989 entered into a currency joint venture with SBC that proved to
be the first step towards a sale of O'Connor to SBC. Following the merger, O'Connor was
combined with SBC's money market, capital market and currency market activities to form a
globally integrated capital markets and treasury operation. A number of O'Connor executives
were brought into key positions within the bank in an attempt to cultivate a more
entrepreneurial culture at SBC

SBC acquired Gary P. Brinson's Brinson Partners in 1994 to bolster the bank's US asset
management business.

SBC spent US$2 billion to assemble an investment banking franchise through the
acquisitions of S.G. Warburg in 1995 and Dillon, Read & CO. in 1997 to form Warburg
Dillon Read.
Merger with Union Bank of Switzerland
Aggressively pushing ahead its various acquisitions, UBS was mired in a series of
entanglements with activist shareholders who were critical of bank's relatively conservative
management. Martin Ebner, through his investment trust, BK Vision became the largest
shareholder in UBS and attempted to force a major restructuring of the banks operations. The
groundwork for the merger of SBC and UBS was actually laid by their mutual competitor,
Credit Suisse which had approached UBS about a merger that would have created the second
largest bank in the world in 1996. UBS's management and board unanimously rebuffed the
proposed merger. Ebner, who supported the idea of a merger, led a major shareholder revolt

that resulted in the replacement of UBS's chairman, Robert Studer. Studer's successor Mathis
Cabiallavetta would be one of the key architects of the merger with SBC.

The combined UBS logo incorporated UBS's name with SBC's "three keys" symbol.
On December 8, 1997, Union Bank of Switzerland and SBC announced an all stock merger.
At the time of the merger, Union Bank of Switzerland and Swiss Bank Corporation were the
second and third largest banks in Switzerland, respectively, both trailing Credit Suisse.
Discussions between the two banks had begun several months earlier, less than a year after
rebuffing Credit Suisse's merger overtures.
Acquisition history
Swiss Bank Corporation, prior to its merger with Union Bank of Switzerland was the result of
the combination of dozens of individual firms, many of which date to the 19th century. The
following is an illustration of the company's major mergers and acquisitions and historical
predecessors
Swiss Bank
(merged 1897)

Corporation Basler

&

Basler Banvkerein

Zrcher

(est.

1856

as

Bankverei

Bankverein,

renamed in 1872)

(est. 1880)

Zrcher
Bankverein
(est. 1889)

Basler Depositenbank
(est. 1882)
Schweiz Union bank

(est. 1889)
Handelsbank

Basler

(est. 1862, acq. 1945)

O'Connor
(est. 1977, acq. 1992)
Brinson

Partners

(est. 1989 originally division of

First Chicago Corporation started
c. 1981, acq. 1994)
Warburg Dillon Read

S.

(merged 1997 with SBC-Warburg under SBC ownership)

(est.

G.

Warburg
1946,

&

acq.

Co.
1995

to form SBC-Warburg)
Dillon,

Read

&

Co.

(est. 1832, acq. 1997)

Swiss Banking Act of 1934:

Bank secrecy was codified in Switzerland by the 1934 Federal Act on Banks and Savings
Banks (Swiss Banking Act of 1934) following a public scandal in France, when MP Fabien
Albertin denounced tax evasion by eminent French personalities, including politicians,
judges, industrialists, church dignitaries and directors of newspapers, who were hiding their
money in Switzerland. He called these men of "a particularly ticklish patriotism", who
"probably are unaware that the money they deposit abroad is lent by Switzerland to
Germany". The Peugeot brothers and Franois Coty, of the famous perfume family, were on
his list. Since then, Swiss banks have acquired worldwide celebrity due to their numbered
bank accounts, which critics such as ATTAC NGO alleged only help legalized tax evasion,
money laundering and more generally the underground economy.
Under the Swiss principle of bank secrecy, privacy is statutorily enforced, with Swiss law
strictly limiting any information shared with third parties, including tax authorities, foreign
governments or even Swiss authorities, except when requested by a Swiss judge's subpoena.
However banking is not strictly anonymous since under its banking law all Swiss bank
accounts, including numbered bank accounts, are linked to an identified individual. This law

only permits a bank to share information with others in cases of severe criminal acts, such as
identifying a terrorist's bank account or tax fraud, but not simple non-reporting of taxable
income (called tax evasion in Switzerland). In April 2013, French Minister Jrme Cahuzac
was forced to resign when the Geneva public prosecutor, acting quickly on a French request
related to tax fraud, found evidence of undeclared Swiss accounts.
Under pressure from the G20 and the OECD, the Swiss government announced in March
2009 that it will abolish the distinction between tax fraud and tax evasion in dealings with
foreign clients. The distinction remains valid for domestic clients. Any bank employee
violating a client's privacy could be punished quite severely by law. After signing 12 new
double taxation treaties in accordance with the international standard set by the OECD,
Switzerland was removed from the grey list of non-compliant tax jurisdictions.
In October 2013, the Swiss government stated that it intended to sign an international
agreement sponsored by the OECD that, if ratified by Parliament, will align Swiss bank
practices with those of other countries and in effect end the special secrecy that clients of
Swiss banks had enjoyed in the past.
After the revelations of whistleblower Bradley Birkenfeld in 2007, UBS was caught redhanded by the United States government offering tax evasion strategies, sending undercover
bankers with encrypted computers to the United States. After it was caught, UBS paid a $780
million penalty and handed over hundreds of client files to American authorities. In 2010, the
Swiss and the United States governments negotiated an agreement allowing Swiss bank UBS
to transmit to the US authorities information concerning 4,450 American clients of UBS
suspected of tax evasion.
In the aftermath of the UBS and Julius Baer banking cases, some wealthy clients who
continue to use offshore accounts are turning to private banks in Singapore and Hong Kong.
In addition to the local Singapore or Hong Kong banks, offices have been opened in those
localities by a number of Swiss private banks. The move to Singapore and Hong Kong is an
alternative to the banking secrecy that Swiss banks have come under attack for. Singapore has
bank secrecy provisions comparable to those in Switzerland. Although Hong Kong does not
have the same bank privacy laws, it offers flexibility in the creation of opaque companies that
can serve as tax conduits.

Many offshore banks, located in tax havens such as in the Cayman Islands and Panama, also
have strict privacy laws
Swiss bank accounts aren't just for millionaires, criminals or government officials trying to
hide ill-gotten wealth, or celebrities protecting their assets from former spouses. They're
available to anyone and lots of average people have Swiss bank accounts. People who live in
countries with unstable governments and banks in particular often turn to Swiss banks
because of their security and privacy.
But let's face it, most of us really just want to be able to say, "Oh, I'll wire the money from
my Swiss bank account."

OFFSHORE TAXATION
In general, Switzerland does not tax non-resident bank accounts with the exception for EU
nationals who either pay a withholding tax or declare their earnings to their own tax
authorities, but the scope of investment income actually taxed is very restrictive. We estimate
that around 80% of EU-sourced money is not declared to local tax authorities. As for US
citizens, they are obliged to report
their assets held in Switzerland to the US tax authorities.
Current international disputes have resulted in Switzerland having to adopt the OECD
standard on administrative assistance in tax matters, which forms part of the OECDs Model
Tax Convention on Income and on Capital. The standard relates to the exchange of
information, and adopting this threatens to increase taxation levied on Swiss bank accounts.

SWISS OFFSHORE PRIVATE BANKING: SIZE & ORIGINS

The Swiss private-banking industry has an enviable reputation around the world,
attracting huge amounts of wealth into the country. The Swiss National Bank(SNB) estimates
that, as of the end of 2008, there were around CHF2.2trn invested with Swiss banks in
Switzerland by non-residents so-called offshore accounts although this figure is down on
the CHF3.1trn reported as at end-2007 owing to the collapse in financial markets during the
course of 2008. Offshore accounts make up around 60% of the total invested in Swiss banks
according to SNB data. Swiss economic and political stability in
an uncertain and volatile world has been a major attraction for wealthy people, encouraging
them to place their money in Swiss banks. This is obviously true for wealthy individuals in
places like Latin America and

some Asian and European countries today, but it has even been a valuable lurein the past to
attract money into Switzerland from clients in other countries of Western Europe, notably
France, Germany, Italy, Spain and even the UK.
More contentious though has been the issue of Swiss banking secrecy and taxation. Since
1934 when the Swiss Federal Law on Banks & Savings Banks was passed, it has been a
criminal offence for bank employees to pass on information about bank clients accounts to
third parties, even government tax inspectors from other countries .As Switzerland does not
impose tax on bank accounts for non-residents, it is suspected by many that wealthy
individuals in high-tax countries wishing to avoid tax have put their money in Swiss banks
safe in the knowledge that both the money transferred and investment income earned
on it will not be divulged to the local tax authorities. Some mostly non-Swiss have
claimed that this 1934 Swiss law on banks was a deliberate attempt to protect Swiss banks
from foreign intrusions. Previously, as had been the case in most countries, banking secrecy
was a matter of best practice, but the 1934 Federal law took it to a higher level of seriousness.
Certainly, the 1930s were
a period of considerable economic and political upheaval and uncertainty. In particular,
European taxes were high after World War I to pay for reconstruction and redemption of war
debts, and government agents from both France and Germany attempted to infiltrate Swiss
banks to discover what as
sets their own citizens had placed in Swiss banks. Notable incidents include the 1932 Paris
Affair when the French authorities acquired the names of 1,000 politically prominent clients
of Basler Handel bank after two of its staff was arrested in Paris as they were trying to help
some French citizens to avoid paying coupon tax. This caused a scandal to erupt in France.
Another notorious case was in 1931 when a German, Arthur Pfau, tried to persuade UBS
employees to give him details about its German clients. He was unsuccessful. It should be
noted that this incident pre-dated the Nazis taking power in Germany in 1933, disproving
some of the rather high-minded, but deluded comments by some that Swiss banking secrecy
was imposed to protect Jewish money from the hands of the Germans. A particularly graphic
example of this delusion can be seen from the following extract from Credit Suisses 1966
Quarterly Report:

To a large degree, it is only a matter of academic interest whether there was intent in
Switzerlands 1934 Federal banking legislation to enshrine banking secrecy in law for the

purposes of gathering funds from foreign clients seeking to evade tax and thus boost the
Swiss banking industry. The main issues are whether the effects of the law actually did result
in foreigners evading
tax by putting their money into Swiss banks, and, perhaps even more pertinently for public
policy, whether foreign governments do believe this to be the case. In this regard, the role of
Switzerland in films and literature has only increased suspicions in revenue-hungry foreign
governments about the origins and motives of wealthy foreigners placing their money
offshore in Switzerland.
Switzerland has a much envied reputation as a private-banking Centre which has
Attracted enormous amounts of wealth from around the world CHF2.2trn of assets under
management (AuM) in 2008 according to statistics compiled by the Swiss National Bank
(SNB). We estimate that around 50% of these
AuM come from European citizens. Switzerland has benefited from its image of
political and economic stability, banking secrecy and low tax. Although this may have
attracted money into the Swiss banks, it has also attracted envious thoughts and now action
from other countries. Credit Suisse and UBS together manage around 50% of Swiss privatebanking assets, a further 15 banks manage another 30%, with another 33 banks managing just
under 20% of the total. The industry is remarkably fragmented outside the dominance of the
top 2

SOURCES OF SWISS OFFSHORE MONEY

As regards the origins by country of the non-resident money placed in Swiss banks, SNB
statistics are pretty vague, but the SN
B has disclosed the currency of the custody accounts (see the chart below). On the basis that
all of the assets invested in euro came from Europe and most of the Other category was in
pounds, we believe that it is reasonable on this evidence to presume that around 40% of
Swiss banks offshore
accounts have their origin in Europe, with this amount equaling CHF1.2trn

Swiss Bank Account Advantages

Privacy

Your relationship with your Swiss bank can be compared to doctor/patient confidentiality or
the private information you might share with an attorney. Swiss law forbids bankers to
disclose the existence of your account or any other information about it without your consent
(except for certain circumstances, which we'll discuss later). Where the similarity ends is
when that privacy is violated. Whereas in the United States, if your doctor or attorney violates
your confidence you must begin legal action; in Switzerland, if a banker divulges information
about a bank account without permission, immediate prosecution is begun by the Swiss
public attorney. Bankers face up to six months in prison and a fine of up to 50,000 Swiss
francs. And, you have the option of suing the bank for damages. Needless to say, Swiss banks
are very careful about protecting your privacy.
The only exceptions to the Swiss banking privacy rule are criminal activities such as drug
trafficking, insider trading or organized crime, which we'll talk more about later.
Low Risk
So privacy is a big deal if you have money you don't want other people to know about, and
unless you're a criminal it's highly unlikely anyone can ever find out about your account. For
example, doctors who might be sued for malpractice might have money in a Swiss account to
prevent them being totally wiped out in the event of lawsuit. Unethical, yes, but it happens.
Really, anyone can have assets that they want to protect from attack. Sometimes, though,
privacy isn't the main reason people want a Swiss bank account. Switzerland has had an
extremely stable economy and infrastructure for many years and hasn't been at war with
another country since 1505. Swiss bankers are also highly trained in investing and know how
to grow your money.
Increasing your wealth means little if your money isn't protected. So, how safe is your money
in a Swiss bank? Depositor protection in Switzerland is governed by the Swiss Bankers
Association's (SBA) self-regulatory Depositor Protection Agreement and, since July 1,
2004, was also codified into the Swiss Banking Act with a few additional requirements that
significantly strengthened depositor protection in Switzerland [Source: SwissBanking.org].
The revised Depositors' Protection Agreement covers all deposits and is also applicable to
non-bank securities dealers. Protecting depositors is vital in maintaining public confidence in
the Swiss banking system and, in order to strengthen this confidence, the SBA had drawn up
a self-regulatory Depositor Protection Agreement with its member banks in 1984. This

agreement guarantees that, in the event of a bank failure, depositors will rapidly receive their
legally privileged claims. As an additional safety measure, Swiss law demands high capital
adequacy. Swiss banks can therefore certainly be counted amongst the safest in the world.
In fact, the Swiss franc is considered one of the world's premier currencies with virtually zero
inflation and has been historically backed by at least 40 percent gold reserves. Swiss banks
are also known to have very sophisticated investment services and Internet banking.
Regulations
In the United States, law enforcement agencies, the judicial system, and even private citizens
can gain access to financial information of all sorts. In Switzerland, however, neither a bank's
officers, nor employees are allowed to reveal any account or account holder information to
anyone, including the Swiss government.
The Swiss banker's requirement of client confidentiality is found in Article 47 of the Federal
Law on Banks and Savings Banks, which came into effect on November 8, 1934. The article
stipulates that "anyone acting in his/her capacity as member of a banking body, as a bank
employee, agent, liquidator or auditor, as an observer of the Swiss Federal Banking
Commission (SFBC), or as a member of a body or an employee belonging to an accredited
auditing institution, is not permitted to divulge information entrusted to him/her or of which
he/she has been apprised because of his/her position."
Exceptions
In order to sidestep this law, there must be a substantial criminal allegation before a
governmental agency, especially a foreign one, can gain access to account information. Tax
evasion, for example, is considered a misdemeanor in Switzerland rather than a crime.
According to the Swiss Bankers' Association Web site, however, there is also a duty for
bankers to provide information under the following circumstances:

Civil proceedings (such as inheritance or divorce)

Debt recovery and bankruptcies

Criminal proceedings (money laundering, association with a criminal organization,

theft, tax fraud, blackmail, etc.)

International mutual legal assistance proceedings (explained below)

International mutual assistance in criminal matters

Switzerland is required to assist the authorities of foreign states in criminal matters as a result
of the 1983 federal law relating to International Mutual Assistance in Criminal Matters.
Assets can be frozen and handed over to the foreign authorities concerned. Assistance in
criminal matters follows the principles of dual criminality, specialty and proportionality.
Dual criminality means that Swiss courts don't lift the requirement of bank/client
confidentiality unless the act being investigated by the court is punishable under the law in
both Switzerland and the country requesting the information. The specialty rule means that
information obtained through the arrangement can only be used for the criminal proceedings
for which the assistance is provided. The proportionality rule means the measures taken in
conducting the request for assistance must be proportionate to the crime.
International mutual assistance in administrative matters
Under these proceedings, the Swiss Federal Banking Commission (SFBC) may
communicate information only to the supervisory authorities in foreign countries subject to
three statutory conditions:

The information given can't be used for anything other than the direct supervision of
the banks or financial intermediaries who are officially authorized and can't be passed
on to tax authorities.

The requesting foreign authority must itself be bound by official or professional

confidentiality and be the intended recipient of the information.

The requesting authority may not give information to other authorities or to other
public supervisory bodies without the prior agreement of the SFBC or without the
general authorization of an international treaty. Information can't be given to criminal

authorities in foreign countries if there are no arrangements regarding mutual legal

assistance in criminal matters between the states involved.
Taxation
Swiss residents pay 35 percent tax on the interest or dividends their Swiss bank accounts and
investments earn. This money is namelessly turned in to the Swiss tax authorities.
For nonresidents of Switzerland there are no taxes levied on those earnings, unless:
Swiss Withholding Tax
There is a 35 percent Swiss withholding tax on interest and dividends paid out by Swiss
companies. So, if you invest in a Swiss company such as Nestl or Novartis, then 35 percent
of any dividends will be withheld as a tax regardless of where you live. The same is true if
you buy bonds issued by a Swiss company. If you're a Swiss taxpayer (or if your country has
a double taxation agreement with Switzerland) then you can claim the tax back. Double
taxation is when income is taxed both in your home country, as well as the country in which
the income is earned.
EU Withholding Tax
On July 1, 2005, the European Union Withholding Tax came into effect to prevent residents
of EU member countries from avoiding paying tax on interest earned on money deposited in
foreign banks with very strong banking secrecy laws. The EU goal had been for all countries
to disclose interest earnings to the home countries of their bank clients so that that money
could be taxed. Several non-EU countries, Switzerland included, didn't agree because it went
against their banking privacy/secrecy laws. Now, bank clients who live in the European
Union pay a withholding tax on the interest made by certain investments. This tax started at
15 percent and is gradually increasing to 35 percent by 2011. No exchange of information or
taxes on capital or capital gains is levied.
Inheritance Tax

If you want to pass on your account to your family (and you're not a Swiss resident) you're in
luck because there is no inheritance tax in Switzerland for nonresidents. Your heirs are
responsible for declaring the holdings to their country's tax authorities, however.
According to Swiss law, nonresidents of Switzerland who would like to open a Swiss bank
account must be at least 18 years old. Other than that, there aren't a lot of restrictions. Your
account can be in almost any currency, although most choose the Swiss franc, U.S. dollar,
Euro or Sterling, and there is often no minimum balance required to open an account. Once
you've started making deposits, however, there is a minimum balance you have to maintain
that varies from bank to bank and by type of account.
Choosing a bank and an account
The Swiss bank you choose to deal with depends on what types of investments you want to
make and the type of account you want have. One thing to keep in mind is unless you don't
care about the privacy aspect of a Swiss bank account, you shouldn't choose a bank that has a
branch in your country. Bank branches have to follow the laws in the countries in which
they're located -- not where the corporate bank office is located. For example, a Swiss bank
branch in the United States has no greater privacy capabilities than a regular U.S. bank does.
The type of account you open depends on the number of investments you want to have access
to and the amount of money you want to maintain in the account. The more extensive the
investment services and options are, the higher the required balance for the account. You can
also have access to a safe deposit box at a Swiss bank.
Earning interest
If you maintain your account in Swiss Francs you will earn a small amount of interest, but
will then have to pay the Swiss withholding tax. For this reason, most account holders that
don't live in Switzerland have their Swiss bank account in some other currency such as U.S.
Dollar, British Pound or Euro. When you do this, your money can be put into a money market
fund and will earn interest there.
Opening an account

While it's usually better to open your account in person, there are many Swiss banks that will
allow you to open an account by mail or fax. There are also many firms that exist to assist
people in setting up offshore accounts.
Because Swiss anti-money-laundering law requires you prove where your money is coming
from, many certified documents are required in order to open an account. These include
authenticated copies of your passport; documents explaining what you do for a living such as
tax returns, company documents, professional licenses, etc.; proof of where the money you
are depositing is coming from such as a contract from the sale of a business or house; and all
of the typical personal information about yourself such as your birth date, a utility bill to
prove your residence, all contact information, and, of course, your name. They'll also want to
know what you want to do with the money once you have the account.
If you're opening your account by mail, you'll need to have the bank applications sent to you
to complete and sign along with the rest of the documents mentioned above.
One difference between opening an account in person and doing it by mail is the requirement
of an apostille on the authenticated copy of your passport (and no, a driver's license won't be
accepted as proof of your identity).
An apostille is a seal used to certify that an official document is an authentic copy. In most
countries, you can get it from a notary public but sometimes notaries aren't familiar with
them. If this happens you must either find another notary who is, or find out what other
authority in your country can issue apostilles. Any country that participated in the Hague
Convention designates an authority that can issue apostilles (e.g., in the United States, the
office of the state's secretary is authorized to do this). The most important thing is to always
make sure the seal says APOSTILLES.
Opening a numbered account
Numbered accounts are usually not as easy to open. They typically require that you
physically go to the bank in Switzerland. They also typically require an initial deposit of at
least $100,000 and cost about $300 per year or more to maintain. And remember, they're still
not anonymous since there has to be a connection at some level between who you actually are
and your account.

Minimum deposits/balances and fees

Minimum balances vary greatly by type of account (i.e., a few thousand dollars to one million
dollars or more). And, banks charge differing fees based on the types of transactions and the
account type you have. For example, on a basic account, international bank transfers
(outgoing) might cost $3 or $4 each. They may also charge $5 to $10 when you deposit
international checks to your account. Annual account maintenance costs are charged based on
the number of entries in your account statement and are sometimes in the neighborhood of
0.5 Swiss Francs (i.e., $0.41) per entry.
Accessing Your Money

Credit card: Most Swiss banks will issue a credit card with your account that you
can use to make purchases, as well as withdrawals at ATMs around the world. Cash
advances, however, will charge a fee (usually 2.5 percent). Use of a credit card can
also be traced back to your Swiss bank revealing the fact that you have the account.
These credit cards are issued differently from typical credit cards, however. Rather
than pulling a credit report and actually issuing true credit, Swiss banks require that
you make a security deposit that is 1 to 2 times your monthly credit limit depending
on the type of account you have. The security deposit itself is held in a separate
account and invested.

Cash withdrawals: If you're in Switzerland you can walk into your bank and make a
direct cash withdrawal, leaving no record of the access.

Travelers' checks: Buying travelers' checks is one way of using the money from your
Swiss account and maintaining your secrecy. They're easy to use and widely accepted,
but you will have to pay a 1 percent commission on the amount of the check.

Travelers Check from American Express

Courtesy of Valentin Wittich

Bank transfers: A simple way to use the money in your Swiss bank account is to
request a bank transfer. But, again, you're essentially revealing the existence of your
account, as well as your account number. To prevent revealing your account number
and name, most Swiss banks will send money from your account in the bank's name
without releasing your identity, but sometimes those types of transfers aren't accepted
outside of Switzerland.

Checks: Swiss bank accounts do offer checking (except on numbered accounts).

However, if you're after privacy, you're leaving a trail of breadcrumbs directly back to
you. You lose the confidentiality most people want with a Swiss account and,
therefore, checks are rarely used with these accounts.

Closing your account

You can close your Swiss bank account at any time with no restrictions or cost. You can get
your money immediately and invested money as soon as it is liquidated.

Swiss banks petrified by Modi's black money law, ask customers to comply
Right from 1950, India has had the dubious distinction of rolling out amnesty schemes
quinquennially so much so that the same set of people participated in successive schemes
with a smirk on their faces. This of course by contemptuously disregarding the prior solemn
warning accompanying each scheme that it was the last opportunity to return to the path of
rectitude.
This telling commentary on the efficacy and desirability of amnesty schemes was made by
none other than the Wanchoo Committee of yore.
Now the Modi government has put an end to this farce and mollycoddling of tax evaders and
black money generators. For, the black money (Undisclosed Foreign Income and Assets) and

Imposition of Tax Act, 2015 (black money law for short), contrary to the popular notion, is
not a typical amnesty scheme but a riot act -- comply or face dire consequences.
It offers a limited compliance window from 1 July 2015 to 30 September 2015 within which
one can come clean and pay a tax of 30 percent on foreign wealth secreted away together
with a penalty of another 30 percent. Critics say 60 percent is too high an impost even for
those possessed by contrition but then they would better comply because otherwise the noose
could tighten around their necks.
The black money law says should the assessing officer unearth undisclosed foreign income
and asset post this limited amnesty, the consequence would be 30 percent tax plus penalty of
90 percent with the depressing prospect of cooling heels behind bars for ten years.
The law targets residents and therefore there should be no difficulty in nabbing them once the
officials have built a watertight case. The ire of the law falls mainly on those who while
smugly residing in India salt away their ill-gotten wealth through subterranean channels aka
hawala route to salubrious climes like Switzerland, Mauritius and Dubai.
The Income Tax Act 1961 sets the stage for the assessing officer under the black money law
to step in and every resident must disclose his foreign assets in his normal income tax return.
The ones not declared is what the officer under the black money law is going to pounce on. A
good tango indeed.
That the redoubtable Swiss banks of all are asking Indian residents to take full advantage of
the compliance window is a definitive straw in the wind that the limited amnesty is going to
be a success and that reprisal is going to be swift and fast against recalcitrant black money
generators in the years to come. What has made the Swiss and other European banks to relent
for the first time is the possibility of their officials being put behind bars in India for seven
years in addition to fine for abetting the crime by Indian residents. This is no mean victory for
the Modi government. A permanent anti-black money law rather than periodical quasipermanent amnesty laws was what the doctor had ordered. Modi and Jaitley just delivered
that.

Verily, the secretive banks unable to withstand the heat turned on them by the Modi
government are now putting pressure on their Indian customers to come clean on the nature
of money deposited with them.
Modi has been pilloried for making a rash promise that he would get Rs 15 lakh for each one
of the Indian citizens from out of the illicit funds stashed away abroad by Indians during his
2014 electioneering. His government has made amends for his act of rashness.
The compliance window is likely to witness a huge surge in activity in the one month starting
1 September, thanks to the cumulative effect of Indian governments pressure on foreign
banks and foreign banks pressure in turn on the Indian residents.
A permanent riot act feared by the formidable Swiss is something no subsequent government
at the Centre dare disown and repeal. Modi might well have the last laugh before the Bihar
elections. To be sure, he may not be able to give Rs 15 lakh to every Indian but he can go to
town and proclaim that he has humbled the formidable Swiss banks as well as the brazen
tribe of black money generators in India. Indians by and large savor the sweetness of
humbling foreign rogue nations.

CASE STUDY :
Indian corporates invariably under invoice their exports and over invoice their imports from
tax heaven countries such as Singapore, UAE, Hong Kong, etc. Thus the promoters of the
public limited companies who hold rarely more than 10% of share capital, earn black money
abroad at the cost of majority shareholders and tax income to the Indian government.
Politicians, political parties and corrupt higher officials of government and its institutions
take bribes from foreign companies and park/invest the money abroad in tax havens for
transferring to India when needed. Many times locally earned bribes/funds/collections are
also routed abroad through hawala channels for evading from Indian tax authorities and
consequent legal implications.
The Vodafone tax case is a glaring example where foreign multinational companies also
evade tax payments in India by making transactions with shell companies registered in tax
haven countries

India has moved down to 61st place in terms of foreigners' money in Swiss banks and it now
accounts for a meager 0.123 percent of the total global wealth worth $1.6 trillion in
Switzerland's banking system.
While the UK and the US have retained their top two positions with the largest shares of the
foreign clients' money with Swiss banks, Pakistan has inched up to 73rd place.
Interestingly, just two big banks -- UBS and Credit Suisse -- account for nearly two-third of
the total money kept by foreigners in Swiss banks, while their share in case of Indians is even
higher at about 82 percent.

As per the latest data released by Switzerland's central banking authority SNB (Swiss
National Bank), Indians' money in Swiss banks declined by over 10 percent to about 1.8
billion Swiss francs ($1.98 billion or Rs 12,615 crore) in 2014.
This accounts for just 0.123 percent of the total funds kept in the Swiss banks by people from
across the world.
This is the second lowest level of Indian money in Swiss banks -- after an increase of over 40
percent in 2013 -- and the latest data comes amid an enhanced clampdown against the famed
secrecy wall of Switzerland's banking system.
The funds, described by SNB as 'liabilities' of Swiss banks or "amounts due to the customers
of

banks

in

Switzerland" are official Swiss figures and do not indicate to the quantum of the muchdebated alleged black money held by Indians in the safe havens of Switzerland.
Besides, SNB's official figures do not include the money that Indians or others might have in
Swiss banks in the names of entities from different countries.
An analysis of the latest SNB data also showed that the big banks accounted for 1.48 billion
Swiss francs of Indians' money, up from 1.36 billion Swiss francs a year ago.
At the end of 2014, there were 275 banks in Switzerland, but only two -- UBS and Credit
Suisse -- were classified as 'big banks' by Zurich-based SNB at that time. There are also many
foreign-controlled banks operating in the country.
The two big banks' share also rose in the case of the UK, the US and a number of other
countries.
Their share almost doubled in case of Pakistan to 472 million Swiss francs, but still
accounted for just 36 percent of the total amount of 1.3 bill billion Swiss franc held in all
Swiss banks by their clients from that country (up from just about one billion Swiss franc a
year ago).
This pushed Pakistan one place higher to 73rd place on the overall list of the countries in
terms of foreigners' money in Swiss banks. India has come down three places.
In the top-ten, the UK and the US are followed by West Indies, Guernsey, Germany,
Bahamas, Luxembourg, France, Jersey and Hong Kong.
The UK alone accounts for 22 percent of total global funds in Swiss banks. Just four top
nations together account for over half of all foreigners' wealth in Swiss banks, which rose to
1.47 trillion Swiss franc (about Rs 102 lakh crore or $1.6 trillion) in 2014.
There are only 19 countries with share of over 1 percent each and they together command
more than 80 percent of funds. The remaining 20 percent is divided among close to 200 other
countries.
China (up at 26th place with 8.2 billion Swiss franc) has a share of 0.55 percent, while
Pakistan has 0.09 percent.

A number of perceived tax-havens rank higher than India in terms of money in Swiss banks,
while others placed above India include Singapore, Italy, Japan, Australia, Russia, the UAE,
Saudi Arabia, the Netherlands, Belgium, Spain, Israel and Cyprus.
More than half of the total funds comes from the developed countries (854 billion Swiss
franc), while the offshore centres account for 415 billion Swiss franc and all the developing
countries put together 207 billion Swiss franc.
Europe accounts for about 900 billion Swiss franc, while Asia Pacific's share is close to 500
billion Swiss franc.
As per the latest data, the total Indian money held in Swiss banks at the end of 2014 included
1,776 million Swiss franc or Rs 12,350 crore held directly by Indian individuals and entities
(down from 1,952 million a year ago), and another 38 million Swiss franc (down from 77.3
million Swiss francs at 2013-end) through 'fiduciaries' or wealth managers.
However, "amounts due to customers' savings and deposit accounts" was only CHF 52
million (down from CHF 63 million a year ago), while over CHF 100 million was due
through other banks and the remaining amount of well over one billion Swiss francs have
been classified as "other amounts due to the customers" from India.
As per the latest data, the amount held by Indians through fiduciaries has reached a record
low level, while it used to be in billions till about seven years ago.
The latest data from Zurich-based SNB comes at a time when Switzerland has begun sharing
foreign client details on submission of evidence of wrongdoing provided by India and some
other countries.
It has been facing growing pressure from India and many other countries to share foreign
client details, although its own lawmakers were resisting such measures for a long time.
According to the SNB data, funds held by the US entities in Swiss banks rose for the second
consecutive year and stood at 244 billion Swiss franc at the end of 2014, despite a major
crackdown by the American authorities against the Swiss banks.

The countries ranked below India include Qatar, Oman, Iran, Mauritius, Norway, Denmark,
Finland, Nepal, Bangladesh, Vatican, Zimbabwe, Sri Lanka, Afghanistan, Myanmar and
Bhutan.

If the latest guideline of Supreme Court is to be followed, the entire list of black money
account holders should be out by the early hours of October 29. The Apex Court has ordered
the Narendra Modi-led central government to reveal the entire list of perpetrators who are
guilty of stocking up unaccounted sums of money. A day after the government revealed the
names of Pradeep Burman (Promoter of Dabur India), Pankaj Chimanlal Lodhiya (Rajkotbased bullion trader), Radha Satish Timblo (Director of Goa-based mining company Timblo
Pvt. Ltd.), the SC lashed out the government to give the complete list of the black money
holders to the Special Investigation Team (SIT) and the court too.
The long list of tax violators has been demanded by the SC and the list has come up through a
social messaging app WhatsApp which reads that Wikileaks has leaked secret information
which contains names of 20 politicians who have amassed black money, hidden in Swiss
banks among other places. We at India.com cannot vouch for the authenticity of the list.
However, with the names set to be out in public domain tomorrow, we bring to you the list,
which is doing the rounds of social media since the past few days. We bring to you the list

below, but whether the black money holders list is true, half-true, not true is for you to judge
(amount in crores).
1- Ashok Gehlot (220000)
2- Rahul Gandhi (158000)
3- Harshad Mehta (135800)
4- Sharad Pawar (82000)
5- Ashok Chavan (76888)
6- Harish Rawat (75000)
7- Sonia Gandhi (56800)
8- Muthuvel Karunanidhi (35000)
9- Digvijay Singh (28900)
10- Kapil Sibal (28000)
11- Rajeev Gandhi (19800)
12- Palaniappan Chidambaram (15040)
13- Jayaram Jaylalitha (15000)
14- Kalanithi Maran (15000)
15- HD Kumarswamy (14500)
16- Ahmed Patel (9000)
17- J M Scindia (9000)
18- Ketan Parekh (8200)
19- Andimuthu Raja (7800)

20- Suresh Kalmadi (5900)

The suspense over the detailed list continues to build as time passes by. It will be interesting
to see if the central government hands over the list of the account holders to the Supreme
Court on October 29. Union Finance Minister has said that the government has already
shared the list with the SIT on June 27 and there is no question of not sharing it with the
Supreme Court. If the entire list is out in public domain, it will be a historic day for both the
government and the people of India. While the persons named on the list will be hit with an
embarrassing bomb.

Webliography
www.businessinsider.in
www.indianexpress.com
www.slideshare.com
www.wikipedia.com
www.timesofindia.com
www.indiangovtlaw.com