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Swiss Banking Secrecy

Agreement on the Swiss banks' code of conduct with regard to The Exercise of Due Diligence

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The 1992 edition of this Agreement (CDB 92) does not modify banking secrecy in any way; nor did its predecessors. The banks must check the identity of their clients as soon as they establish business relations with them. For over-the-counter transactions, the limit at which identity must be checked has been lowered from Sfr 100,000 - to Sfr 25,000. -. Where business relations are set up by correspondence with a client domiciled abroad, the bank must moreover require official legalisation of the signature. If, at the time business relations are beneficiary, the bank must require the account holder to sign Form A, disclosing the ultimate beneficiary. Active assistance in arranging the flight of capital is forbidden in business relations with individuals or companies, even if domiciled abroad, who are using their accounts to this end in a semi-professional way. Furthermore, the 1992 Agreement takes into account the rules in force defining the behavior required of the banks: new provisions of the Penal Code and tightening of requirements for irreproachable conduct in banking for which the banking law provides, etc.

Where criminal proceeding are underway, whether in Switzerland or abroad, a banker cannot claim ignorance of facts which he has undertaken to check. Accordingly, when his duty of banking secrecy is waived, he must provide information on the legal situation of account holders and the identity of the ultimate beneficiaries. This is particularly important when the account has been opened in the name of a domiciliary company, an establishment, a foundation or a trust based in a tax haven. Swiss banks are consequently able to provide the judicial authorities with fuller information than banks in some other states would be obliged to do. In 1988, the Basle Committee on Banking Regulations and Supervisory Practices approved a code of banking conduct for members of the group and for other states based on the principles contained in the Agreement on Due Diligence.

It is safe to say that this Agreement, in conjunction with the Federal Banking Commission Guidelines on money laundering of 18 December 1991, does have a deterrent effect on anyone tempted to use front men or domiciliary companies to deposit funds of criminal origin in Swiss banks. Its weakness, however, is that it applies exclusively to the banking sector and not to financial transactions carried out by people who are not bankers. It was accordingly necessary to tighten up the rules in general, which was achieved with the recent introduction of the new provisions in the Penal Code (penalising money laundering, the failure to exercise du care in financial transactions, membership of a criminal organisation, and seizure of funds of criminal origin, etc.). A future federal law on money laundering will subject all persons engaging in financial transactions in a professional capacity on behalf of third parties to administrative provisions in keeping with the Federal Banking Commission Guidelines on money laundering.

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