Swiss Phasing Out Secret Bank Accounts

The legendary secret Swiss bank accounts that for years sheltered the money of crooks, corrupt dictators and secretive international financiers are largely being abolished by Switzerland’s banking authorities.

Under increasing pressure to combat money laundering, Switzerland’s Federal Banking Commission on Friday said that starting in July all bank account holders must identify themselves. But banks will still be allowed to open anonymous accounts if the deposits involved stem from ongoing legal proceedings such as divorces or inheritances.

Swiss banks have provided a haven for the funds of drug runners and corrupt government officials worldwide through airtight banking laws that date to 1934. The late Ferdinand Marcos of the Philippines, for example, allegedly stored billions of dollars of state funds in Swiss banks.

But Switzerland in recent years has been moving toward relaxing its bank secrecy policies. Two years ago, Switzerland suffered a billion-dollar money-laundering scandal that resulted in the resignation of the nation’s justice minister.

In addition, the Swiss have been under growing pressure from U.S. authorities to help combat money laundering. U.S. authorities have gained increasing access to the secretive Swiss banking system when they are investigating for criminal activity.

Because the Swiss have been moving toward opening up their system, experts believe that the exodus of tainted money probably began some time ago, most likely to such areas as Hong Kong, the Channel Islands off Great Britain and the Caribbean.

“The crooks out there have increasingly felt Switzerland is not the best place to put their money,” said Leonard Gumport, a Los Angeles lawyer who specializes in finding overseas money for creditors and bankruptcy trustees.

Gumport, whose work has included chasing down funds belonging to Saudi financier Adnan Khashoggi, said he expects the new rules to result in more money being put into such investments as rare coins or stamps.

“This is a fascinating development that will result in a lot of money moving someplace else if it hasn’t already gone,” Gumport said.

The Swiss are replacing the “Form B” accounts, which have allowed customers to remain anonymous by conducting transactions through lawyers, notaries or trust administrators. They will be phased out by next year for accounts requiring written statements on the identity of the real owners. According to Swiss statistics, Swiss banks held some 30,000 Form B accounts at the end of 1989.

Previously, a bank customer’s representatives only had to assure officials that the client was not using a bank account to conceal crimes. But Swiss authorities said that rule was inadequate.

Swiss banking authorities said last year that they would investigate why the number of Form B accounts had not declined despite a 1987 agreement with banks requiring them to more closely watch the identity of customers.

Last August, Switzerland adopted laws to prevent money laundering by requiring that banks ascertain the identity of their customers, but the Form B system provided a loophole to avoid detection. In addition, the Swiss Justice Ministry has proposed legislation that would encourage banks to report suspicious financial transactions.