Corruption Challenges – Lokpal, POCA, etc

What are Swiss Banks?


From UPSC perspective, the following things are important :

Prelims level : Swiss Banks

Mains level : Corruption and money laundering

A whistleblower has leaked information on more than $100 billion held in 30,000 accounts of Zurich-headquartered Credit Suisse, one of the world’s most infamous banks which hold black money.

What is the news?

  • The investigation refocused attention on Swiss banks and their famous, century-old culture of secrecy.
  • This swiss tradition is under pressure as countries around the world try to get their super-rich to pay legitimate taxes on their wealth.

Swiss Banks: Defined by Secrecy

  • Since at least the beginning of the 18th century, Geneva had become a favoured destination of French royalty and other European elites seeking discreet havens to stash their wealth.
  • In 1713, Swiss government authorities announced laws prohibiting bankers from giving out information about their customers.
  • Thus began a powerful culture of silence and secrecy that went on to become the defining feature of Swiss banking.
  • In 1934, Switzerland passed the Federal Act on Banks and Savings Banks, commonly known as the Banking Law of 1934 or the Swiss Banking Act.

What’s behind this upmost secrecy?

  • Article 47 made it a crime to reveal details or information of customers to almost anyone — including the government — without their consent and in the absence of a criminal complaint.
  • Violators can get five years in prison; Article 47 lies at the heart of some of the most stringent banking secrecy laws anywhere.

Why are they favourite destination to park black money?

  • As wealth became easily mobile across international borders, the safety and stability of Swiss banks, located in a peaceful country presented an irresistible attraction for the super-rich.
  • Switzerland itself is a politically neutral country.
  • Swiss bank accounts are attractive to depositors because they combine low levels of risk with very high levels of privacy.
  • The Swiss economy is extremely stable, and the banks are run at very high levels of professionalism.
  • Almost any adult in the world can open an account in a Swiss bank. Opening an account is not difficult, and requires not much more than basic KYC, including a proof of identity such as a passport.

Question of ‘black money’

  • “Black money” allegedly stashed away by Indians in Swiss banks is a political issue in India, and parties and political functionaries have often made promises to “bring it back”.
  • Swiss authorities have maintained that they cooperate with the Indian government to fight tax evasion and fraud.

Indian motives and moves

  • The two countries have had a system of automatic exchange of information in tax matters since 2018.
  • Under this, detailed financial information on all Indian residents with accounts in Swiss financial institutions was provided for the first time to Indian authorities in September 2019.


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