HOW DOES A SWISS BANK ACCOUNT WORK?

Switzerland is one of the few countries in the world that guarantees, by law, the secrecy of its bank accounts. As long as the client of a Swiss bank has not done anything that is consid­ered illegal in Switzerland, the bank will not reveal the client's identity to anyone.

During World War II, for example, many families from war-torn Germany, Italy, and France were able to keep their savings secure by putting them in Swiss banks. Many Europeans still consider having a bank account in Zurich, Basel, Lugano, or Geneva to be a sign of financial security.

Opening a legal, numbered Swiss bank account is still relatively easy to do, usually involving nothing more than going to Switzerland, filling out a few forms, and making a deposit. Swiss bankers are known to be dependable, trustworthy, and, above all, discreet. These qualities have made Switzerland one of the world's banking centers. But they have also made Switzerland a center for money laundering.

Swiss bank accounts are useful for money-laundering schemes because once money passes through a respectable Swiss bank, it is accepted anywhere in the world. When several Swiss banks were found to be facilitating the activities of international drug traffickers in the 1980s, the Swiss authorities finally decided to break open several secret accounts that were linked to illegal activities abroad.

Most people holding Swiss bank accounts, however, do not use them to launder illegally earned money. They merely want their legally earned funds to be safe and free from government control and taxes at home. Swiss bankers do not reveal the accounts of clients accused of avoiding taxes in their home country, since tax evasion is not consid­ered to be "illegal" in Switzerland: it is only a civil, not a criminal offense.

Foreigners—as long as they break no Swiss laws—can keep their money in Swiss bank accounts without fear. This guarantee of secrecy can be used by many unscrupulous people for a wide variety of shady international activities. In the case of the Iran-contra scandals during the 1980s, for example, the secret deals between America's CIA and the Iranian arms merchants were paid for in part with money deposited by CIA agents at banks in Switzerland.

Philippine dictator Ferdinand Marcos had also deposited large sums of illegally acquired funds in Swiss banks during the 1970s and 1980s. When he was deposed, the Philippine government called for the return of these funds, which was agreed to by the Swiss authorities. After several abuses of Swiss banking secrecy, the Swiss authorities announced that they would be ready to open any accounts revealed to be linked to illegal international activity.

1. Why are Swiss banks so popular in the world?

2. What are Swiss bankers known to be?

3. What did the Swiss authorities decide to do in the 1980s?