Is Switzerland Still a Safe Place to Keep Your Assets?
Swiss banking was once what everyone aspired to. They wanted the secrecy, the prudence and the investment expertise of the Swiss bankers in Zurich and Geneva.
Seeing the demise of Credit Suisse recently got me thinking about just how far Switzerland has fallen. The country once stood almost alone in terms of secret bank accounts and the safety of your money. It would have been unimaginable to think of one of the country’s largest banks failing and being taken over by rival UBS for a relatively paltry sum.
There are not many reasons to use Switzerland for banking nowadays. It lives on its past reputation for prudence and secrecy.
Its reputation for financial prudence is in tatters.
Swiss Banking Secrecy Ended Long Ago
Switzerland stopped offering secret, numbered accounts at the end of the 1980s. Back then it was possible to show up in Zurich or Geneva with a suitcase of cash. You could walk into a bank, open an account with minimal formalities and have only a number to identify the account. No other identification was necessary. This was the ultimate secret bank account. No paper trail as to where the funds came from and no practical way for any creditor to seize the account.
Nowadays Switzerland is part of the Common Reporting Standard (CRS). CRS is an attempt to abolish bank secrecy around the world. Along with the US version FATCA it obliges banks to share your bank balances with your country of residence. I’ve written about this at length before and some of the ways that you can avoid your account balances being reported. Fortunately, the bureaucrats who came up with CRS left many loopholes we can exploit.
Don’t Trust Banks With Your Gold
Swiss banks may be best avoided, even for gold storage. Gold is the ultimate asset for safety and security. It’s perhaps the most secure tangible asset. But storage is a problem. Counterparty risk is a crucial consideration when you’re storing large quantities of gold.
Swiss banking giant, UBS, stored 299 ounces of gold for a German client. The value of 299 ounces of gold today is $581,000. The client had deposited his gold with UBS as far back as 2007. When he attempted to withdraw his gold, UBS demanded proof that he’d paid his taxes in Germany. The client declined. UBS then refused to give the customer his own gold he had stored with them. The client, quite rightly, was outraged by the antics of UBS. He sued them in the Swiss courts, in a case that has rumbled on for years.
The lower court in Aargau, Switzerland sided with the bankers at UBS, claiming that ‘a dubious business relationship should be assumed’ due to the man’s refusal to provide tax details.
Not giving up, however, the client appealed the judgement to the higher court in Lausanne. The appeal court overturned the judgement and said that “The Swiss money laundering law is not violated in the return of the gold”.
So, the client eventually got his gold. But only after years of hassle and expense. During all that time he didn’t have access to his own money.
Spreading Your Assets Over Multiple Jurisdictions is Essential
This type of situation is not limited to Switzerland, of course. Bank accounts are frozen every day in almost every country. Intrusive information is demanded by banks, not only to open accounts but to maintain them too. Banks routinely close accounts with no notice for obscure reasons.
That’s why it’s so important to have multiple options. Bank accounts across multiple jurisdictions, gold stored in non-bank facilities and multiple citizenships to make sure you can travel at short notice. A Swiss banking presence can still be part of an overall asset protection strategy. just not the major part.
The days of keeping all your assets in a reputable Swiss bank are long gone.