Bank secrecy

{{Short description|Agreement between a bank and its clients that activities remain private}}

{{Redirect|Bank–client confidentiality|its scope as a confidentiality agreement|Non-disclosure agreement}}

{{Redirect|Financial secrecy|the index measuring banking secrecy|Financial Secrecy Index}}File:Gornergrat in Wallis, Switzerland, 2012 August.jpg is known for its bank secrecy and strict bank–client confidentiality. Pictured: the Swiss Alps, the location of many underground storage bunkers for gold.{{clarification needed|reason=Gornergrat is a hotel not a bunker|date=August 2022}}]]{{Banking |terms}}

Banking secrecy,{{Cite news|url=https://www.reuters.com/article/us-finance-secrecy-index/global-study-names-switzerland-as-capital-of-bank-secrecy-idUSKBN1FJ2I0|title=Global study names Switzerland as capital of bank secrecy|last=O'Donnell|first=John|date=January 30, 2018|work=Reuters|access-date=June 4, 2016|language=en-US}}{{Cite news|url=https://www.forbes.com/sites/taxanalysts/2017/04/05/switzerland-their-lips-say-yes-but-their-eyes-say-no/#426d756c5783|title=Swiss Bank Secrecy—Their Lips Say Yes, But Their Eyes Say No|last=Gibson|first=Stuart|date=April 5, 2017|work=Forbes|access-date=June 1, 2018|language=en}} alternatively known as financial privacy, banking discretion, or bank safety,Guex (2000), p. 240{{Cite web|url=https://www.bloomberg.com/news/videos/2018-01-24/tidjane-thiam-says-markets-and-volatility-are-going-up-video|title=Tidjane Thiam Says Markets and Volatility Are Going Up|last=Bloomberg Surveillance|website=Bloomberg News |date=January 24, 2018|access-date=January 24, 2018}} is a conditional agreement between a bank and its clients that all foregoing activities remain secure, confidential, and private.{{Cite news |date=November 17, 2008 |title=Financial Privacy |language=en-US |work=Investopedia |url=https://www.investopedia.com/terms/f/fianancial-privacy.asp |url-status=deviated |access-date=June 16, 2018 |archive-url=https://web.archive.org/web/20180618125619/https://www.investopedia.com/terms/f/fianancial-privacy.asp |archive-date=June 18, 2018 |quote=It also prohibits the sharing of client information to affiliates of the institution as well. For example: A customer holds a checking account at a bank. The bank has an investment division as well as an insurance division. The bank may give information to the client about the other needs served by their external divisions, but not vice versa.}} Most often associated with banking in Switzerland, banking secrecy is prevalent in Luxembourg, Monaco, Hong Kong, Singapore, Ireland, and Lebanon, among other off-shore banking institutions.

Otherwise known as bank–client confidentiality or banker–client privilege,{{Cite news|url=https://www.reuters.com/article/us-swiss-banks-specialreport/special-report-the-battle-for-the-swiss-soul-idUSBRE93H07620130418|title=Special Report: The battle for the Swiss soul|last=Thomasson|first=Emma|date=April 18, 2013|publisher=Reuters|access-date=May 19, 2018|language=en-US}}{{Cite book|title=The Fall of UBS: The Forces that Brought Down Switzerland's Biggest Bank|last=Schütz|first=Dirk|date=2000|publisher=Pyramid Media Group|isbn=9780944188200|language=en}} the practice was started by Italian merchants during the 1600s near Northern Italy (a region that would become the Italian-speaking region of Switzerland).Guex (2000), p. 237 Geneva bankers established secrecy socially and through civil law in the French-speaking region during the 1700s. Swiss banking secrecy was first codified with the Banking Act of 1934, thus making it a crime to disclose client information to third parties without a client's consent. The law, coupled with a stable Swiss currency and international neutrality, prompted large capital flight to private Swiss accounts. During the 1940s, numbered bank accounts were introduced creating an enduring principle of bank secrecy that continues to be considered one of the main aspects of private banking globally. Advances in financial cryptography (via public-key cryptography) could make it possible to use anonymous electronic money and anonymous digital bearer certificates for financial privacy and anonymous Internet banking, given enabling institutions and secure computer systems.{{Cite book |last1=Enzmann |first1=Matthias |last2=Fischlin |first2=Marc |last3=Schneider |first3=Markus |title=Financial Cryptography |chapter=A Privacy-Friendly Loyalty System Based on Discrete Logarithms over Elliptic Curves |date=2004 |editor-last=Juels |editor-first=Ari |chapter-url=https://link.springer.com/chapter/10.1007/978-3-540-27809-2_4 |series=Lecture Notes in Computer Science |volume=3110 |language=en |location=Berlin, Heidelberg |publisher=Springer |pages=24–38 |doi=10.1007/978-3-540-27809-2_4 |isbn=978-3-540-27809-2}}

While some banking institutions voluntarily impose banking secrecy institutionally, others operate in regions where the practice is legally mandated and protected (e.g. off-shore financial centers). Almost all banking secrecy standards prohibit the disclosure of client information to third parties without consent or an accepted criminal complaint. Additional privacy is provided to select clients via numbered bank accounts or underground bank vaults.

Recent research has indicated that the use of offshore financial centers has been of concern because criminals get involved with them. It is argued that these financial centers enable the actions of criminals. However, there have been attempts by global institutions to regulate money laundering and illegal activities.{{Cite journal |last=Young |first=Mary Alice |date=2013-07-05 |title=The exploitation of offshore financial centres: Banking confidentiality and money laundering |url=https://www.emerald.com/insight/content/doi/10.1108/JMLC-01-2013-0004/full/html |journal=Journal of Money Laundering Control |language=en |volume=16 |issue=3 |pages=198–208 |doi=10.1108/JMLC-01-2013-0004 |issn=1368-5201|url-access=subscription }}