A couple of weeks ago Swiss Federal Council released a statement that can make one question the Swiss bank secrecy. But wait, don't worry!

The Swiss government officially announced that they no longer wants "undeclared, untaxed funds from overseas". The council further said that it will take action to "regularize untaxed assets" in Swiss banks and keep out newm untaxed cash, usually known as "Schwarzgeld" or black money.

The country's Finance Minister Hans-Rudolf Merz said that the "integrity and stability" was at stake for one of the leading offshore financial centers. He added: "We are not interested in untaxed money". (My, my, times have certainly changed!)

But there was no indication from the government how they would go about to find out whether existing funds in banks or new deposits had been taxed in the right way by foreign governments.

No Automatic Info Exchange

One thing where the Finance Minister was very clear - Switzerland will not adopt any kind of automatic exchange for tax purposes.

"Automatic exchange of information would be the end of banking secrecy, and it would greatly damage the Swiss financial industry," Merz said. "The Federal Council continues to reject the automatic exchange of information in terms of laying bare every detail of citizens' lives," the statement noted.

Article 26 Again

Merz restated that Switzerland will follow the standards of Article 26 the Organization for Economic Co-operation and Development (OECD) model treaty on tax information exchange. The OECD procedure can only be accomplished in bi-lateral, double-taxation agreements.

Under tremendous pressure from OECD and G-20, Switzerland has signed 18 such treaties in the last year; the first with the United States. Five agreements are scheduled for discussions in parliament next month. At the same time there are very real threats by opponents to challenge them to a nationwide vote where they may well be rejected.

Fraud No, Evasion Yes

As we have often noted, foreign tax evasion is not a crime under Swiss law, but tax fraud is considered as a criminal offense.

In a deal with the U.S. last year, UBS, the largest Swiss bank, was forced to agree to disclose bank account details of thousands Americans, who supposedly had evaded taxes, but the Swiss Administrative Court blocked the release of the names, ruling that it would violate Swiss law.

It is generally understood that under the OECD Article 26 procedure, the requesting country must name the individual and the bank involved and also show some substanial evidence of tax fraud. No "fishing expeditions" are allowed.

R.I.P.?

So is Swiss bank secrecy dead? Not hardly.

The statement by the Federal Council was most likely a public relations stunt. Another attempt to show that the top Swiss politicians want to collaborate with other countries seeking tax information.

But the truth is that the Swiss bank and financial secrecy law alive, and unless repealed by parliament, it will not allow wholesale release of the names of foreign account holders -- no matter how desperate the OECD, the G-20 and the IRS may become.

So long as you, as a foreign person with a Swiss account, are not engaged in tax fraud or some other criminal activities, information concerning your account cannot be released by Swiss banks. And in the unlikely case information would be released improperly, you have the right to appeal to the Swiss courts that we just mentioned have upheld the law.