Your Guide to Bank Secrecy

Bank secrecy refers to a type of legal requirements that exists in certain jurisdictions prohibiting banks from providing authorities with information about their customers and the accounts of their customers except in certain situations, such as when there is a suspicion of money laundering or a criminal complaint has been filed. The specific situations and circumstances in which banks are required to disclose such information vary greatly between jurisdictions. For example, bank secrecy legislation is much tighter is Switzerland than in the United States, meaning that it is harder for authorities to gain access to customer information and that it is subsequently more likely that a customer’s information will remain a secret.

Bank Secrecy in the United States

In the U.S., there are two key pieces of legislation governing bank secrecy. The Bank Secrecy Act (BSA) refers to the Currency and Foreign Transactions Reporting Act of 1970. The act mandates that U.S. financial institutions help the U.S. government detect and prevent money laundering. The act specifically requires financial institutions to keep documentation of all negotiable instruments purchased with cash and of all cash transactions over the amount of $10,000. Furthermore, the act requires all financial institutions to report any kind of suspicious activity that could be indicative of tax evasion, money laundering, or any other kind of criminal or illicit activity.

In 2001, the USA PATRIOT Act (“Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act”) expounded upon these rules in an attempt to make it even harder for banks to find their way around bank secrecy rules. The act specifically aimed to make it harder for parties to launder money internationally in order to sponsor terrorism by putting certain foreign jurisdictions, foreign financial institutions, and classes of international transactions that tend to be used for money laundering under special scrutiny.

Bank Secrecy & Offshore Jurisdictions

In some cases, it can be possible to gain more protection by going to offshore jurisdictions, where there may be bank secrecy laws that offer more privacy. However, it should be noted that with the automatic exchange of information, many countries now share information with one another, which means if you do want to keep all information strictly confidential, it can be a bit trickier. If bank secrecy is a priority for you, you may want to contact a professional who can help you set up an offshore solution that maximizes your privacy.