Finance and Law | Bank Secrecy Laws in Europe

Bank Secrecy Laws in Europe

Tradition of the Bank Secret in European Countries

In Europe, there are two approaches to bank secrecy laws. One consists in putting state control or 'equity' and 'solidarity' above privacy and private property. That tradition is popular in big European countries such as Germany or France where the state has always played a significant role in economic life of people. Formally existing, bank secrecy laws are not strong and can be easily violated or 'reconsidered' by the state for the sake of 'justice and common good' if need be.

Smaller countries such as Switzerland, Austria, Luxembourg and Belgium have a contrasting tradition of bank secrecy laws. In those countries, bank secrecy laws are considered to be of both private and public interest. The countries have traditionally been important financial, banking and business places. They have traditionally kept a rather high profile of privacy and economic liberties which were accountable for their welfare. Therefore, an intricate legislation has been elaborated which was aimed at protecting the privacy and freedom of the citizens against the state machine. That legislation provided for the security of both residents and non-residents doing business in those countries. Bank secrecy laws were part of the notion of liberty and privacy protection. In Switzerland, Austria, Luxembourg and Belgium are part of the legal instruments making those countries some of the most important banking places all over the world.

Bank Secrecy Laws in Europe 

Bank secrecy was first codified in Switzerland in 1934 (Swiss Banking Act) and has been adopted by other European countries to a greater or lesser degree. The bank secret is a professional secret according to the European bank secrecy legislation. Like a lawyer or a doctor, the banker is not allowed to reveal the information about the bank accounts and financial situation of the client. Even after the end of the contract, the banker is obliged to keep his client's information confidential. Otherwise, he runs a risk of being legally prosecuted. Nevertheless, there are certain exceptions to bank secrecy laws. Under certain circumstances, bank secrecy can be unveiled.

Bank Secrecy Law Exceptions in Europe

In all European countries where banks exist bank secrecy laws are regarded as a virtue and a norm, no matter whether the country belongs to the tradion of the bank secret or the state control. Indeed, no one wants that anybody else sees what they have on their bank account. However, in some situations the bank secret can be universally unveiled. It depends on how the system of bank secrecy laws functions.

In the countries where the bank secrecy laws are strong, the bank secret cannot be unveiled in general. Only on some rare and severe conditions can the banker reveal the bank secret. However, it should be proved that it is in the client's interest and with his consent. For instance, in case of a criminal procedure or of a specialised bank surveillance routine carried out by a competent administrative organisation responsible for bank security. Even in those cases, bankers encounter risks of revealing too much information. For that bankers can be prosecued

In countries where the bank secret is not the first priority, exception to bank secrecy laws are galore. In addition to the aforementioned exception, there are others. The state has a lot of possibilities. It can force the banks to cooperate with it in detecting and fighting against money laundering and tax evasion. It can also create conditions for persons who can be eligible for a certain bank account. Thus, we see without strong bank secrecy legislation, the state can use banks for its own purposes.

Attacks against the European Bank Secrecy Laws

Today, the dominant tendency from all sides is to render the european bank secrecy legislation less strong. Different forces are interested and various measures are taken under the pretence of equity and struggle against tax evasion. Although bank secrecy laws still exist, they are no longer as strong and  and as they were 10 - 15 years ago. The increasing power of the state is eager to intrude into people's private lives and gain control of their fortune. 

A good illustration is the European Union is a new law according to which bank secrecy is no longer applicable to non-residence of a country. For instance, if a Belgian resident has a bank account in France, the information about his French account will be automatically transmitted to the corresponding tax administration of his place of residence.