Offshore jurisdictions have long been synonymous with banking privacy. In Switzerland for example, often considered the international centre of private banking, the law prohibits Swiss banks from disclosing information about the existence of an account to any individual, company or government. It is only in the case of a criminal investigation that Swiss Banking Secrecy can be lifted.
 
In the climate of US Senate investigations and moves from the European Union to extend the scope of the European Savings Directive, there will be increasing pressure on banking centres for greater transparency and openness.
 
Such moves have led many to question whether this is the beginning of the end of banking privacy. However, the reality is that where the international banking landscape is changing, these moves are a positive step whereby an individual can maintain their fundamental right to privacy, as long as they are compliant with the laws of the country in which they reside or are domiciled.
 
There are a range of personal reasons, unrelated to tax, why a high net worth individual might want the details of their personal financial affairs to remain private. Wealth often attracts unwanted publicity. All over the world, newspapers and publishers from time to time publish ‘rich lists’ detailing the earnings of a country’s wealthiest individuals; it is understandable that some people might not wish the contents of their bank account to be discussed in a national newspaper. In some countries, wealth can make you a target of organised crime. Being discreet about your wealth can give you added protection from kidnappers or identity thieves. And then there’s the sometimes unwanted attention and solicitation from family members, or venture capitalists seeking seed money; banking privacy can be important for a high net worth individual. It is also worth remembering that historically bank secrecy rules in a number of countries were developed to help families protect themselves against expropriation of assets and corruption in their home countries.
 
Recent changes to non-domicile legislation in the UK is an example of how a government has taken steps to ensure tax law compliance while still respecting an individual’s right to hold assets overseas. An individual can claim non-domicile status and not have to declare overseas income and gains to the UK government; however, to be able to do so they will need to pay the UK government a fee of £30,000 (once they have been resident in the UK for the required number of years). This scenario allows the tax payer to maintain their financial privacy.
 
The move to greater transparency began some time ago, with the introduction of more stringent anti-money laundering legislation, designed to combat international organised crime and terrorism. Transparency is a positive move, and the recent tax investigations in Liechtenstein only emphasise the widely acknowledged certainties in life of death and taxes. The message from governments worldwide is clear: there is still a place for privacy as long as an individual takes responsibility for being tax compliant.

*Please note that the contents of this article are for your informational purposes only and should not be solely relied upon. Independent professional advice should be sought from you tax adviser with regard to any proposed changes if you believe these may affect you. 

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