Is there any good reason for privacy?
Earlier this week the Swiss lower house rejected a deal their government worked out with the IRS. In the deal, Swiss banks that do business in the US would have to turn over the names of almost 5,000 US customers that have deposits.
Under current law, turning over those names would be illegal. The banks can only disclose customers’ identities if there’s reasonable evidence of fraud. Apparently, the US hasn’t proven that case. So the lower house scuppered the deal. Treasury stands ready to put the thumb-screws on, though, and could ultimately revoke the right of UBS or Credit Suisse to do business here.
The current flap raises the question, however, if there is any good reason for privacy. In a perfect world, perhaps there wouldn’t be. People would respect one another. And wealthy folks wouldn’t have to worry about scams, or harassment, or extortion.
But we don’t live in a perfect world. If the number of emails we receive from purported Nigerian treasury officials is any indication, there are lots of people that want our money. And one way to protect it is to hide the fact that we have it. In addition, there are perfectly good reasons to have a Swiss account apart from privacy issues: students travelling in Europe, business officials with dealings in the Middle East or Africa, or investors seeking a European safe-haven from the Greek dust-up. After all, Switzerland isn’t part of the Euro.
There are all kinds of good reasons to keep financial information confidential. In this David-and-Goliath banking conflict, I’m rooting for the little Swiss boy.
Douglas R. Tengdin, CFA
Chief Investment Officer
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