The ultra-rich, powerful, and the echelons of this world, for years, have used anonymous bank accounts for all sorts of transactions. Whether it be for availing complete privacy or to evade taxes, anonymous bank accounts are completely legal. You may be thinking that these sorts of accounts are used by the corrupt, however, some people wish to maintain the privacy or to tackle some legal issues eliminating the notion that these accounts are used for illegal activities.
Table of Contents
- What are anonymous bank accounts?
- UBS under scrutiny: A review of the Switzerland banking laws
- Why are people attracted to anonymous bank accounts?
- Anonymous bank accounts: Can you open one today?
- How to reduce taxes legally without having anonymous bank accounts?
What are anonymous bank accounts?
Ever heard of swiss accounts? Or secret bank accounts? If you’ve heard about any of the two, then you should know that anonymous bank accounts are the same. All these three are the same type of bank accounts meaning they provide the highest level of privacy to the account owners.
Anonymous bank accounts have been used by people for all sorts of reasons from perfectly normal transactions to conducting illegal activities. Although the banking law to ensure secrecy was made after the first world war to protect the citizen’s assets. In doing so, countries like Switzerland were able to attract millions of dollars into their economy leading Switzerland to be one of the strongest economies in the world.
What makes an anonymous bank account unique is that it does not hold the name of the account owner. There is no account title that will let you know who is the owner of the account. So, how does the bank realize whose account it is?
It might be difficult to understand how a bank can manage transactions if they don’t know who the owner is. However, that’s not the case. The bank system assigns codes or numbers to the account title instead of the account owner’s name. Anonymous bank accounts are also referred to as “numbered accounts”.
The number of the account and the name of the client is only available to the higher-ups in the bank management. They are bound by the banking secrecy law not to reveal the details even if government officials require it. The only condition for revealing details is that those asking for the name or account information should have substantial proof that the account is used for or has been obtained through illegal activities.
Traditionally, the client’s name and the number assigned to his account were mentioned on a card which was then kept in a safe to ensure nobody had access to it. Only the banker and his boss were able to retrieve that card from the safe whenever there was a need for it. As technology advanced, all of this was done electronically.
UBS under scrutiny: A review of the Switzerland banking laws
One of the largest Swiss banks, UBS has been the center of many financial controversies over the years. The bank came under the scrutiny of the French, Germans, and the American tax authorities for assisting individuals in evading taxes.
In 2007, the Swiss banking giant came under the pressure of the media for tax evasion controversies. It so happened that one of their bankers, who belonged to the US, Bradley Birkenfeld had approached the US tax authorities and disclosed information about one of the anonymous bank accounts owners. In a turn of events, UBS was taken to court by the department of justice and fined $780 million. However, such an event further strengthened the banking secrecy code in Switzerland to protect the client’s privacy.
Since then, several ex-employees who had worked for UBS and now started their wealth management firms in Switzerland were indicted. The department of justice after the 2007 revelation had strengthened its grip on these individuals in the hopes that these activities don’t happen in the future. However, all these legal crackdowns further cemented the banking secrecy laws of the country.
In 2012, German tax authorities had tightened their grip on the UBS Zurich branch and raided their office taking around 100 computers and data records with them. However, the investigation did not prove anything, and that UBS claimed in court that they were more than willing to accommodate any internal investigations required.
In 2013, UBS french offices were fined 10 million euros for helping french authorities evade taxes. Later in 2014, the banking giant had to post a bond of over a billion euros but that was not all. The cases continue to wrack up against the behemoth bank and in 2019 UBS was fined $4.9 billion for helping the French evade taxes.
The investigations and cases continue to stack against the Swiss bank and what is even more surprising is after the Panama leaks, the pressure on the Swiss government to improve their banking laws from other countries is adding further pressure.
UBS would argue in court that they had no idea of how the accounts were being used. However, with the renewed pressure from major developed and developing countries, these irresponsible statements might not be strong enough in court today.
The point of bringing UBS is to help you understand that these laws are not laid in stone and can easily be changed. Swiss banking laws might still provide the highest level of privacy, however, now owning an anonymous bank account is not a sure-fire way to hide in plain sight.
Why are people attracted to anonymous bank accounts?
Remember the movie “Wolf of Wallstreet” where Jordan Belfort heads to Switzerland to open anonymous bank accounts? Well, there are a lot of reasons for owning an anonymous bank account and they are as follows.
Still maintains privacy
Even with so much pressure from many countries’ governments, you can be assured that your banking details are secure unless you’re caught doing transactions for illegal activities. In that case, the banks are obliged to show your accounting details to the relevant authorities.
Many people seek privacy to secure their wealth as well. In countries that are riddled with corruption, their officials are likely to extort their wealthy individuals in the hope to make quick money. Rich people in these countries head to Switzerland to save their hard-earned money because they know that the Swiss bankers will not reveal their details.
Then there is the case of local banks accessing your information in the hopes to slap you with additional financial lawsuits to make quick money. In such cases, individuals prefer to save their money by keeping it in anonymous bank accounts.
You may have heard of cases where banks are being hacked and account details are compromised. This can be an alarming situation for many. If you’re one of those individuals that feel that your local bank does not have adequate protection against hackers and that your banking details might not be safe, an anonymous bank account is always an option for you.
In 2014, JP Morgan, one of the largest financial institutions was hacked and around 80 million users’ data was compromised leaving many vulnerable at the hands of the hackers involved. In Bangladesh, millions of dollars were transferred after hackers got into the bank’s system. The money was never recovered or even traced. Capital One was hacked in the year 2019 and around 100 million client’s account details were stolen. The list of such examples goes on and on.
With the world getting greedy, many people will come after you with ridiculous claims in the hopes of making money if you’re rich. If that is the case, you would want a bank account that protects your assets.
In such cases where people slap you with frivolous lawsuits, the court can freeze your assets until the case comes to an end. This can take a lot of time and with a frozen bank account, you can’t do much especially if your life savings are all in one account. An anonymous bank account helps you stay away from these types of issues by protecting your assets in a foreign country.
Let’s be honest, everybody knows an anonymous bank account for one thing. Perhaps, that’s the only benefit most people know. Since World War I, Swiss banking laws were modified to ensure the strict privacy of their clients with severe consequences to those that reveal the bank client’s data.
Many companies have come under the scrutiny of tax authorities for avoiding taxes through having shell companies and anonymous bank accounts in foreign countries. Companies like Apple and Amazon have faced the heat from media and government bodies for making billions of dollars but paying $0 in federal taxes. Due to this unwanted media attention, Amazon has finally started by paying income taxes in 2020 yet still doesn’t pay a penny towards federal tax.
Anonymous bank accounts: Can you open one today?
Due to tighter regulations and strict banking laws that require KYC, opening an anonymous bank account is not possible in this era. Agreements have been made in place for providing bank owner’s information to the authorities in their country of origin.
These new laws have restricted investors from investing or depositing money into foreign accounts as the level of privacy has been reduced. This has reduced the incentive for serious investors to consider anonymous bank accounts. However, there are still ways around this and one can remain anonymous.
Many people have started to open bank accounts in foreign countries in the name of a third party that they know. However, the account is not operated by the third party but by the true owner (the investor). The difference here is that the account is owned in the name of somebody else while it is run by a different person. Tax authorities will get details of the third part but they won’t know who is the one running the account.
Let’s go back to the example of Jordan Belfort. Yes, we’re going to use that because it is the most-watched movie with a lot of financial concepts. Jordan Belfort asks his wife’s aunt (non-US citizen) to open a bank account in her name in Europe where he transfers his money and can use it safely without the feds knowing.
This does not guarantee safety. Even in the movie, Jordan faces the heat from feds as they start getting onto his tricks. If the account comes under scrutiny by government authorities due to allegations of illegal activities, an investigation into the account could lead to the person (true owner) running the account.
Another way you can open anonymous bank accounts today is by buying an existing company with all its details. When you buy a company, it is up to the new owner to change the bank account details and shift them to the name of the new owner. However, if you do not do that and run the account as it is, it can be a type of anonymous bank account. This is illegal to do and if the bank realizes that the account owner has changed but the title is not updated, your bank account could be frozen.
How to reduce taxes legally without having anonymous bank accounts?
There is a way for investors, business owners, and wealthy individuals to avoid or reduce their taxes legally. Some countries offer tax incentives for their locals to invest in certain financial markets to promote their growth. While others use their dual nationality to take advantage of lower tax rates in either of the two countries. There are also expense-related loopholes in many countries that one can take advantage of.
Then there are tax-free countries like the Bahamas and many more where individuals can get citizenship. Once they are nationals of the country, they can take advantage of the tax-free environment that the country provides in the hopes to boost economic activity.
Many wealthy individuals in the States move to Puerto Rico or the Virgin Islands with their businesses, hire a few people, sign a couple of deals and enjoy a tax-free life. Although it sounds very easy to do, it is not as there are a lot of factors involved.
If you’re looking for legal ways of avoiding tax, you need to hire a lawyer or a tax consultant. People in these professions learn tax codes of different countries as if they were their bible and can use those laws in their favor. Don’t go about doing these things to avoid taxes yourself as these are tricky and require the right knowledge. If you’ve missed something or have done something the wrong way, you might end up getting in trouble. A tax consultant is your way of sorting out your finances and reducing your taxes legally.