How is black money stored in a Swiss bank?

The storage and handling of black money in Swiss banks involve several complex and often clandestine processes. Here are some key points to understand how this works:

Layering and Routing

Black money often reaches Swiss banks after passing through multiple tax havens and shell companies, a process known as "layering." This involves moving the money through 5-6 different jurisdictions to obscure its origin and the identity of the owner. For example, money might be routed through places like Jersey Island, Mauritius, or Singapore before finally being deposited in a Swiss bank3.

Use of Shell Companies and Nominee Accounts

To maintain anonymity, black money is frequently deposited into Swiss banks through shell companies or nominee accounts. These accounts are legally held by financial institutions or intermediaries, but the economic benefits accrue to the actual owners, who remain hidden from the authorities1.

Secrecy Laws

Swiss banks have historically been known for their strict secrecy laws, which were first codified in 1713 in Geneva. These laws protect the identity of clients, making it difficult for authorities to trace the owners of the deposited funds. However, in recent years, Switzerland has begun to cooperate more with international authorities to combat tax evasion and money laundering, leading to some relaxation of these secrecy laws3.

Round Tripping

Black money can also be routed back to the country of origin through a process called "round tripping." This involves sending the money to a tax haven like Mauritius or Singapore, where it is dressed up to look like foreign capital, and then reinvesting it back into the home country. This method allows the money to be repatriated while concealing its illicit origins1.

Misuse of Legal Channels

Black money can be reinvested in the home country through legal channels such as Foreign Direct Investment (FDI) or participatory notes (PNs). For instance, investments from Mauritius and Singapore, which are known tax havens, are often used to conceal the identities of Indian tax evaders investing in their own companies1.

Smuggling and Other Channels

In addition to banking channels, black money can also be converted and repatriated through other means such as gold imports, smuggling of precious stones, or fictitious software exports. These methods allow the black money to be reintegrated into the local economy without detection1.

Overall, the storage of black money in Swiss banks involves a sophisticated network of shell companies, nominee accounts, and layered transactions designed to maintain secrecy and evade detection.