Banking secrecy, alternately known as financial privacy, banking discretion, or bank safety, is a conditional agreement between a bank and its clients that all foregoing activities remain secure, confidential, and private. Most often associated with banking in Switzerland, banking secrecy is prevalent in Luxembourg, Monaco, Hong Kong, Singapore, Ireland, Lebanon and the Cayman Islands, among other off-shore banking institutions. Otherwise known as bank–client confidentiality or banker–client privilege, the practice was started by Italian merchants during the 1600s near Northern Italy. Geneva bankers established secrecy socially and through civil law in the French-speaking region during the 1700s. Swiss banking secrecy was first codified with the Banking Act of 1934, thus making it a crime to disclose client information to third parties without a client's consent. The law, coupled with a stable Swiss currency and international neutrality, prompted large capital flight to private Swiss accounts. During the 1940s, numbered bank accounts were introduced creating an enduring principle of bank secrecy that continues to be considered one of the main aspects of private banking globally. Advances in financial cryptography could make it possible to use anonymous electronic money and anonymous digital bearer certificates for financial privacy and anonymous Internet banking, given enabling institutions and secure computer systems. While some banking institutions voluntarily impose banking secrecy institutionally, others operate in regions where the practice is legally mandated and protected. Almost all banking secrecy standards prohibit the disclosure of client information to third parties without consent or an accepted criminal complaint. Additional privacy is provided to select clients via numbered bank accounts or underground bank vaults.
mobster Meyer Lansky took money from New Orleansslot machines and shifted it to accounts overseas. The Swiss secrecy law two years later assured him of G-man-proof-banking. Later, he bought a Swiss bank and for years deposited his Havana casino take in Miami accounts, then wired the funds to Switzerland via a network of shell and holding companies and offshore accounts.
You ask why, if there's an important role for a regulated banking system, do you allow a non-regulated banking system to continue? It's in the interest of some of the moneyed interests to allow this to occur. It's not an accident; it could have been shut down at any time. If you said the US, the UK, the major G7 banks will not deal with offshore bank centers that don't comply with G7 banks regulations, these banks could not exist. They only exist because they engage in transactions with standard banks.
