“There is only one thing in the world worse than being talked about, and that is not being talked about.”[1]  Oscar Wilde’s insightful observation about humankind’s proclivity toward public recognition does have exceptions.  For a variety of reasons, men and women throughout the world have often sought confidentiality in their financial affairs, chiefly through banking in jurisdictions with a tradition of bank secrecy.

Usually, the customer seeks the assurance that the bank will not disclose account information to curious tax inspectors, anxious creditors, and intrusive relatives.[2]  On occasion, the customer may seek to hide his identity from the bank itself, as well as from third parties.[3]  To this end, the customer may open an anonymous account.

An anonymous account, also known as a numbered bank account, is a type of bank account where the accountholder’s name is kept secret, and he identifies himself to the bank by means of a code word known only by the accountholder and a restricted number of bank employees.[4]  The purpose of an anonymous account is simple: to reduce to a bare minimum the bank employees who have access to the name of the accountholder.[5]  This is done to insulate bank employees, who may be the target of inquiries or bribes, from third parties who want to know the identity of the accountholder.[6]

The classic numbered account is legendary in pop culture, as expressed in countless movies and books.  The storyline is always the same – a spy from right out of the pages of a James Bond novel walks into a Swiss bank, hands over his account number written on a note, and passes it to his private banker in exchange for a briefcase full of cold, hard cash.

Once upon a time, it could work that way.  Forty years ago, the world was a different place.  Swiss banks offered bank secrecy, including anonymous bank accounts, numbered bank accounts, and even the famous bearer passbook savings account.[7]  Each tax haven used to provide exclusive private bank accounts with unshakeable financial privacy.[8]  Company agents could sign up customers for an offshore bank account at the same time they sold them an offshore company or an offshore trust.[9]

But in those days, governments were smaller and certainly less aggressive in collecting taxes.  Today, every government in the world is hungry for more taxes.[10]  For this reason, the popular conception of numbered bank accounts – based on a myth to inject suspense into Hollywood action thrillers and keep moviegoers on the edges of their seats – has gone the way of the dinosaur.  And like dinosaurs, they only “live” in books and movies.

At the same time, there are certain aspects of the popular conception that do not stray too far from reality.  For example, numbered accounts do offer increased privacy.[11]  In the usual case, a customer’s name, address, and signature are provided in the account opening agreement.[12]  But with a numbered account, only the account number is entered in the general bank system.[13]  The numbered account is then assigned to an individual account manager for personal handling.[14]  The file with the customer’s name is maintained separately from the named accounts, with only key personnel having access.[15]

As owners of anonymous bank accounts have become accustomed to expect, depositing and withdrawing money is based upon an agreed form of communication between the account manager and the customer.  And when the communication is not face-to-face, such as by telephone or written instruction, a secret code is used in addition to the account number.[16]

Numbered bank accounts are most frequently associated in the public mind with a desire by the accountholder to minimize governmental scrutiny and taxation, usually by concealing the illegal source of money that is stored in an account.  They are a product of strict financial secrecy laws in offshore banking havens. [17]  Recent reports indicate that as much as $ 600 billion of illegal money is hidden in offshore banks.[18]  Moreover, there is strong evidence indicating that a substantial portion of the funds concealed offshore have been used to sustain terrorist groups such as Al-Qaeda.[19]

How are anonymous and numbered bank accounts used to launder money?  First, an anonymous bank account is opened in an offshore banking haven such as the Cayman Islands, Bermuda, or Luxembourg.[20]  Second, the criminal deposits his ill-gotten gains into that account, often through a wire transfer from another bank, without any questions being asked about where the funds originated from.[21]  Third, when the criminal wants to use the funds, he merely transfers them to an account in his name in a large onshore jurisdiction.[22]

By running criminal proceeds through these anonymous accounts, onshore banks never discover the source of the funds, much less whether the account was controlled by a criminal who was laundering the proceeds.[23]  Requests for information by other jurisdictions are either declined because the information is not available or because of laws protecting financial secrecy.[24]

While the Swiss banking system’s reputation for hiding numbered bank accounts under a cloak of anonymity was once considered sacrosanct, the seal was broken on its banking secrecy back in 2013 when it signed an international agreement with the OECD (Organization for Economic Cooperation and Development) to fight tax evasion.  Since then, other international agreements, such as the FATCA, have continued to chip away at the remaining vestiges of bank secrecy deeply ingrained within Swiss culture.  Today, these agreements have marked the end of bank secrecy in Switzerland.

[1] Oscar Wilde, The Picture of Dorian Gray 2 (Isabel Murray ed., Oxford University Press 1974) (1891).

[2] William W. Park, Anonymous Bank Accounts: Narco-Dollars, Fiscal Fraud, and Lawyers, 15 FDMILJ 652 (1992).

[3] Id.

[4] Numbered Bank Account (Wikipedia), http://en.wikipedia.org/wiki/Numbered_bank_account, last visited: Nov. 28, 2010.

[5] Numbered Account (The Asset Protection Law Center) http://www..rjmintz.com/numbered-account.html, last visited: Nov. 27, 2010.

[6] G. Philip Rutledge, Article: Bank Secrecy Laws: An American Perspective, 14 Dick. J. Int’l L. 601 (1996).

[7] Asset Protection Law Center, supra note 451.

[8] Id.

[9] Id.

[10] Id.

[11] Id.

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] Id.

[17] Richard A. Johnson, Why Harmful Tax Practices Will Continue After Developing Nations Pay: A Critique of the World’s Initiatives Against Harmful Tax Competition Offshore: The Dark Side of the Global Economy, 26 B.C. Third World L.J. 351, 370 (2006).

[18] Id.

[19] William Brittain-Catlin, Offshore: The Dark Side of the Global Economy at 207-13 (2005).

[20] Richard K. Gordon, On the Use and Abuse of Standards for Law: Global Governance and Offshore Financial Centers, 88 N.C.L. Rev. 501, 563 (2010).

[21] Id.

[22] Id. at 563-64.

[23] Id. at 564.

[24] Id.