Is Private banking appropriate for me?

Here you’ll find some key factors to determine, if you need private banking services or not:

Service levels and Products offered

·         Private banks offer an inside advocate the private banker whose mission is to help his or her clients make easy use of the bank's products and services.

A private banker will routinely arrange complex wire transfers for a client who simply calls in by phone to request them. Retail banks may offer offshore services, but a private banker is an expert in facilitating the creation of offshore trusts and corporations, opening accounts for them, and arranging transactions on their behalf. Retail banks will allow clients to open multiple accounts, but a private banker will not only create these accounts for a client, but also keep track of the assets in each account and arrange transactions among them.

Private banks provide its clients with a team of specialists under the coordinated direction of the private banker. These specialists include investment managers, trust officers, estate planners, and other financial experts, all prepared to act in concert. The private banker orchestrates their services with a degree of coordination that is often difficult or impossible to achieve in retail banking.

·         Multiple Accounts

A striking feature of the private bank accounts examined is their complexity. Private bank clients often have many accounts in many locations. Some are personal checking, money market or credit card accounts. Others are in the name of one or more shell companies. Multiple investment accounts are common, including mutual funds, stocks, bonds and time deposits.

The reality right now is that private banks allow clients to have multiple accounts in multiple locations under multiple names and do not aggregate the information.

·         Secrecy Products

Most private banks offer a number of products and services that shield a client's ownership of funds. They include offshore trusts and shell corporations, special name accounts, and codes used to refer to clients or fund transfers.

·         Movement of Funds

Client account transactions at private banks routinely involve large sums of money., Most private banks provide products and services that facilitate the quick, confidential and hard-to-trace movement of money across jurisdictional lines. For example, private banks routinely facilitate large wire transfers into, out of and among client accounts, in multiple countries.

·         Credit

Another common private bank service involves the extension of credit to clients. The clients leave their deposits in the bank and use them as collateral for large loans. This practice enables the bank to earn a fee not only on the deposits under their management, but also on the loan.

Culture of Secrecy

A culture of secrecy pervades the private banking industry. Numbered accounts at Swiss banks are but one example. There are other layers of secrecy that private banks and clients routinely use to mask accounts and transactions. For example, private banks routinely create shell companies and trusts to shield the identity of the beneficial owner of a bank account. Private banks also open accounts under code names and will, when asked, refer to clients by code names or encode account transactions.

Secrecy Jurisdictions

In addition to shell corporations and codes, a number of private banks also conduct business in secrecy jurisdictions such as Switzerland and the Cayman Islands, which impose criminal sanctions on the disclosure of bank information related to clients and restrict U.S. bank oversight. The secrecy laws are so tight, they even restrict internal bank oversight.

For example, if a bank's own employee uncovers a problem in an office located in a secrecy jurisdiction, that employee is barred from conveying any client-specific information to colleagues in the United States, even though they are part of the same banking operation. The bank's auditors and compliance officers operate under the same restrictions; any audit or compliance report sent out of the country must first be cleansed of client-specific information.

If a bank employee in the United States wants more information about a problem in a secrecy jurisdiction involving specific clients, he or she has to fly to the secrecy jurisdiction to discuss the matter in detail or review documentation. Even then, the restrictions continue. For example, before allowing an employee to travel to Switzerland, private banks such as J.P. Morgan and Citibank require their employees to sign a non-disclosure statement, reminding them that Swiss law bars disclosing client information acquired in Switzerland to anyone, even their fellow bankers in the United States.

If a U.S. private bank were to tell its Swiss office that an individual is suspected of money laundering and to close any accounts related to that individual, Swiss law bars the Swiss office from disclosing the existence of any such accounts. Then, if U.S. bank personnel wanted to confirm the closure of any accounts, someone from the private bank would have to fly to Switzerland to do so. Upon returning, the private bank official could not, without breaking Swiss law, communicate any specific account information to senior bank management in the United States or to U.S. bank regulators. The bottom line, then, is that private bank personnel cannot have a frank discussion in the United States about what the private bank is doing in Switzerland without breaking Swiss law.

Source: http://levin.senate.gov/issues/psireport2.htm