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Swiss Bankers Welcome Enhanced Due Diligence Measures

by Ulrika Lomas,, Brussels

27 December 2012

The Swiss Bankers Association (SBA) has recently welcomed the Taxed Assets Strategy Paper issued by the Swiss Federal Council, and plans for enhanced due diligence.

In its statement, the SBA highlights the fact that it has “long advocated a tax-compliant financial centre and therefore fundamentally supports the objectives set by the Swiss Federal Council."

The SBA states that it is also prepared to collaborate constructively on the further development of the measures to help ensure that the new due diligence obligations are plausible, practicable and can be established internationally.

In particular, the SBA welcomes the fact that the Swiss Federal Council provides for a risk-based approach to the implementation, which will be established by law, but the details of which can be developed by the proven and practical approach of self-regulation together with the Financial Market Supervisory Authority (FINMA).

The SBA states: “Because the reputation of the entire financial centre is of importance, it is good that all financial intermediaries and not only the banks must act in a tax-compliant manner.”

It adds: “The banks in Switzerland also agree with the principle that the application should be global in scope – therefore also applying to Switzerland in accordance with the risk-based approach.”

The SBA continues: “The proposals put forward by the Swiss Federal Council regarding the instrument of self-declaration have not yet been described in detail. It is positive that the Federal Council does not include a systematic self-declaration in its proposals.”

“The SBA has clearly rejected obligatory systematic self-declaration since a long time ago, as this places the clients under general suspicion and is neither practicable, credible nor can it be established internationally. No bank in the world can be made responsible for the tax-compliance of its clients.”

Concluding, the SBA says: “The SBA welcomes the creation of a task force in terms of a general overview. It is important to the SBA that already existing considerations will be taken into account and that work starts very swiftly.”

The Swiss Federal Council recently announced that it wants to prevent banks and other financial intermediaries from accepting untaxed assets, using enhanced due diligence requirements.

The Federal Council has therefore instructed the Federal Department of Finance (FDF) to submit a corresponding consultation draft at the start of 2013, noting that the content of the consultation draft and its schedule should be in line with the implementation of the revised Financial Action Task Force recommendations.

At the same time, the Federal Council took note of the FDF's appointment of a group of experts tasked with drawing up the basis for the longer-term orientation of the financial market strategy.

Commenting on the latest announcement, the FDF explained that: “The Federal Council is stepping up its efforts to combat abuses in the area of money laundering and taxation. With the planned implementation of the revised recommendations of the Financial Action Task Force (FATF), serious tax offences will be qualified as predicate offences for money laundering in future. In the event that they suspect money laundering, financial intermediaries should also report these cases to the Money Laundering Reporting Office Switzerland.”

The FDF highlighted the fact that “the Federal Council also decided with this bill, which incorporates other laws such as tax laws and the Code of Obligations (legislation on companies limited by shares) along with the Anti-Money Laundering Act, to regulate at the same time the principles of enhanced due diligence requirements to prevent the acceptance of untaxed assets.”

The FDF pointed out that: “The extent of the examination depends on the risk posed by the contracting party, which is similar to the due diligence requirements for combating money laundering and terrorist financing. Financial intermediaries will be obliged to issue self-regulation provisions in compliance with specific legal parameters, which are to be recognized and monitored by the supervisory authority. Recognized self-regulation provisions are equivalent to legal provisions in terms of their impact. In the absence of any self-regulation, the supervisory authority will be empowered to issue corresponding regulations.”

It explained that: “Within the scope of the due diligence requirements to prevent the acceptance of untaxed assets, it is envisaged that the financial intermediary will be able to request a self-declaration from clients on the fulfilment of their tax obligations. The self-declaration will serve as an indicator of the tax-compliant conduct of the client. However, there is no self-declaration obligation.”

TAGS: compliance | Finance | tax | investment | law | legislation | Switzerland | regulation | Financial Action Task Force (FATF)

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