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Switzerland Enhances Due Diligence Requirements

by Ulrika Lomas, Tax-News.com, Brussels

18 December 2012


The Swiss Federal Council has recently announced that it wants to prevent banks and other financial intermediaries from accepting untaxed assets with 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 explains 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 highlights 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 points 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 recognised and monitored by the supervisory authority. Recognised 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 adds: “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.”

“Furthermore, the Federal Council took note of the appointment of an independent group of experts by the FDF which will be led by Professor Aymo Brunetti (Professor for Economic Policy and Regional Economics, University of Bern). The brief of the group of experts is to draw up principles for the further development of the Confederation's financial market strategy and to submit proposals and possible courses of action. The group of experts will assume its responsibilities independently and isolated from daily business, and will deal with strategic fundamental issues. The group of experts will regularly conduct discussions with representatives from the sectors concerned and factor their analyses into the group's work.”

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

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