Swiss Turn The Screw On Bank Secrecy

Swiss bankers still reeling from the closure of one of the world’s oldest banks are now nervously eyeing new proposals aimed at increasing transparency.

Private bank Wegelin shut after a US investigation into tax avoidance schemes run by Swiss banks.

Now, the industry is keen to repair relations with foreign governments and the new proposals to tighten the running of the banking industry may help.

Switzerland was one of the first countries to sign up to the Foreign Account Tax Compliance Act (FATCA) which compels foreign financial institutions to identify and reveal financial information about US taxpaying citizens to the Internal Revenue Service (IRS).

The Swiss, along with several other countries including the UK, are now introducing their own versions of the legislation.

Financial integrity

However, Switzerland is taking a bigger step towards full transparency for financial and banking institutions with the aim of combating money laundering and the financing of terrorism.

The real aim of the new rules is to help preserve the integrity and reputation of Switzerland as a centre of world finance.

Among the raft of anti-money laundering regulations that are on the way include new rules on dealing with controversial political figures and organisations.

Tax fraud laws and restrictions on how much cash can be moved without using an intermediary for the transaction are also planned.

The threshold for cash payments is £70,700 before the Anti-Money Laundering Act (AMLA) kicks in.

Banks also face stiffer reporting procedures and a simplified process for transaction reporting.

The main purpose for these restrictions is to highlight issues with anyone requesting greater secrecy for their account or who wants to implement a complex structure to process payments.

Untaxed assets

Switzerland is also making clear that the country will no longer accept untaxed assets from financial intermediaries without consulting the relevant bilateral tax treaties between the Swiss and the client’s country of domicile.

The authorities have stopped short of introducing a certification process for payments accepted by financial institutions and have instead opted for a self-declaration process.

This is in the belief that a credible system will confirm tax-compliant behaviour from those wanting to deposit money, and for any intermediary who suspects that the assets are avoiding tax compliance can legally ask for any relevant proof.

If the client cannot provide proof that they have complied with tax demands in their own country, then the relationship between the intermediary and the client will end.

The moves by Switzerland’s Federal Council underline the desire to build bridges with the US by showing that the government will clamp down on tax avoidance and money.

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