Swiss banks will in future have to refuse money from clients if they suspect that it has not been taxed, under proposals put forward by the government as part of measures to preserve the country’s “integrity” as a financial centre.
Also, people wanting to purchase real estate or luxury goods will not be able to put down more than CHF100,000 ($107,400) in cash, with the remainder of the transaction being carried out by financial intermediaries who are subject to the law on money laundering.
Switzerland is under pressure to act from the Financial Action Task Force, an inter-governmental body, which sets the international standards in combating money laundering.
The two measures are part of a series announced by the government on Wednesday. The proposed measures are now being submitted to interested parties for their comments, which must be provided by June 15.
If a customer asks the bank to exercise particular discretion, or wants the money invested in complex structures without providing a good reason, this would indicate that it might not have been taxed, the government said.
The same considerations will apply if a change in behaviour of an existing client prompts suspicions about their tax status. In such a case, they must be asked to provide proof of tax compliance; if they fail to do so, the “business relationship is ultimately to be terminated”, the finance ministry said in a statement.
It said it was reasonable for banks to assume that the money is probably in order if the client comes from a country which has a double-taxation agreement with Switzerland.
Among world leaders
Finance Minister Eveline Widmer-Schlumpf told journalists after the cabinet meeting that the government would like to see tax fraud worth at least CHF600,000 defined as a crime. This would meet international recommendations. However, she said the exact sum was “not set in stone”.
In such a case, tax fraud would be defined as either the use of forged documents or deception of the tax authorities for the purpose of tax evasion, she explained.
Widmer-Schlumpf stressed that Switzerland was already among world leaders as far as combating money laundering was concerned, but international standards continued to evolve which was why the government wanted to adapt its rules.
“The bigger a financial centre is, the greater the risk of its being misused for undesirable purposes,” she warned.
Money laundering is the covert introduction of illegally acquired assets into the legitimate economy with the aim of disguising their true illegal origin.
This may take place in three phases:
Phase 1: placement. In this phase the assets (primarily cash) are paid into banks and thus turned into bank money, or used to purchase assets that can be liquidated at short notice.
Phase 2: layering. The goal of this phase is to spread the money placed in phase 1. It often involves complex international transactions using, among other things, offshore banks and bogus companies. Another way to spread the money is through a myriad of confusing and seemingly unconnected transfers.
Phase 3: Integration. The integration phase is when the assets are reintroduced into the legal economy, which may involve purchasing assets (e.g. real estate or precious metals) or shareholdings, etc.
(Source: Swiss Banking Association)