Cabinet seeks tighter rules on foreign money

Foreign clients will face an extra hurdle before they can put their money in a Swiss bank account RDB

The Swiss government says it will introduce tighter rules to prevent banks and other financial intermediaries from accepting untaxed funds, but has stopped short of forcing clients to declare they have complied with their fiscal obligations at home.

Swiss Finance Minister Eveline Widmer-Schlumpf said on Friday that financial institutions could however decide to demand such a declaration from their customers. This would be part of a series of enhanced due diligence requirements planned by the authorities. 

The requirements would be similar to those already in place to combat the financing of terrorism and money laundering. A risk analysis would help banks decide how much information would be required from specific foreign clients.

Widmer-Schlumpf added that a refusal to provide proof that assets had been taxed could be considered one indication that a client has not fulfilled their fiscal obligations abroad.

And declarations would not be necessary in cases such as those involving clients whose assets are covered by the Fatca agreement with the United States, a deal that comes close to amounting to an automatic exchange of customer data.

Under Fatca, which was initialled by Switzerland last week and is due to be phased in from 2014, foreign financial institutions agree to notify the American authorities of accounts held by US citizens.

While the government on Friday said it would provide some ground rules, it expects banks and financial intermediaries to draw up stronger due diligence guidelines, something similar to a checklist to determine whether a client is above board.

Finma, Switzerland’s financial market supervisory body, will decide if the proposed guidelines are sufficient, the aim being that if a customer was shown to be attempting to hide untaxed assets, a bank would have to refuse their business.

The new guidelines would be implemented along with the planned revision of Switzerland’s anti-money laundering legislation. The upgraded law would notably consider “serious tax offences” as the precursor of money laundering.

Contrasting reactions

The Swiss Bankers Association said it welcomed the government decision on client declarations, adding that it had always defended such a system for its customers.  

Political reactions were less enthusiatic. Centre-left Social Democrat Suzanne Leutenegger Oberholzer said she was concerned the banks would devise some kind of “half-clever” rules.

She added she was disappointed the government had not kept its earlier promise to implement compulsory declarations, pointing out that this had not led to problems at the Basel and Zurich cantonal banks where similar rules were already implemented. 

For the centre-right Christian Democrats, the chosen option is the one favoured by the bankers. “Finma will be responsible for making sure the system is credible,” said party president Christophe Darbellay.

For rightwing Swiss People’s Party parliamentarian Hans Kaufmann, the government’s decision is partially acceptable, pointing out that no other country in the world is relying on foreign bank clients to declare whether their assets had been taxed at home.

Kaufmann said there no reason for Switzerland to apply this solution, adding that the government’s so-called clean money strategy was not compatible in his view with such declarations.