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New directives to deal with dormant accounts

New guidelines come into force on July 1 to deal with the future treatment of dormant accounts in Swiss banks.

They replace a set of directives issued by the Swiss Bankers Association in 1995 at a time when there was a huge debate about dormant accounts dating back to the Second World War era, particularly those belonging to Holocaust victims.

The guidelines are aimed at preventing a situation in which the banks have to spend millions of francs in a painstaking search of archives, as was the case when an audit of Swiss banks was carried out by the New York banker, Paul Volcker, and a special "committee of eminent persons".

The audit - the most extensive of its kind in the world - cost a total of some SFr800 million.

The Bankers Association said last August that it was "vital" that future decisions on dormant accounts were made within the framework of the existing legal system, with particular regard to rights of ownership and the rights of the individual.

"It would run counter to Swiss legal tradition if banks and asset managers were forced - as is more or less the custom under Anglo-Saxon law - to hand dormant accounts over to the state after only five or 10 years and the rightful owner's claim to the assets were to lapse at this point," said Association deputy chief executive officer, Victor Füglister.

Until now, an account became dormant if there had been no contact with the customer for 10 years.

Under the new guidelines, dormancy basically occurs when a customer or proxy fails to contact the bank and the bank is unable to contact the customer or his or her proxy.

The onus is now on the banks to take precautions and measures to avoid loss of contact with customers and to keep the number of new dormant customer relations to a minimum.

Customers are to be advised by the banks about problems and consequences of dormancy verbally or in writing at the opening of business relations.

Other points of interest in the guidelines include:
· a suitable control system shall ensure that dormant assets are promptly and completely detected,
· the assets in question are to be earmarked and recorded centrally by the bank in order to facilitate any search entitled persons may make,
· in cases of dormancy the rights of the customer or his heirs against the bank remain intact,
· the banks shall waive the right to terminate contractual relationships on the grounds of dormancy and thus a statute of limitations does not apply,
· the board of directors of the Swiss Bankers Association continues to use the Banking Ombudsman as the Central Claims Office for inquiries by entitled persons into dormant accounts at Swiss banks.

by Robert Brookes

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