Illicit wealth under corporate veil maximum in US: Swiss

It said that the World Bank report examined 150 cases of corruption in a selected number of countries worldwide.

Updated: Jul 08, 2012, 14:36 PM IST

New Delhi: Facing criticism of providing safe haven to alleged black money from abroad, Switzerland has claimed that the maximum instances of "corrupt assets" being concealed under corporate veil have been found in US and the European nation is on the same footing as India on this front.

Under global pressure to act against any possible misuse of Swiss financial institutions, especially banks, to hoard illicit wealth from other countries, Switzerland government's Federal Department of Finance (FDF) has agreed to adapt its bilateral tax treaties with various countries as per the international standards.

The FDF, which is equivalent to Finance Ministry in Switzerland, has said in a report on international financial and tax matters for 2012 that the country is at the forefront of global efforts to tackle cross-border financial crime.

It has cited a World Bank study on 'home corrupt assets are hidden' to claim that the maximum instances of corporate vehicles being used to conceal 'corrupt assets' have been found in the US, while Switzerland is ranked way below at 13th place, jointly with India.

It said that the World Bank report examined 150 cases of corruption in a selected number of countries worldwide.

"As part of these cases, over 800 corporate vehicles were used to conceal corrupt assets. The highest number of such corporate vehicles was found in the United States (102), while seven were based in Switzerland," it said.

Seven such corporate vehicles were found in India as well, while the US was followed by the British Virgin Islands (91), Panama (50), Liechtenstein (28) and Bahamas (20) among the top five.

"The report also shows that 76 of the corporate vehicles had a bank account in Switzerland, while 107 had one in the US," the FDF said.

"The report also addressed how easy it is to set up such a corporate vehicle without naming the beneficial owner. 41 of just over a hundred trust and company service providers failed to undertake sufficient due diligence.

"For example, only 3 of the 27 US service providers reviewed asked for clear identity documentation. In the remaining sampled OECD countries, the figure was 9 out of 20 respondents," it added.

Noting that the international pressure to cooperate in the fight against tax offences has increased, the FDF said in another recent report titled 'Financial Centre Strategy' that it aims "to continue to create favourable framework conditions for Switzerland's financial centre while at the same time ensuring its worldwide acceptance."

"The pressure on bank client confidentiality and the tax system are putting a strain on the future of Switzerland?s financial centre. The management of untaxed assets was seen as a competitive advantage for a long time, but those days are now over.

"The understanding has won out that untaxed assets are in the interest of neither Switzerland nor the banks over the longer term. The new financial market policy is consistently geared towards the management of taxed assets," the FDF said.

It said that further concrete measures to implement this strategy should be finalised by September 2012.

"The future investment income and capital gains of foreign bank clients in Switzerland should be subject to a tax at source with a compensatory effect.

"Combined with improved administrative assistance upon request in accordance with international standards and the extension of the due diligence requirements of financial service providers, this tax will reconcile the protection of privacy with the tax claims of governments," it noted.