Untaxed money: Swiss banks to boost vigil on overseas clients

Stepping up their efforts to curb flow of unaccounted money, Swiss banks will strengthen their due diligence of overseas clients and advise them to comply with international tax regulations.

Geneva/New Delhi: Stepping up their efforts to curb flow of unaccounted money, Swiss banks will strengthen their due diligence of overseas clients and advise them to comply with international tax regulations.

The latest move comes in the wake of Switzerland agreeing to automatic exchange of information and mutual administrative assistance in tax matters with foreign authorities.

Known for banking secrecy practices, Switzerland is perceived in India as one of the safe havens for stashing away unaccounted money.

To ensure compliance with global regulations, the Swiss Bankers Association (SBA) has suggested steps to ensure that untaxed money are not flowing into the banks in the country.

The grouping emphasised that the recommendations are aimed to "prevent the receipt of untaxed assets".

Banks have been asked not to accept any assets where they know that the assets are and will remain untaxed. This would also be applicable for cross-border clients who are changing banks within Switzerland, according to recommendations made by the SBA to its members.

"Through increased due diligence and by applying risk- based considerations, banks are to ensure that clients, in particular those from European countries that offer their taxpayers the means of regularising their situation, do not bring untaxed assets into Switzerland," SBA said in a statement.

Founded in 1912, SBA has 333 institutional members and around 18,700 individual members, according to its website.

Besides, the prominent grouping has urged Swiss banks to ensure that clients are in compliance with regulatory requirements.

"Where countries offer possibilities for clients to regularise their situation, banks should persuade such clients of the options for regularisation available in their country of tax domicile and help them to select the best solution," it said.

In cases where the client is not following the recommendations, the bank should take a call on whether the relationship is still acceptable.

These recommendations are to bridge the period until a new international standard for the exchange of information comes into effect, the association said.

"For the Federal Council, an international standard for the automatic exchange of information qualifies as a suitable alternative to a final withholding tax, an approach that was followed up until recent months," it noted.

Shedding its veil of banking secrecy, Switzerland has agreed to be part of the global convention on tax matters formulated by Paris-based policy advisory group Organisation for Economic Cooperation and Development (OECD).

The Swiss Bankers Association (SBA) recently said that they expect a significant decline in quantum of foreign money managed by banks in Switzerland due to the country becoming signatory to the OECD convention.

Swiss banks put together managed assets totalling 5.57 trillion Swiss francs (over Rs 383 lakh crore) at the end of 2012, out of which 51 percent came from abroad, after an increase of over six percent during the year.

"We anticipate that implementation of the automatic exchange of information within the OECD will in the short term lead to a reduction in the volume of assets managed in Switzerland," it said last month.

The grouping expects the fall in volume of assets since previously untaxed assets would have to be regularised before the move to automatic exchange of information can take place.

However, the banks expect the situation to stabilise over the longer term with a corresponding increase in assets managed in Switzerland.

About 60 jurisdictions, including India, are signatories to OECD's Multilateral Convention on Mutual Administrative Assistance in Tax Matters that provides for

The convention, which has now been signed by 58 jurisdictions, including India, provides for information sharing and mutual cooperation among the members.

Stressing the importance of cross border business, the association's CEO Claude-Alain Margelisch had said that international regulations naturally have a major impact Swiss wealth management.