Monday, July 8, 2013
While underlining its general support for the adoption and implementation of the revised Financial Action Task Force (FATF) recommendations, the Swiss Bankers Association has (SBA) nevertheless stressed the need for a number of amendments to be made to the draft in order for the banks to be able to implement the provisions.
On February 16, 2012, the FATF approved a partial revision of its standards on combating money laundering, terrorist financing and now also the financing of the proliferation of weapons of mass destruction.
In accordance with the new standards, serious tax crimes will qualify as a predicate offence for money laundering, the provisions on determining the beneficial owner of legal entities and trusts will be clarified, and a risk-based approach will be established as the most efficient instrument for combating financial crime.
At the end of February, the Swiss Federal Council adopted a consultation bill to allow the revised international recommendations to be implemented.
Notably, the bill introduces a disclosure obligation for holders of bearer and registered shares in unlisted companies in order to enhance the transparency of legal entities, and an extension of the due diligence requirement for establishing the identity of beneficial owners. The draft legislation introduces a new predicate offence to money laundering in the form of qualified tax fraud in the area of direct taxation and extension of the existing predicate offence in the area of indirect taxation. A serious tax offence is deemed to involve sums in excess of CHF600,000 (USD628,209).
Furthermore, purchases of real estate and movables may be paid for in cash only up to a sum of CHF100,000 (USD107,572). It is mandatory for payments of larger sums to be processed via a financial intermediary subject to the Anti-Money Laundering Act. Finally, the effectiveness of the reporting system is to be increased and the procedures for financial intermediaries will be simplified.
The SBA argues, however, that in addition to the threshold of a minimum CHF600,000, multiple offences should be introduced as a further qualifying criterion. The SBA says that it "emphatically rejects" the general intent to deceive as a qualifying criterion for tax evasion, insisting that as this is a subjective criterion with a broad scope for interpretation, it is impossible for the banks to recognize the personal motives of a client. All criteria must therefore be both "objectively and outwardly identifiable," the association argues.
Alluding to the fact that banks are now not only required to identify the beneficial owner but also the shareholder, that is the holder of bearer shares or voting rights that controls unlisted companies, the SBA emphasizes that it rejects this measure, pointing out that "the identification process will result in an excessive outlay for banks and financial intermediaries." The SBA does, however, concede that it is important to find a solution with regards to bearer shares in order for Switzerland to pass the OECD's Peer Review.
Concluding, the SBA underscores that it "categorically rejects the additional duty to investigate and due diligence duties which arise from the financial intermediaries through the mandatory processing of cash transactions of over CHF100,000."
It insists: "This would in some instances give rise to the banks assuming responsibility that should correctly lie with the parties involved in the transaction."