Berne/New Delhi: Under pressure from India and other nations to act against black money menace, Switzerland will put in place stricter due diligence norms for banks to prevent inflow of illicit assets into the country.
Besides, banks would have to terminate their relationship with existing clients in case they are unable to provide the required tax compliance proof for current assets held by them.
The new due diligence requirements, being mandated for banks and other financial institutions, are aimed at making Switzerland a "tax-compliant financial centre".
Switzerland today said that in the future, banks and other financial intermediaries would have to comply with enhanced due diligence requirements when accepting assets in order to prevent the inflow of untaxed assets.
In this regard, the Federal Council has referred a corresponding dispatch on amending the Anti-Money Laundering Act to Parliament.
Long perceived as a safe haven for stashing untaxed assets, Switzerland has been making efforts to do away with its banking secrecy practices and among others, would be part of the global automatic exchange of tax information regime.
The latest move also comes at a time when Switzerland is making public names, including that of Indians, among scores of foreign nationals with Swiss bank accounts, for being probed in their respective countries.
According to the Swiss government, the new due diligence requirements should prevent the inflow of untaxed assets to the country.
The new norms would be in place for clients from countries where the future agreements on the Automatic Exchange of Financial Account Information (MCAA) do not apply.
"This means that they will not be applicable to clients whose country of origin has an MCAA with Switzerland. This also includes US clients, as FATCA effectively has an MCAA.
"The due diligence requirements are not applicable to clients who are resident in Switzerland for tax purposes," it said in a statement.
Financial intermediaries would have to put in place a risk-based assessment when accepting assets to determine whether or not the assets have been duly taxed.
The details of the risk-based assessment would be established by the supervisory authorities and the recognised self-regulatory organisation.
"Where a financial intermediary has to assume based on an assessment of this nature that a client is offering untaxed assets, the business relationship must be rejected in the case of new clients," the statement said.
With regard to existing clients, the Swiss government said that an offer of untaxed assets raises the suspicion that the assets the client already has with the financial intermediary are also untaxed.
In such a case, the financial intermediary also has to clarify the tax compliance of these assets, again using a risk-based assessment.
"If the clarification leads to the assumption that these are actually untaxed assets, then the client must provide the financial intermediary with proof of tax compliance within a reasonable period or regularise the situation.
"If the client does not do so within the allotted period of time, the financial intermediary must terminate the business relationship," it noted.
However, the business relationship would not be terminated in cases where it is not possible for the client to provide proof of tax compliance or to regularise the tax situation without running the risk of unreasonable adverse effects.
Separately, the Swiss Federal Council has submitted the dispatch on the required legal basis for implementing the standard for the automatic exchange of information in tax matters (AEOI) to Parliament.
The vast majority of the cantons, political parties and interested parties approved the proposals in the consultation procedure.
With respect to standard for automatic exchange of information on tax matters, Swiss government said the same can be implemented in two ways -- through a bilateral agreement or by means of the Multilateral Competent Authority Agreement (MCAA).
The first proposal submitted to the Parliament pertains to the OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters.
It makes provision for three forms of information exchange -- upon request, spontaneous and automatic.
The second proposal is related to MCAA that was inked by Switzerland in November 2014.
A corresponding federal act is required to ensure that the provisions of this agreement and of the global standard for the automatic exchange of information can be applied.
The new Federal Act on the International Automatic Exchange of Information in Tax Matters (AEOI Act) contains provisions on the organisation, the procedure, the judicial channels and the applicable criminal provisions, the Swiss government said in a separate statement.
Consultations on both proposals were held from January 14 to April 21, 2015.
"Even if a referendum is held, the legal basis could come into force at the start of 2017, and the exchange of information with partner states could commence in 2018, in line with what Switzerland indicated to the Global Forum in October 2014," the statement said.
Parliament would have to decide not only on the legal basis but also, at a later date, on the agreements signed by Switzerland.
