TRANSPARENCY The billions of assets regularized in recent years in Switzerland may suggest
that undeclared money remains a widespread practice. The repressive arsenal has been strengthened, but has not
filled all grey
areas EMMANUEL GARESSUS , ZURICH AND SÉBASTIEN RUCHE @garessus and t @sebruche
In the canton of Zurich alone, around CHF 10 billion of undeclared money has been adjusted in
over the past ten years, the German press reported in early January. In Zurich as in the rest
in the country, the number of spontaneous declarations has exploded in recent years, often before entry into
effectiveness of the automatic exchange of tax information. Is it still possible to hide assets in
Switzerland? The vice tightens, but without completely annihilating gray areas that make it not
always able to know if an asset is declared or not.
Tax risk has shifted. After the shift in automatic exchange of information (AEOI)
for the Swiss financial centre, "the issue of tax compliance has shifted to other
channels, sectors and countries. Swiss banks very generally do their job in opening
accounts, monitoring and anti Geneva.
Since 2018, Switzerland has been exchanging information with other countries on accounts held by
foreigners. This automatic exchange of information, set up at global level under the aegis of br the OECD, is practiced by 100 jurisdictions. Swiss banks are now required to know the status
tax on assets held by their clients.
Move to art or jewelry
Wealthy people who have their money in banks in Switzerland "are sometimes considered by a
some public as the profiteers of the system, but this image is out of step with fiscal realities.
The threats of tax laundering will always exist for a financial intermediary, but these
threats are much better understood today, and their impacts are carefully assessed in the framework
sound risk management", continues Sergio Uldry.
The financial and anti international standards, if they do not exceed them. "Other practices have become more uncertain,
in particular in relation to assets of a non-financial nature. Potentially ill-gotten fortunes
could sometimes find refuge in instruments such as the art market or luxury," he adds. In
specifying that the offence of money laundering – it is often forgotten – is not only for banks, but
also for art, watchmaking, jewelry, car and real estate dealers.
Safes have in the past been targeted by the Financial Action Task Force (FATF), the body responsible for
the fight against money laundering, after the emergence of specialized pharmacies. In practice, renting a
bank safe always requires the holding of an account with the institution in question, such as
so that the knowledge of the customer is acquired in all cases. In non art, for example, dubious transactions always leave traces, but the identity of the buyer or the
seller is not easy to establish in case of recourse to intermediaries or if transactions go through
offshore companies, says Sergio Uldry.

In the fight against money laundering, from 1 January 2021, the threshold above which traders
in precious metals and precious stones must apply the due diligence obligations provided for by law
(LBA) to cash payments is lowered from 100,000 to 15,000 francs, to follow the recommendations
of the FATF. "Switzerland is following the general trend in the EU to restrict cash transactions, but with
a much lower intensity than in the EU," concludes Sergio Uldry. Still, if we respect the obligations of
Due diligence, cash payments of more than 100,000 francs are not totally prohibited in Switzerland. In
France, the ceilings vary but are often lower. In Italy, the general ceiling is lowered in 2020 to
2000 euros.
Automatic exchange (AEOI) does not apply to Swiss residents (their account details
banks are not transferred to the cantonal tax authorities or the federal tax administration). As a result,
no one can know exactly whether these assets are being declared. Especially since the declaration is made a
posteriori (at the beginning of the year concerning the previous year).
Accounts numbered "have never existed"
A classic of spy movies, numbered accounts "have always never existed," notes a
A tax specialist from French-speaking Switzerland who prefers to speak on condition of anonymity: "Most banks do not open them
more, unless there is good reason, such as the desire to increase confidentiality within the bank that houses the br account."
For example, when the bank boss doesn't want his employees to know exactly how much
he owns. "But the identity of the customer is still known by a small number of executives of the bank,"
says our source. For the quidam, this is therefore not a very easy way to defraud.
What if the client's canton of residence organises a tax amnesty? This could be a sign that the customer
wants to regularize. But here again, it is difficult to establish with certainty: "If he asks for his tax statements, it is
the sign that he could use them to benefit from the amnesty, but we are not sure until we have a
proof of the tax administration, "notes this tax specialist.
For foreign account holders in Switzerland, several scenarios are possible. If the
holder is a foreigner domiciled in a country that has concluded an automatic exchange agreement with the
Switzerland, his assets will be found. But if his country does not automatically exchange data with
Bern, again, it is impossible to be certain that he declares his assets.
Nevertheless, some clues can give indications: does this customer have his bank mail sent
in his country of origin? Is he asking for a tax statement? Is he possibly asking to recover the tax
anticipated who would have hit his investments? The money deposited in Switzerland comes from the customer's country of origin?
Does he make payments to his country of origin? Did he provide a tax compliance certificate
signed by a specialist in his country?
Another configuration: a foreign customer holding a Swiss account through a structure, such as a trust,
a Panamanian foundation or company. If the country where the structure is located has concluded an AEOI
with Switzerland, the structure is considered tax transparent. In this case, the bank that hosts the account performs tax reporting.
The paradox of tax havens
It may also be that this structure is defined as an investment entity managed in a
professional, which allows her to transmit the data of her accounts herself. In this case, the
Swiss bank cannot verify that assets are declared. Unless U.S. taxpayers are Involved. FATCA agreements require financial intermediaries around the world to report r their American customers. This system also allows companies to carry out reporting. They must
for this purpose, be registered with the US tax authorities and appear in a public register. A Swiss bank
will be able to verify that a structure that does the reporting itself is still registered in this register.
Economic beneficiaries, on the other hand, do not appear in public registers. It is therefore
theoretically possible that a Panamanian structure – for example – is created by a taxpayer
European, who would be the beneficial owner and who would sit on the board of directors. In other words,
who would have all the powers. This structure could be considered an investment entity
professional and ensure that itself does the tax reporting.
In general, a tax expert tells us, if such a structure comes from an OECD country, it
will attract less suspicion than if it is based in a more exotic jurisdiction. What about
tax, exactly? For them, the situation is paradoxical.
Switzerland and the European Union have chosen to sign automatic exchange agreements with a maximum
jurisdictions considered to be tax havens, on the idea that they were more likely to receive undeclared funds. But in practice, this means that the companies in these jurisdictions are not
considered tax transparent. And so that they can perform the tax reporting. Whereas in the absence of an AEOI agreement with Switzerland, for example, transmission
information was made by the Swiss banks hosting the accounts.
Mafia circuits
"The tax problem is to strengthen not the regulations but rather the implementation of the law.
Outside of the banking system, there are relatively few lawsuits and background checks
economic, for example in transactions from individual to individual. The verification is indeed
complicated," reveals Sandrine Giroud, partner at Lalive in Geneva. Risk areas concern
art, luxury and antiques. "It is therefore a question of priority of criminal policy and budget",
summarizes the tax specialist. In the financing of terrorism and mafia organizations, "suspicions
weigh heavily on sales of furniture or art on websites, i.e. transactions of a few
thousands of francs, which are not analysed by the authorities. Operations also sometimes go through
cryptocurrencies, which justifies the caution of banks in this area, "she says.
"The threats of tax laundering will always exist for a financial intermediary"