Share

Swiss banks to root out undeclared funds

Geneva - Amid a massive scandal involving France's former budget minister and an undeclared Swiss bank account, Swiss banks are more eager than ever to kick out tax cheats and clear their names, bankers and industry experts say.

Tax evasion has become "a real problem for Swiss banks, because it is damaging their reputation" an analyst with a large Zurich-based bank said, requesting anonymity.

"A few years ago, the banks saw taxation as the client's problem, but today, that has changed. It has become the bank's problem," he added.

A scandal surrounding former French budget minister Jerome Cahuzac, who last week was charged with tax fraud after admitting to having an undeclared foreign bank account, has not only sent shockwaves through the French political establishment, but also through the Swiss banking sector.

Cahuzac - once in charge of tackling tax evasion - has admitted to opening an undeclared Swiss bank account in 1992, and, after Switzerland pledged to cooperate with foreign tax authorities in 2009, transferring the some €600 000 to Singapore.

Switzerland with its cherished banking secrecy rules was long considered a prime destination for undeclared funds, but the country has recently been cracking down in a bid to clear its reputation as a tax haven.

"We are moving towards a model of (accepting only) declared funds, but I can't tell you how long or what shape it will take," a high-level executive at one of Switzerland's main banks said on condition of anonymity.

Under pressure from all sides, Swiss banks have gradually been trying to solve the problem, case by case, country by country.

After Washington a few years ago began aggressively going after Swiss banks enabling US clients to evade the taxman, a solution has been reached that basically blocks banks from hosting undeclared accounts for Americans.

And Switzerland reached agreements last year with Britain, Austria and Germany to ease its cherished bank secrecy and ensure that their nationals' holdings in Swiss banks were taxed.

The accords with London and Vienna took effect on January 1, but the German parliament ended up blocking that country's deal late last year, considering it too easy on tax cheats.

Banks have begun closing undeclared accounts

Even though the German deal fell through, two large Swiss banks, Credit Suisse and Julius Baer, have opted to start kicking out German clients who do refuse to declare their holdings back home.

While no measures have yet been announced when it comes to French nationals with Swiss bank accounts, Geneva tax attorney Philippe Kenel said he believed they would soon receive the same treatment as their German counterparts.

"The large Swiss banks first, and then the small ones, will begin closing French citizens' undeclared accounts," he predicted.

"This is already happening when it comes to German clients, and it will happen with French clients as well," he added.

A Geneva banker who asked not to be named agreed.

"What is clear today is that the number of clients with undeclared accounts will shrink," he said.

Closing the door on all tax-cheating clients could be painful exercise for a number of Swiss banks.

According to a banking law professor at the University of Geneva, who did not want his name published, more than half of the European funds stashed away in Swiss bank accounts are undeclared.

In practice, however, the Swiss banks can do little to weed out clients intent on cheating the system.

Demanding that all clients provide full tax returns from their home countries is considered mission impossible, due to the mountains of paperwork and since most clients would likely refuse outright, banking industry sources say.

Instead, banks are opting to have clients sign a document certifying that their tax papers are in order, and blindly trusting that they are telling the truth.

Cahuzac for instance reportedly handed over a "bogus" certificate to the Singapore branch of a wary Julius Baer bank, purportedly proving that his money had been declared to tax authorities.

Convinced that he was telling the truth, the bank had agreed to transfer his funds to Singapore.

According to the latest available statistics from Switzerland's central bank, Swiss banks in 2011 managed 31.78 billion Swiss francs for French clients.

That is not counting the some 2.55 billion Swiss francs that Swiss trusts handled for French nationals that year.



We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.2%
Rand - Pound
23.89
+0.0%
Rand - Euro
20.44
+0.1%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.1%
Platinum
908.75
+1.3%
Palladium
1,014.28
+1.3%
Gold
2,219.42
+1.1%
Silver
24.83
+0.8%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders