Black money pursuit: Swiss amend key law on foreign requests

Under pressure from India and other countries, Switzerland has made key changes in its local laws governing assistance to foreign nations in their pursuit of black money allegedly stashed in Swiss banks.

These amendments, which have come into force this month, would allow India and other countries to make 'group requests' for information about suspected black money hoarders, while Swiss authorities would not give prior intimation to suspected individuals or entities before sharing their details.

However, the onus would be on India (or any other requesting nation) to establish that any prior intimation to the account holders before information exchange would defeat the "purpose of the administrative assistance" and the success of investigation would be thwarted.

In one of the major roadblocks to effective and timely exchange of information with foreign authorities about suspected illicit account holders, the Swiss laws provide that

the person concerned would get a prior intimation of any such international assistance and he or she is also given an opportunity to appeal against this decision and inspect the files before being transmitted to the requesting nation.

While Switzerland has decided to retain these clauses in its amended Federal Act on International Administrative Assistance in Tax Matters, it has now incorporated at least 10 changes in this Act to lower guard on its famed banking secrecy walls to improve its information-exchange framework.

According to one of these amendments forming part of a new Gazette Notification, "If the foreign authority demonstrates grounds for secrecy regarding certain case documents, the FTA (Federal Tax Administration) may refuse to allow a person entitled to appeal to inspect the corresponding files...."

Swiss Federal Council decided in June this year to relax this key legislation, following an intense pressure from India and other countries probing cases of suspected tax crimes. The Swiss Parliament approved revision of this Act in March this year, while a referendum deadline for the proposed amendments expired on July 10, 2014.

In reply to queries on the status of the new Act, a spokesperson for Switzerland's State Secretariat for International Financial Matters told PTI, "I can confirm that the revised Federal Act on International Administrative Assistance in Tax Matters entered into force on August 1."

However, the new Act explicitly mentions that the Swiss authorities would not consider a request if "it constitutes a fishing expedition" or "if it violates the principle of good faith, particularly if it is based on information obtained through a criminal offence under Swiss law."

This would thwart India's attempts to seek information on the so-called HSBC list, which Switzerland alleges that Indian and other foreign authorities got hold of after a former bank employee stole data about customers.

In another new clause in the revised Act, the Swiss tax authorities would inform the banks and other entities about 'deferred notification' of persons entitled to appeal against the information exchange.

"Any person who wilfully or negligently violates the notification ban shall be liable to a fine not exceeding 10,000 Swiss francs (about Rs 6.75 lakh)," the new Act says.

Swiss authorities have decided that the new clauses about deferred intimation to suspected persons about information exchange in select cases, would also apply to 'administrative assistance requests' already submitted by March 21 this year.

Also, the revised Act provides that the clauses related to 'group requests' for information would apply to requests submitted after February 1, 2013. The new Act defines group requests as "administrative assistance requests for information on two or more people with identical behaviour patterns who are identifiable by means of precise details".

Following receipt of such requests from a foreign country, the FTA would ask the bank or other entity to identify all the persons concerned by a group request and these persons would also notified about the same.

"The persons entitled to appeal may participate in the procedure and inspect the files," the new Act says, unless the foreign authority demonstrates grounds for secrecy regarding the case documents. The FTA would also notify any other persons whom "it must assume, on the basis of the files, are entitled to appeal... about the administrative assistance procedure".

However, requesting authority is "not entitled to inspect files or be present during proceedings in Switzerland".  In case, the FTA determines the request for information was not within the applicable legal framework, it would "notify the requesting authority of this in writing, and give it the opportunity to supplement its request in writing".

The new Act has come into force at a time when there is an intense debate in India on alleged black money stashed by Indians in Swiss banks and the Indian government has stepped up its pressure on Switzerland to share information on such cases.

Switzerland has said it is committed to cooperate with the new government in India's fight against black money and has also invited an Indian delegation to visit Berne for discussions in this regard.