Baker & McKenzie Holds Briefing on Tax and Money Laundering Compliance

How to survive in today’s complex world of tax and money laundering

Zurich, Switzerland, June 22, 2012 - In the context of the regular Business Briefings organized by the Wealth Management Team of Baker & McKenzie Zurich, Mark Livschitz and Robert Desax yesterday spoke about the most recent international developments affecting financial intermediaries, lawyers and tax advisors with regard to tax compliance and anti-money laundering rules and addressed possible mechanisms to manage and control risks associated with daily work.

“The international tax world as we knew has ended in 2009,” Mr. Desax said.

He emphasized that taxpayers today must be aware of the fact that governments and international organizations are cooperating to a wide extent in order to secure their fiscal interests and that this cooperation targets individual taxpayers, businesses and their advisors. Nowadays, taxpayers must simply assume that tax authorities know much more about them than they might expect. The developments towards more tax transparency also affect financial intermediaries, lawyers and tax consultants. As a matter of risk management in their daily work, these advisors should adopt certain protective principles of behavior which Mr. Desax summed up into three: precaution, risk awareness and the need to be diligent when writing e-mails. For instance, every e-mail should be written in a way that it could be made public and read by a tax authority without giving the author sleepless nights. Advisors should further ensure that they remain compliant with foreign laws and do not inadvertently assist in evading foreign taxes.

Mr. Livschitz elaborated on tax crimes likely becoming predicate offenses to money laundering, as recommended by the FATF. This proposed new rule entails manifold serious challenges for financial intermediaries, such as possible full tainting, as a consequence of a simple tax evasion, of a bank account holder’s totality of assets, or the difficulty for the financial intermediary, in the absence of in-depth oversight of the client’s business, to recognize where and when his client’s income has not been declared. Also, the effectiveness of the proposed amendment of the law was doubted.

“The success ratio of suspicious transactions reports in terms of court convictions is as low as 4.2%,” Mr. Livschitz said. “In spite of all criticism, financial intermediaries will need to cope with the likely new rules in order to protect themselves. "

In addition to the usual anti-money laundering diligence checks and oversight, Mr. Livschitz recommended that, the assertion of “tax reasons” as an explanation for transactional anomalies should be increasingly questioned, and tax reasons should be ruled out during KYC-checks as motive for a foreign-based party to open a Swiss bank account; account opening by foreign-based private clients should be allowed with balances from clearly declared sources only – with background checks of follow-up receipts where the source is not white-listed; and in particular, hold mail arrangements should no longer be accepted as a rule, since they would deprive the account holder of the records he needs to declare the funds and thus, quite often are linked to tax evasion.

For any questions about this press release, please contact:

Mark Livschitz ( + 41 384 1214)
Robert Desax ( +41 44 384 1325)
Marnin Michaels ( +41 44 384 1208)