Trust Estate

Wealth Industry Presses Case For Financial Privacy, Swiss Trusts Law

Tom Burroughes Group Editor London 6 March 2018

Wealth Industry Presses Case For Financial Privacy, Swiss Trusts Law

A STEP conference in Switzerland, with this publication as media sponsor, recently discussed challenges ranging from assaults on financial privacy, digital security to the possibility of domestic Swiss trust law.

The need to fight for financial privacy, navigate new regulatory moves and seize opportunities to build a domestic Swiss trusts industry were some of the topics discussed by private client industry practitioners at the second annual Swiss & Liechtenstein STEP Federation conference, held – as was the case in 2017 – in Interlaken.

Policymakers around the world, often via groups such as the OECD and other international forums, have been looking to build a tax equivalent of the OPEC cartel of oil exporters, the meeting heard. While responding to often understandable anger about tax evasion and misuse of offshore centres, much of the policy direction has involved threats to legitimate privacy.

Switzerland’s move beyond bank secrecy, the fast-evolving world of citizenship-by-investment and how to manage one’s digital legacy were other topics at the conference, held over two days in the Swiss town. (For a full list of speakers, the agenda and other details, see here.)

The theme of why financial privacy and defence of legitimate property rights was aired in the first panel of the conference by HSH Prince Michael of Liechtenstein, chairman, Industrie- und Finanzkontor Ets. And while he discussed the changing nature of the financial privacy/legal landscape, Prince Michael argued that some European nations are “extremely concerned” about what they see as the protectionist, highly regulated momentum of the European Union.

Alluding to Brexit, he said: “The remaining countries in the EU are going towards an ever-closer union….towards a core union. It will mean a more planned economy with more centralisation and more regulation and laws. There are incentives for some EU countries to have more autonomy, as versus centralisation. We need some disruption and some creative destruction to build things again."

Following on from the political issues flagged by Prince Michael, Richard Frimston, a partner at Russell-Cooke LLP, spoke of how political uncertainty in Europe and further afield remained an issue for the industry. In the UK, specifically, it was not just Brexit that created uncertainty, but the squeezes on non-domiciled residents and the taxation of foreign-owned property, among other factors. New European rules to stop money laundering, and other changes, give the private client industry and opportunity to help people cope with all this uncertainty, he said. 

Dr Christian von Dertzen, a partner at Flick Gocke Shaumberg, noted how his firm’s work, for example, is being affected by how countries such as Germany that are engaging in widespread gathering of information – as in the case of Spanish properties owned by German citizens. There is demand from clients for wealth protection solutions that are legally robust and don’t have to be torn up every few years, Dr von Dertzen said. Increasingly, clients want “reputational security”. The industry and culture has changed: “It’s no longer about hiding assets,” he said. 

The panel moderator, Dr Ariel Sergio Goekmen, member of the executive board at Schroder & Co Bank, suggested that one issue is how, in a variety of legal systems, the presumption of innocence is under threat.

Russell-Cooke’s Frimstone said STEP is looking at the “rehabilitation of trusts” and he said that in the UK, a Common Law jurisdiction, trusts have been pressured by the present and previous government. The industry must explain to the wider population that trusts are important and not just for wealthy individuals.

One problem, Prince Michael told delegates, is that the role of explaining the importance of private property rights has been left to governments and NGOs. “We need to show why private property is essential for the growth of a healthy economy,” he said. 

In the second panel, participants talked about new laws – or legislation in the pipeline – that affect Switzerland’s trusts and asset management sector. 

David Wilson, a partner at Schellenberg Wittmer and moderator of the panel, set out issues for the trusts and wealth management sectors from the Financial Services Act and the Financial Institutions Act, which introduce new investor protections and licensing requirements for asset managers. The legislation is most likely - given the speed of Swiss political action - to become law in 2020, Wilson said.

To some extent, Switzerland is in the position of its financial institutions having a “passive” stance, where they only have the freedom to create foreign subsidiaries and often the country has imported legislation from abroad. He gave examples of how Swiss firms are affected by EU-based rules such as the recently enacted MiFID II directive, for example. Franz de Planta, president of OAR, said on the same panel. He noted certain differences between prospective Swiss rules and the MiFID II regime: MiFID II bans retrocession payments by firms, while Swiss rules don’t.

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