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World's Biggest Offshore Centre Transmits Two Million Account Details

Tom Burroughes

8 October 2018

Switzerland’s federal tax body has passed over data on about two million accounts under the global automatic exchange of information (AEOI) regime set up to stamp out cross-border tax evasion. This is the first time the country has used this power.

The exchange involving the means that the Alpine state, home to around $2.4 trillion of cross-border money and by far the world’s largest offshore centre, sent information to most European Union (with one exception and a delay) and nine other states: Australia, Canada, Guernsey, Iceland, Isle of Man, Japan, Jersey, Norway and South Korea. 

The data transmission happened at the end of September. The FTA said it did not send data to Cyprus and Romania because “they do not yet meet the international requirements on confidentiality and data security”. (Romania is a EU member state.) The Swiss organisation said transmission of data to Australia and France is delayed because of technical issues. The FTA said it has not yet received data from Croatia, Estonia and Poland. The other partner states have sent it data, the organisation said in a statement last Friday.

The global pacts to exchange data, known as the , came into force and affected a first wave of countries in 2017, with a second group, including Switzerland, adopting the system this year. (About 100 jurisdictions in total are signed up to automatic information exchanges.) The CRS was introduced as a package of members of the countries, and others, amid rising concerns about misuse of offshore centres. Switzerland, for example, has seen its bank secrecy laws, long a shield against foreign demands for data, come under assault. The country signed a pact in 2013 with the US under which scores of Swiss banks entered non-prosecution agreements and paid fines to draw a line under legal claims about illegal offshore accounts. 

Ironically, the US is not a signatory to the CRS, and the US enforces tax of expats through the Foreign Account Taxation Act, aka FATCA, which was enacted initially in 2010. (This situation has prompted anger about alleged hypocrisy of the US over demands for potentially sensitive information.)

Switzerland’s FTA said around 7,000 reporting financial institutions (banks, trusts, insurers and others) are registered with it and these institutions collected the data and transferred it to the FTA. The FTA sent information on around 2 million financial accounts to the partner states and received information in the millions from them. 

Definitive numbers on information received are not yet available. The FTA cannot provide any information on the amount of financial assets, it said.

“Identification, account and financial information is exchanged, including name, address, state of residence and tax identification number, as well as information concerning the reporting financial institution, account balance and capital income,” it said. 

“The exchanged information allows the cantonal tax authorities to verify whether taxpayers have correctly declared their financial accounts abroad in their tax returns,” it said. 

The automatic exchange of information will now happen annually, the FTA continued. In 2019, data from 2018 will be exchanged with around 80 partner states, provided these meet the requirements on confidentiality and data security. 

The Common Reporting Standard system has been criticised, however, because some of the countries involved in the system might not respect legitimate client confidentiality over data. One industry figure has branded it a "disaster waiting to happen".