New legislation is making Switzerland an open book. With the implementation of FATCA (Foreign Account Tax Compliance Act), information on funds held all over the world by all those liable to pay taxes in the United States is being made accessible to the Federal Government. Switzerland has long been every Bond villain’s favorite place to store cash, but the notorious tax haven for elite earners is changing the game by enlisting as one of the first countries to comply with FATCA regulations.
The fine print is, of course, extensive. Swiss banks are bound by a “model 2” agreement, which bypasses the Swiss government. Institutions report directly to the Feds regarding American citizens, US based companies, as well as green card holders with bank accounts in Switzerland. FATCA is especially crucial in the Swiss banking industry since the notoriously private accounts hold a significant portion of global transnational funds. While it will be no small feat for Swiss banking institutions to identify and locate all of those affected by FATCA, customer compliance is required before data is transferred.
Refusal is not a get out of jail free card. Even if clients refuse data transfer, institutions are still required to disclose to the IRS the total valuation and number of undeclared assets. After filing a “request for administrative assistance,” Washington receives the details of the accounts and assets held in Switzerland. As Patrick Dorner, director of the Swiss Association of Asset Managers says that refusal “is admitting that he is not at rights with the American tax system.” Non-compliant banks and clients are subject to heavy sanctions, with a starting penalty of 30% withholding on interest, and dividend payments.
Going forward, all trust companies, wealth management firms, insurers, and industries must register with the IRS and begin to report on their American clientele. So far, over 4,000 Swiss companies have been listed and are well on their way to registering. With the backing of FINMA, Switzerland’s market monitor, FATCA took effect on June 30th, 2014 and will continue to assist institutions in working with the US to ensure the “fatcats” are paying their due.