Films like Martin Scorsese’s The Wolf of Wall Street, which is set in the early 1990s and depicts the antics of a fraudster whose ill-gotten gains are stashed away in a Swiss bank, do not help to dispel Switzerland’s tarnished image in the banking industry. Scanning the newspaper headlines over the past couple of months, there have been headlines along the lines of ‘Switzerland has failed to share information’, ‘US senators extradite Swiss bankers’, and ‘XYZ Bank says it is working closely with authorities after German tax fraud report’. The story never seems to come to an end.
In a STEP Journal editorial in April 2010, I mentioned that the Swiss government had issued a statement declaring that banks will no longer accept undeclared deposits. In the four years since that statement, Swiss banks have changed their business model completely and have equipped themselves with extraordinary speed to deal with the new environment. As I read my Financial Times this morning (and the very useful STEP Wealth Structuring News Digest), I noted that another significant step has been taken, whereby Switzerland has agreed to sign up to a new global standard on automatic information exchange, ‘provided that the exchanged information is only applied for tax purposes’, in the words of the Swiss Bankers Association. Exchange of information is expected to start in 2017, all of which places yet another huge burden on the Swiss banks just as they are recovering from, or getting used to, FATCA.
In terms of the political landscape, in early February Swiss voters approved proposals introduced by the far right to curb immigration and limit the number of foreigners allowed into the country. This means that quotas will be reintroduced. More importantly, it means that Switzerland will have to renegotiate its bilateral agreement with the EU on the subject of free movement of people within the next three years or revoke it, which will then have the effect of threatening the existence of the other bilateral agreements. It is difficult to see at this stage how all of this will pan out, but it will be challenging for Switzerland to foster good neighbourly relations with the EU.
In this STEP Journal’s Swiss focus, Marie Flegbo-Berney (page 40) reviews a recent referendum that approved the initiative ‘against excessive compensation’. Its aim is to formally involve shareholders in decisions about compensation for directors and senior managers of listed companies. This is clearly a sensitive subject that is not only confined to Switzerland. Peter Cotorceanu and Quan Nguyen (page 49) navigate the FATCA rules applicable to Swiss trust companies and the trusts they administer, and demonstrate that determining which FATCA rules apply can be a difficult task. Dmitry Pentsov’s article (page 37) on the subject of Swiss protectors for ‘Russian’ trusts describes the relevant issues when dealing with private clients in areas where the trust concept is not always fully understood. This phenomenon is not only restricted to Russian clients.
Looking at the variety of articles in this edition of the STEP Journal, I am reminded of the discussions and criticism about the content of early editions of the STEP Journal. Considering that the main focus for STEP at the time was the UK, a number of ‘foreign’ STEP members maintained that the STEP Journal content was too UK-centric, while some of the UK contingent said they had no interest in reading about trust or succession-planning laws of exotic foreign jurisdictions. I believe that this is one of the beauties of the STEP world and of the STEP Journal: we all get an opportunity to see how other practitioners in other parts of the world deal with issues that affect our daily professional lives on a regular basis. The principles are more often than not very similar, even if the detail can be very different. Each of the articles in this edition of the STEP Journal would be worthy of note in some way or another in this editorial but there is just not enough space here. I simply recommend that you read them all!
