Some Swiss banks are becoming more aggressive towards non-Swiss customers. In recent months, Israeli customers have received notice from their bank in Switzerland that they must close their account. In order to exert pressure on customers to close their accounts, the bank is charging a fee for each month that the account is left open. For example, one bank is charging 250 Swiss francs ($260) a month.
This measure is being enforced for small accounts of up to several hundred thousand dollars. The bank said that the reason is that the accounts are too small, because it has set a new minimum threshold for managing assets.
Legal sources said that banks in Switzerland also do not want to work with customers when it is suspected that the account contains assets that have not been reported to the tax authorities. "The banks in Switzerland have concluded that it is not worthwhile for them to maintain accounts containing assets that have not been arranged with the tax authorities. The banks realize that if they are exposed to accounts like this, they are liable to be subject to sanctions as a result," said ZAG S&W Tel Aviv partner and Taxation and Anti-Money Laundering Department manager Adv. Boaz Feinberg. Adv. Yael Grossman, who specializes in money laundering and securities, added, "There is a trend among banks in Switzerland to demand that customers close accounts in which they have money when it is suspected that the money has not been reported to the authorities. In order to motivate the customers to do this, they are charging high fees for the period during which the money is kept there."
Monitoring voluntary disclosure
At the same time, not everyone agrees that the fines are linked to suspicions that money has not been reported to the tax authorities. "Many customers did receive letters notifying them that they would have to pay a certain monthly fee that could be regarded as a penalty, if they do not either increase their balances to $1 million or close their accounts. It should be stressed that in these cases, my impression is that the bank has decided in any case to close accounts below $1 million - even accounts that have chosen to declare the assets to the tax authorities, says former Tax Authority deputy director accountant Gidi Bar-Zakay.
Bar-Zakay added, "The banks in Switzerland are aware of what's going on, and are contacting customers and trying to make sure that they have properly declared they accounts under Israel tax law. Beyond that, they also realize that the voluntary disclosure process (of assets and income to the Tax Authority, I.A.) takes a considerable amount of time, and at this stage, they are willing to settle for a statement that they customer has begun the disclosure process, and are monitoring to verify that the customer is serious about it."
Demand: A bank transfer
Either way, the customers required to close their accounts have discovered that this procedure is not as simple as it seems. "You can't close the account and get the balance in cash. The banks usually refuse, and insist on transferring the money in a bank transfer exclusively to a different account of the same customer," Feinberg explains.
A bank transfer also turns out to be complicated, however, because many banks around the world are reluctant to accept money from accounts that have been closed, due to the same concern that the money has not been reported to the tax authorities. The customers find themselves stuck, paying a considerable penalty charged by the bank.
"The banks in Switzerland have definitely decided that being tough with foreign residents is better than risking complications with the tax authorities. This is a very aggressive step, because it means really touching the money, and extracting it the hard way from the customers," Feinberg says.
Following US pressure
Banks around the world are currently under pressure, following stepped up regulation in the war against tax evasion. The US is leading this trend, and has established the FATCA rules requiring all the banks in the world to verify that their customers' money has been properly reported. At the same time, the US is imposing heavy fines on banks suspected of abetting tax evasion. In Israel, for example, Bank Leumi (TASE: LUMI) is expected to pay a NIS 2.1 billion fine.
Where the US is concerned, there are clear rules, but in other countries, the matter is still in the process of being developed. The banks realized where the trend is headed, however, and fear potential fines in the future. They are therefore doing all in their power to combat this phenomenon now, even through aggressive measures, and even at the price of harming their customers.
Published by Globes [online], Israel business news - www.globes-online.com - on November 5, 2014
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