Monday, October 5, 2015

OECD Releases All Final BEPS Reports - Links Herein

 The OECD presented today the final package of measures for a comprehensive, coherent and co- OECDordinated reform of the international tax rules to be discussed by G20 Finance Ministers at their meeting on 8 October, in Lima, Peru.  The OECD/G20 Base Erosion and Profit Shifting (BEPS) Project provides governments with solutions for closing the gaps in existing international rules that allow corporate profits to « disappear » or be artificially shifted to low/no tax environments, where little or no economic activity takes place.


Arrow actions 13 2015  Explanatory Statement 2015 (EN / FR / ES / DEU)
Arrow Action 1 Action 1: Addressing the Tax Challenges of the Digital Economy
Arrow Action 2 Action 2: Neutralising the Effects of Hybrid Mismatch Arrangements
Arrow Action 3 2015  Action 3: Designing Effective Controlled Foreign Company Rules
Arrow Action 4 2015  Action 4: Limiting Base Erosion Involving Interest Deductions and Other Financial Payments
Arrow Action 5 Action 5: Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance
Arrow Action 6 Action 6: Preventing the Granting of Treaty Benefits in Inappropriate Circumstances
Arrow action 7 2015  Action 7: Preventing the Artificial Avoidance of Permanent Establishment Status
Arrow Action 8 Actions 8-10: Guidance on Transfer Pricing Aspects of Intangibles
Arrow actions 11 2015  Action 11: Measuring and Monitoring BEPS
Arrow actions 12 2015  Action 12: Mandatory Disclosure Rules
Arrow Action 13 Action 13: Guidance on Transfer Pricing Documentation and Country-by-Country Reporting
Arrow actions 14 2015 

Action 14: Making Dispute Resolution Mechanisms More Effective

Arrow Action 15

Action 15: Developing a Multilateral Instrument to Modify Bilateral Tax Treaties

Revenue losses from BEPS are conservatively estimated at USD 100-240 billion annually, or anywhere from 4-10% of global corporate income tax (CIT) revenues. Given developing countries’ greater reliance on CIT revenues as a percentage of tax revenue, the impact of BEPS on these countries is particularly significant.

“Base erosion and profit shifting affects all countries, not only economically, but also as a matter of trust,” said OECD Secretary-General Angel Gurría. “BEPS is depriving countries of precious resources to jump-start growth, tackle the effects of the global economic crisis and create more and better opportunities for all. But beyond this, BEPS has been also eroding the trust of citizens in the fairness of tax systems worldwide. The measures we are presenting today represent the most fundamental changes to international tax rules in almost a century: they will put an end to double non-taxation, facilitate a better alignment of taxation with economic activity and value creation, and when fully implemented, these measures will render BEPS-inspired tax planning structures ineffective,” Mr Gurría said.

Undertaken at the request of the G20 Leaders, the work to address BEPS is based on the 2013 G20/OECD BEPS Action Plan, which identified 15 actions to put an end to international tax avoidance. The plan was structured around three fundamental pillars: introducing coherence in the domestic rules that affect cross-border activities; reinforcing substance requirements in the existing international standards, to ensure alignment of taxation with the location of economic activity and value creation; and improving transparency, as well as certainty for businesses and governments.

The OECD will present the BEPS measures to G20 Finance Ministers during the meeting hosted by Turkey’s Deputy Prime Minister Cevdet Yilmaz on 8 October, in Lima, Peru. 

Following delivery of the BEPS measures to G20 Leaders during their annual summit on 15-16 November in Antalya, Turkey, the focus will shift to designing and putting in place an inclusive framework for monitoring BEPS and supporting implementation of the measures, with all interested countries and jurisdictions invited to participate on an equal footing.

The final package of BEPS measures includes new minimum standards on: country-by-country reporting, which for the first time will give tax administrations a global picture of the operations of multinational enterprises; treaty shopping, to put an end to the use of conduit companies to channel investments; curbing harmful tax practices, in particular in the area of intellectual property and through automatic exchange of tax rulings; and effective mutual agreement procedures, to ensure that the fight against double non-taxation does not result in double taxation.

The BEPS package also revises the guidance on the application of transfer pricing rules to prevent taxpayers from using so-called “cash box” entities to shelter profits in low or no-tax jurisdictions, and redefines the key concept of Permanent Establishment, to curb arrangements which avoid the creation of a taxable presence in a country by reliance on an outdated definition.

The BEPS package offers governments a series of new measures to be implemented through domestic law changes, including strengthened rules on Controlled Foreign Corporations, a common approach to limiting base erosion through interest deductibility and new rules to prevent hybrid mismatch arrangements from making profits disappear for tax purposes through the use of complex financial instruments.

Nearly 90 countries are working together on the development of a multilateral instrument capable of incorporating the tax treaty-related BEPS measures into the existing network of bilateral treaties. The instrument will be open for signature by all interested countries in 2016. 

The BEPS measures were agreed after a transparent and intensive two-year consultation process between OECD, G20 and developing countries and stakeholders from business, labour, academia and civil society organisations. 

“Everyone has a stake in reversing base erosion and profit shifting,” Mr Gurria said. “The BEPS Project has shown that all stakeholders can come together to bring about change. Swift implementation by governments will ensure a more certain and more sustainable international tax environment for the benefit of all, not just a few.” 

Examples of BEPS schemes to be eliminated


October 5, 2015 in BEPS | Permalink | Comments (0)

Justice Department Announces New Strategy to Combat Intellectual Property Crimes and $3.2 Million in Grant Funding to State and Local Law Enforcement Agencies

Attorney General Loretta E. Lynch announced today that the Justice Department will launch a new collaborative strategy to more closely partner with businesses in intellectual property enforcement efforts and will award over $3.2 million to ten jurisdictions to support state and local task forces in the training, prevention, enforcement and prosecution of intellectual property theft and infringement crimes.

“The digital age has revolutionized how we share information, store data, make purchases and develop products, requiring law enforcement to strengthen our defenses against cybercrime – one of my top priorities as Attorney General,” said Attorney General Lynch. “High-profile instances of hacking – even against large companies like Sony and Target – have demonstrated the seriousness of the threat all business face and have underscored the potential for sophisticated adversaries to inflict real and lasting harm.” 

The new FBI collaborative strategy builds upon the work previously done by the department while also working with industry partners to make enforcement efforts more effective. As part of the strategy, the FBI will partner with third-party marketplaces to ensure they have the right analytical tools and techniques to combat intellectual property concerns on their websites. The bureau also will serve as a bridge between brand owners and third-party marketplaces in an effort to mitigate instances of the manufacture, distribution, advertising and sale of counterfeit products. This new strategy will help law enforcement and companies better identify, prioritize and disrupt the manufacturing, distribution, advertising and sale of counterfeit products. Crimes will then be investigated by the FBI and other partners of the National Intellectual Property Rights Coordination Center and finally prosecuted by the Department of Justice.

Additionally, the Office of Justice Program’s Intellectual Property Enforcement Program (IPEP) will award $3.2 million in grants to aid state and local law enforcement in addressing intellectual property crimes.

Local award recipients announced today include the following:

City of Austin Police Department - $400,000

City of Hartford Police Department - $399,545

Cook County State Attorney's Office - $400,000

Baltimore County Police Department - $120,174

North Carolina Department of Secretary of State - $367,076

New Jersey State Police - $269,619

City of Phoenix Police Department - $253,129

City of Portland Police Department - $373,569

Virginia State Police - $253,128

City of San Antonio Police Department - $400,000

Since IPEP’s establishment in 2009, the department has invested nearly $14.8 million for 41 task
forces across the country. These grants have supported the arrest of 3,522 individuals, the dismantling of 1,882 piracy or counterfeiting organizations and the seizure of $266,164,989 in DOJ IP task Forcecounterfeit property, other property and currency in conjunction with IP enforcement operations.

The department also launched a new intellectual property website to serve as a both a resource to companies facing intellectual property challenges as well as a mechanism to educate the public on how intellectual property theft is a growing threat to the country’s public safety and economic well-being.

October 5, 2015 in AML | Permalink | Comments (0)

Sunday, October 4, 2015

SEC Charges Former Officers of SMF Energy With Fraud

The Securities and Exchange Commission today announced financial fraud charges against four SECformer SMF Energy Corp. officers, alleging that former CEO Richard E. Gathright, former chief financial officer Michael S. Shore, former chief accounting officer Laura P. Messenbaugh, and former senior vice president of sales and investor relations officer Robert W. Beard vastly inflated SMF’s revenues through a fraudulent billing scheme.

The SEC’s action, filed in U.S. District Court for the Southern District of Florida, alleges that SMF overbilled certain mobile fueling customers, including the U.S. Postal Service, by charging for fuel that was not delivered and adding surcharges that the customers’ contracts did not permit. As a result, the SEC alleges that Fort Lauderdale, Florida-based SMF materially overstated its revenues, profit margins, shareholders’ equity and net income, and understated its liabilities in its annual reports for fiscal years 2010 and 2011, its quarterly reports in its fiscal year 2011 and the first half of fiscal year 2012, and other reports filed on Form 8-K over the same time period. 

According to the SEC’s complaint, the overbilling began in 2004 as a minor contributor to SMF Energy’s financial performance but later made the difference between the company being profitable and posting net losses.  In 2012 SMF Energy filed for Bankruptcy Reorganization, and disclosed that it was under federal investigation for bilking the US Postal Service  via overcharging.

The complaint alleges the four officers participated in the fraudulent scheme and that Gathright, Shore and Messenbaugh overstated SMF’s revenues and net income in SMF’s public filings.  According to the complaint, Gathright, of Pompano Beach, Florida; Shore, of Miami, and Messenbaugh, of Plantation, Florida, each reviewed the allegedly fraudulent annual and quarterly reports that Gathright and Shore signed and certified as accurate.  Messenbaugh signed the allegedly fraudulent annual reports and Gathright signed the reports filed on Form 8-K that allegedly contained material misrepresentations and omissions.

“Information in a company’s public filings provides the foundation on which investment decisions are made,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office.  “We allege that SMF used fraudulent billing practices to increase its earnings and would have reported losses rather than net profits had it not relied on such practices.”

The SEC’s complaint alleges violations and the aiding and abetting violations of the antifraud provisions, books and records, internal controls, and disclosure and reporting provisions of the federal securities laws.  The SEC is seeking disgorgement of allegedly ill-gotten gains, plus prejudgment interest and penalties, an officer and director bar against the four former officers, and permanent injunctive relief.

October 4, 2015 in Financial Regulation | Permalink | Comments (0)

Saturday, October 3, 2015

Bennet, Rubio Propose Alternative to Accreditation that Shifts Focus to Student Success

Bipartisan Bill Creates Pilot Program for Alternative Accreditation Process; Expands Programs Eligible to Receive Federal Student Aid

U.S. Senators Michael Bennet (D-CO) and Marco Rubio (R-FL) today introduced a bill to create a DeptOfEducation-Sealvoluntary, alternative system of accreditation for American colleges and universities as well as other providers of higher education. 

The Higher Education Innovation Act creates a new authorization pathway for accessing federal financial aid, such as Pell grants. Innovative schools that offer a high-quality education and have a proven track record of successfully helping students graduate, obtain jobs, and pay back their student loans could participate in this metrics-based authorization process in place of the burdensome input-focused accreditation process. The bill would also allow higher education providers that currently are ineligible to receive federal student aid to access federal financial aid if they demonstrate high student outcomes, including student learning, completion, and return on investment. Only schools that meet these high standards would be eligible for this authorization process.

"Higher education has never been more important for our kids and grandkids with more jobs than ever requiring a postsecondary degree or advanced training. But ‎the incentive structures in higher education are broken, focused too much on inputs and not enough on outcomes," Bennet said. "To succeed in today's economy, students need access to a great education that they complete and that successfully prepares them to succeed in the global job market. We need a new system that encourages, rather than hinders innovation, promotes higher quality, and shifts the focus to student success. The alternative outcomes-based process in this bill will help colleges, new models like competency-based education and innovative providers, and is an important step in shifting the current incentives and creating the 21st-century system of higher education we need."

"America needs a 21st century higher education system that embraces all the new ways people can learn and acquire skills without having to go the traditional four year college degree track," Rubio said. "To modernize our higher education system, we must end the status quo accreditation cartel that stifles competition, encourages soaring tuition costs and limits opportunities for non-traditional students, such as working parents. This alternative accreditation system we've proposed is built on higher quality standards and outcomes than the current accreditation system and would mark an important first step to shake up a higher education system that leaves too many people with tons of student loan debt and without degrees that lead to good paying jobs."

Currently, only students attending accredited institutions of higher education can receive federal student aid funds. The current process for accreditation can be complex and focus too heavily on inputs and process. This bill creates an alternative outcomes-based process that would allow students to use their federal aid at new providers and existing colleges and universities that demonstrate successful student outcomes and offer innovative and effective programs.

The bill would also create an innovative approach to financing higher education. Currently, higher education programs must exist for several years before they are eligible to apply to receive federal financial aid. The Bennet-Rubio proposal would allow new programs, including college and non-college providers, to enter into contracts with the U.S. Department of Education so long as they are generating positive student outcomes.

October 3, 2015 in Education | Permalink | Comments (0)

Friday, October 2, 2015

U.S. Begins Reciprocal Automatic Exchange of FATCA Information With Foreign Governments

The Internal Revenue Service today announced the exchange of financial account information with FATCA_rollcertain foreign tax administrations, meeting a key Sept. 30 milestone related to FATCA, the Foreign Account Tax Compliance Act.

To achieve this, the IRS successfully and timely developed the information system infrastructure, procedures, and data use and confidentiality safeguards to protect taxpayer data while facilitating reciprocal automatic exchange of tax information with certain foreign jurisdiction tax administrators as specified under the intergovernmental agreements (IGAs) implementing FATCA.

"Meeting the Sept. 30 deadline is a major milestone in IRS efforts to combat offshore tax evasion through FATCA and the intergovernmental agreements," said IRS Commissioner John Koskinen.  "FATCA is an important tool against offshore tax evasion, and this is a significant step in the process. The IRS appreciates the assistance of our counterparts in other jurisdictions who have helped to make this  possible."

This information exchange is part of the IRS’s overall efforts to implement FATCA, enacted in 2010 by Congress to target non-compliance by U.S. taxpayers using foreign accounts or foreign entities. FATCA generally requires withholding agents to withhold on certain payments made to foreign financial institutions (FFIs) unless such FFIs agree to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

In response to the enactment of FATCA and other jurisdictions’ interest in facilitating and participating in the exchange of financial account information, the U.S. government entered into a number of bilateral IGAs that set the groundwork for cooperation between the jurisdictions in this area. Certain IGAs not only enable the IRS to receive this information from FFIs, but enable more efficient exchange by allowing a foreign jurisdiction tax administration to gather the specified information and provide it to the IRS.  And some IGAs also require the IRS to reciprocally exchange certain information about accounts maintained by residents of foreign jurisdictions in U.S. financial institutions with their jurisdictions’ tax authorities.

Under these reciprocal IGAs, the first exchange had to take place by September 30, giving the IRS a deadline to put in place a process to facilitate this data exchange.

The information now available provides the United States and partner jurisdictions an improved means of verifying the tax compliance of taxpayers using offshore banking and investment facilities, and improves detection of those who may attempt to evade reporting the existence of offshore accounts and the income attributable to those accounts.

The IRS will only engage in reciprocal exchange with foreign jurisdictions that, among other requirements, meet the IRS’s stringent safeguard, privacy, and technical standards.  Before exchanging with a particular jurisdiction, the United States conducted detailed reviews of that jurisdiction’s laws and infrastructure concerning the use and protection of taxpayer data, cyber-security capabilities, as well as security practices and procedures.

“This groundbreaking effort has fundamentally altered our relationship with tax authorities around the world, giving us all a much stronger hand in fighting illegal tax avoidance and leveling the playing field,” Koskinen said.

Meeting this deadline reflects a significant international collaboration and partnership with dozens of jurisdictions around the world. The capacity for reciprocal automatic exchange builds on numerous accomplishments including the following:

  • Development of a consistent data reporting format, or schema, and the agreement to use this format by all jurisdictions;
  • Establishment of the details and procedures required to assure data confidentiality;
  • Creation of a data transmission system to meet high standards for encryption and security; and
  • Cooperation with foreign jurisdiction tax administrations to achieve the timely implementation of this exchange.

Koskinen noted the risks of hiding money offshore are growing and the potential rewards are shrinking.

Since 2009, tens of thousands of individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP), which is open until otherwise announced. 

For the last analysis of the GIIN registrations and Legal Entity Identifiers, see my Kluwer Tax Post.

October 2, 2015 in FATCA | Permalink | Comments (0)

BHF-Bank (Schweiz) Pleads Guilt and Enters Non Prosecution Agreement

Since Aug. 1, 2008, BHF held a total of 125 U.S.-related accounts, comprising total assets under Justice logomanagement of approximately $202,964,006.  BHF will pay a penalty of $1.768 million.

According to the terms of the non-prosecution agreement signed today, BHF agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute this bank for tax-related criminal offenses.

BHF was established in 1974 as a wholly-owned Swiss subsidiary of BHF-BANK Aktiengesellschaft (BHF-BANK AG), a private bank located in Germany.  Deutsche Bank AG purchased BHF-BANK AG in 2010, and in 2014, BHF-BANK AG was sold to a consortium of investors.  BHF is headquartered in Zurich and has a branch in Geneva.  The name of the group is now BHF Kleinwort Benson Group.

BHF opened and maintained undeclared accounts for U.S. taxpayers.  It chose to continue to service U.S. customers without disclosing their identities to the Internal Revenue Service (IRS) or taking steps to ensure that clients were compliant with U.S. tax laws and without considering the impact of U.S. criminal law on that decision.

BHF offered a variety of traditional Swiss banking services that it knew could assist, and did assist, U.S. clients in the concealment of assets and income from the IRS, such as “hold mail” services, which minimized the paper trail between the U.S. clients and undeclared assets and income, and debit cards, which allowed U.S. clients to access their undeclared accounts without having to visit BHF.

In 1982, Plinius Management Limited, Zurich (Plinius), a trust company, was formed as a wholly-owned subsidiary of BHF to provide special services for wealthy clients, which included advice regarding trusts, foundations, fiduciary agreements and holding companies in order to protect assets and minimize tax liability.  Plinius had no employees, and BHF provided it with staff and infrastructure.

Plinius also assisted with referrals to establish various types of structures, including Liechtenstein Anstalten and Stiftungen, and British Virgin Islands and Panamanian entities.  Plinius did not create the structures; instead, it would contact an external trust company or law firm in Liechtenstein to set up the entity within the agreed-upon jurisdiction.  While Plinius’ relationship managers did not have access to the Forms A held by BHF that identified the beneficial owners, in some cases they were aware of the ultimate beneficial owner(s) of the accounts.  Four subsidiary-related structured accounts were established for U.S. persons, which improperly sheltered U.S. taxpayer-clients and hid their assets from the IRS.

U.S.-related accounts, including offshore structured accounts, came into BHF through its relationship managers, through external asset managers or otherwise.  For example, one account in the name of an offshore entity was referred to a BHF manager from a U.S.-based structuring lawyer prior to 2008, and transferred to BHF from another Swiss bank.  The file contained a Form W-8BEN and certification of non-U.S. persons for the offshore corporate accountholder.  BHF’s management approved opening the account even though the account also held U.S. securities.  There was no Form W-9 completed or provided to BHF for the U.S. beneficial owner.  BHF did not confirm that the U.S. beneficial owner was compliant with U.S. tax obligations. 

In the fourth quarter of 2000, BHF signed a Qualified Intermediary (QI) Agreement with the IRS.  The QI regime provided a comprehensive framework for U.S. information reporting and tax withholding by a non-U.S. financial institution with respect to U.S. securities.  The QI Agreement was designed to help ensure that, with respect to U.S. securities held in an account at BHF, non-U.S. persons were subject to the proper U.S. withholding tax rates and that U.S. persons were properly paying U.S. tax.

BHF implemented a policy that every client had to sign either a Form W-9 or a Declaration of Non-U.S. Person Status, which required the customer to declare whether he or she was a U.S. person for tax purposes.  Some U.S. clients who did not want to have their identities disclosed to the IRS could avoid detection by declining U.S. securities.  Approximately five clients refused to sign a Form W-9, but BHF nevertheless continued to service these clients’ accounts and kept them open.

While participating in the Swiss Bank Program, BHF encouraged existing and prior accountholders and beneficial owners of U.S.-related accounts to provide evidence of tax compliance or of participation in any of the IRS Offshore Voluntary Disclosure Programs or Initiatives or to disclose their accounts to the IRS through such a program.  BHF sought waivers of Swiss bank secrecy from all accountholders and obtained waivers for more than 50 percent of its accounts.  BHF has also provided certain account information related to U.S. taxpayers that will enable the government to make requests under the 1996 Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with respect to Taxes on Income for, among other things, the identities of U.S. accountholders.

Since Aug. 1, 2008, BHF held a total of 125 U.S.-related accounts, comprising total assets under management of approximately $202,964,006.  BHF will pay a penalty of $1.768 million.

October 2, 2015 | Permalink | Comments (0)

Thursday, October 1, 2015

Scholar James Puckett Discusses Wealth Inequality & Progressive Taxation

Tax Scholar James Puckett presented to Texas A&M University's Law faculty his recent scholarship James Puckettexamining equity issues relating to the distribution of wealth and income, and the impact of the tax system thereupon.

Prof. James Puckett (Penn State) opened his presentation with a Stephen Colbert quote: “I make serious coin. But I’m middle class. I just happen to be upper elite platinum plus middle class.”

In his working draft for the presentation, Prof. Puckett described a variety of approaches, some familiar and some novel, and some more administratively challenging than others.



October 1, 2015 in Academia | Permalink | Comments (0)

Texas A&M University Law Seeks to Hire a Veterans Clinic Attorney

The Law Clinic Attorney is responsible for Practicing law and supervising Law Clinic students representing low income clients in a variety of poverty law cases, with a focus on representing veterans. TexasAMSchoolofLaw_logo

5 years experience in legal practice, preferably family law, Substantial experience representing indigent population,

Department of Veterans Affairs Certification. Licensed by the Federal District Court for the Northern District of Texas. Licensed by the 5th Circuit Court of Appeals.

Apply via

October 1, 2015 in Education | Permalink | Comments (0)

Court Clears Path for Medicaid-Compliant Short-Term Annuities

Medicaid compliant annuities can play a powerful role in a client’s long-term care plan if used carefully ThinkAdvisor so that the client does not run afoul of the strict Medicaid resource rules. Clients have often purchased these annuities only to find themselves challenged on the grounds that the annuities represent available resources that can prevent Medicaid eligibility.

In recent weeks, however, a Third Circuit appeals court has taken an important step toward ensuring that long-term care expenses can be met using annuities—even if the annuity in question is a short-term annuity purchased specifically to cover expenses incurred during periods when the client is ineligible for Medicaid coverage.

Read the full analysis at Think Advisor

October 1, 2015 in Financial Regulation | Permalink | Comments (0)

Wednesday, September 30, 2015

Was Payment Institution Account Closings Due to AML Risk or Unfair Competitive Practice by Banks?

Safe Interenvios, SA Liberbank, SA, Banco de Sabadell, SA, Banco Bilbao Vizcaya European_Court_of_JusticeArgentaria, SA, OPINION OF ADVOCATE GENERAL SHARPSTON, delivered on 3 September 2015 (1), Case C‑235/14 (Request for a preliminary ruling from the Audiencia Provincial de Barcelona (Spain))

(Prevention of the use of the financial system for the purpose of money laundering and terrorist financing — Directive 2005/60/EC — Customer due diligence measures — Directive 95/46/EC — Protection of personal data — Directive 2007/64/EC — Payment services in the internal market)

1.        This dispute involves three credit institutions (Banco Bilbao Vizcaya Argentaria, SA (‘BBVA’), Banco de Sabadell, S.A. (‘Sabadell’) and Liberbank, SA (‘Liberbank’); collectively, ‘the banks’) and a payment institution (Safe Interenvios, SA; ‘Safe’). (2) The banks closed accounts Safe held with them because they had concerns about money laundering. Safe claims this was an unfair commercial practice.

2.        Questions have arisen as to whether EU law, in particular Directive 2005/60/EC (‘the Money Laundering Directive’), (3) precludes a Member State from authorising a credit institution to apply customer due diligence measures to a payment institution. That directive provides for three types of customer due diligence measure (standard, simplified and enhanced) depending on the risk of money laundering or terrorist financing. Standard customer due diligence measures under Article 8 comprise, for example, identifying a customer and obtaining information on the purpose and intended nature of a business relationship. Article 11(1) foresees that simplified customer due diligence will apply when the customers of an institution or person covered by that directive (‘a covered entity’) are credit and financial institutions (including payment institutions) themselves covered by the Money Laundering Directive. Article 13 requires enhanced customer due diligence in situations presenting a higher risk of money laundering or terrorist financing. Moreover, Article 5 authorises Member States to impose stricter obligations than those laid down in other provisions of the Money Laundering Directive.

3.        If a credit institution may be authorised to apply (enhanced) customer due diligence measures to a payment institution which itself is covered by the Money Laundering Directive, the Court is asked for guidance on the conditions under which Member States may provide for that to happen. Does their application depend on a risk analysis and may such measures include requiring a payment institution to transfer to a credit institution data pertaining to its own consumers and the recipients of the funds transmitted abroad? Those questions also invite the Court to consider Directives 95/46/EC (‘the Personal Data Directive’), (4) 2005/29/EC (‘the Unfair Commercial Practices Directive’) (5) and 2007/64/EC (‘the Payment Services Directive’). (6)

Case available here

September 30, 2015 in AML | Permalink | Comments (0)

Tuesday, September 29, 2015

The Tax Boondoggle Donald Trump Should Attack, But Didn't

My new article in Forbes on Donald Trump, carried interest and 1031 exchanges.

ImgresI speak to his contrary positions on carried interest and 1031s.  "One intriguing aspect to all this is that thanks to Trump, talk of repealing the carried interest loophole has overshadowed Washington discussion of eliminating another questionable tax giveaway: section 1031Section 1031 has long been an unsupervised real estate tax boondoggle, one from which Trump has most likely benefited."

I conclude by saying "Back to Trump’s attack on carried interest for hedge fund managers: he says that they didn’t “build” anything. But 1031 isn’t a tax break for construction—it’s a benefit when you are trading one investment property for another, just as hedge fund managers trade assets.

If Trump is happy getting rid of the carried interest loophole for hedge funders, then he should be just as happy getting rid of carried interest for real estate fund managers and the even bigger 1031 loophole for real estate investors."

September 29, 2015 in Finance, Tax Compliance, Wealth | Permalink | Comments (0)

BNY Mellon Bribing Foreign Sovereign Fund Officials through Student Internships? Pays $14.8 Million Fine to SEC

This matter concerns violations of the anti-bribery and internal accounting controls provisions of SECthe Foreign Corrupt Practices Act (“FCPA”) by BNY Mellon.

The violations took place during 2010 and 2011, when employees of BNY Mellon sought to corruptly influence foreign officials in order to retain and win business managing and servicing the assets of a Middle Eastern sovereign wealth fund.

These officials sought, and BNY Mellon agreed to provide, valuable internships for their family members. BNY Mellon provided the internships without following its standard hiring procedures for interns, and the interns were not qualified for BNY Mellon’s existing internship programs.

BNY Mellon failed to devise and maintain a system of internal accounting controls around its hiring practices sufficient to provide reasonable assurances that its employees were not bribing foreign officials in contravention of company policy.

The SEC investigation found that BNY Mellon did not evaluate or hire the family members through its existing, highly competitive internship programs that have stringent hiring standards and require a minimum grade point average and multiple interviews.  The family members did not meet the rigorous criteria yet were hired with the knowledge and approval of senior BNY Mellon employees in order to corruptly influence foreign officials and win or retain contracts to manage and service the assets of the sovereign wealth fund. 

According to the SEC’s order instituting a settled administrative proceeding, the sovereign wealth fund officials requested that BNY Mellon provide their family members with internships, and they made numerous follow-up requests about the status, timing, and other details of the internships for their relatives.  BNY Mellon employees viewed the internships as important to keep the sovereign wealth fund’s business. 

“The FCPA prohibits companies from improperly influencing foreign officials with ‘anything of value,’ and therefore cash payments, gifts, internships, or anything else used in corrupt attempts to win business can expose companies to an SEC enforcement action,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.  “BNY Mellon deserved significant sanction for providing valuable student internships to family members of foreign officials to influence their actions.”

The SEC’s order finds that BNY Mellon lacked sufficient internal controls to prevent and detect the improper hiring practices.  The company did have an FCPA compliance policy, but maintained few specific controls around the hiring of customers and relatives of customers, including foreign government officials.  Sales staff and client relationship managers were permitted wide discretion in their initial hiring decisions, and human resources personnel were not trained to flag potentially problematic hires.  Senior managers were able to approve hires requested by foreign officials with no mechanism for review by legal or compliance staff.  BNY Mellon’s system of internal accounting controls was insufficiently tailored to the corruption risks inherent in the hiring of client referrals, and therefore was inadequate to fully effectuate BNY Mellon’s stated policy against bribery of foreign officials.

“Financial services providers face unique corruption risks when seeking to win business in international markets, and we will continue to scrutinize industries that have not been vigilant about complying with the FCPA,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit.

The SEC’s order finds that in 2010 and 2011, BNY Mellon violated the anti-bribery and internal controls provisions of the Securities Exchange Act of 1934.

September 29, 2015 in AML | Permalink | Comments (0)

Monday, September 28, 2015

U.S. Signs New FATCA Competent Authority Arrangements with Australia and the United Kingdom

The Competent Authority of the United States has signed Competent Authority Arrangements (CAA) with two jurisdictions with which it has entered into intergovernmental agreements (IGAs).  The CAAs were signed with the Competent Authorities of Australia and the United Kingdom in accordance with the “Agreement between the Government of the United States of America and the Government of Australia to Improve International Tax Compliance and to Implement FATCA” and the “Agreement Between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland to Improve International Tax Compliance and to Implement FATCA”, respectively, IRS officials announced today.

Download United Kingdom M1A CAA 082815b

Download M1A CAA 8_24_2015 - AUS FINAL

Today’s CAAs with Australia and the United Kingdom are the first such arrangements to be signed. The U.S. Competent Authority expects that numerous other CAAs with additional competent authorities in IGA jurisdictions will be signed in the near future.

“The signing of these Competent Authority Arrangements marks another significant milestone in the international effort to gain proper reporting of offshore accounts and income,” said IRS Commissioner John Koskinen. “Together in partnership with other tax authorities, we are demonstrating how far we have come in the fight against offshore tax evasion.”

Financial institutions and host country tax authorities will use the International Data Exchange Service (IDES) as the secure electronic data transmission system to transmit and exchange FATCA data with the United States. Further information on IDES, including customer resources and support, can be found here.

September 28, 2015 in FATCA | Permalink | Comments (0)

Sunday, September 27, 2015

Proposed Revisions of Financial Institutions Consolidated Reports of Condition and Income (Call Report)

The Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board (Board), and the 640px-FdicLogoOffice of the Comptroller of the Currency (collectively, the agencies) are requesting comment on proposed revisions to the Call Report that would take effect December 31, 2015, or March 31, 2016, depending on the nature of the change.  The agencies encourage you to review the proposal, which has been approved by the Federal Financial Institutions Examination Council (FFIEC), and comment on those aspects of interest to you.  You may send comments to any or all of the agencies by the methods described in the attached Federal Register notice. 

All comments must be submitted by November 17, 2015.  The FFIEC and the agencies will review and consider the comments as they finalize the revisions to the Call Report.

This Call Report proposal is one element of a formal initiative launched by the FFIEC in December 2014 to identify potential opportunities to reduce burden associated with Call Report requirements for community banks.  In embarking on this initiative, the FFIEC is responding to industry concerns about the cost and burden arising from the Call Report preparation process.  The FFIEC's burden-reduction initiative comprises actions in five areas, which are summarized as follows:

  • Implementing an initial group of burden-reducing revisions to the Call Report;
  • Accelerating the start of the next statutorily required review of existing Call Report data items;
  • Assessing the feasibility of a potential community bank Call Report;
  • Conducting industry dialogue to better understand significant sources of Call Report burden; and
  • Providing Call Report training for bankers.

As a foundation for these actions, the FFIEC has developed a set of guiding principles for use in evaluating potential additions and deletions of Call Report data items and other revisions to the Call Report. The attached Federal Register notice provides further information about the community bank Call Report burden-reduction initiative and the guiding principles.

In proceeding with the first action above, the agencies have identified and are proposing a number of burden-reducing changes to the Call Report.  Additional burden-reducing changes to the Call Report are expected to result from other actions taken under the FFIEC's formal initiative. The agencies' proposal also includes certain new and revised Call Report data items, but because of the nature of these changes, they should have a limited impact on community institutions. The proposal also contains instructional clarifications and revisions. The proposed reporting changes, which would take effect in December 2015 unless otherwise indicated, include:

  • Deletions of certain existing data items pertaining to other-than-temporary impairments from Schedule RI, Income Statement; troubled debt restructurings from Schedule RC-C, Loans and Lease Financing Receivables, and Schedule RC-N, Past Due and Nonaccrual Loans, Leases, and Other Assets; loans covered by FDIC loss-sharing agreements from Schedule RC-M, Memoranda, and Schedule RC-N; and certain unused commitments to asset-backed commercial paper conduits in Schedule RC-R, Regulatory Capital;
  • Increases in existing reporting thresholds for certain data items in Schedule RI-E, Explanations; Schedule RC-D, Trading Assets and Liabilities; Schedule RC-F, Other Assets; Schedule RC-G, Other Liabilities; and Schedule RC-Q, Assets and Liabilities Measured at Fair Value on a Recurring Basis; and theestablishment of a reporting threshold for certain data items in Schedule RC-S, Servicing, Securitization, and Asset Sale Activities;
  • Instructional revisions addressing the reporting of:
    • Home equity lines of credit that convert from revolving to non-revolving status in Schedule RC-C;
    • Securities for which a fair value option is elected in Schedule RC, Balance Sheet; and
    • Net gains (losses) and other-than-temporary impairments on equity securities that do not have readily determinable fair values in Schedule RI;
  • New and revised data items and information of general applicability, including:
    • Increasing the time deposit size threshold used to report certain deposit information from $100,000 to $250,000 in Schedule RC-E, Deposit Liabilities, and (effective in March 2016) in Schedule RI, and Schedule RC-K, Quarterly Averages;
    • Revising the statements used to describe the level of external auditing work performed for the reporting institution during the preceding year in Schedule RC (effective in March 2016);
    • Adding contact information for the reporting institution's Chief Executive Officer;
    • Reporting the institution's Legal Entity Identifier if it already has one (on the Call Report cover page);
    • Creating additional preprinted captions for itemizing and describing components of certain items that exceed reporting thresholds in Schedules RC-F and RI-E; and
    • Revising Schedule RI to eliminate the concept of extraordinary items (effective in March 2016); and
  • New and revised data items of limited applicability, including:
    • Revising the reporting of certain securities measured under a fair value option in Schedule RC-Q and moving the existing Memorandum items for the fair value and unpaid principal balance of loans (not held for trading) measured under a fair value option from Schedule RC-C to Schedule RC-Q;
    • Revising the information reported in Schedule RI Memorandum items by institutions with total assets of $100 billion or more on the impact on trading revenues of changes in credit and debit valuation adjustments (effective in March 2016);
    • Adding a new item on "dually payable" deposits in foreign branches of U.S. banks to Schedule RC-E, PartII, Deposits in Foreign Offices, on the FFIEC 031 report; and
    • Revising the information reported about the supplementary leverage ratio by advanced approaches institutions in Schedule RC-R (effective in March 2016).

For the Call Report revisions proposed to take effect in December 2015, the agencies invite comment on difficulties institutions would encounter in implementing any of these revisions in their year-end 2015 Call Reports.

To help you understand the proposed changes to the Call Report, drafts of the Call Report schedules that are proposed to be revised are available on the FFIEC's website ( Draft instructions for the proposed reporting changes will be posted on the FFIEC's website during the comment period for the proposal.

Please forward this letter to the person responsible for preparing Call Reports at your institution. For further information about the proposed reporting revisions, state member banks should contact their Federal Reserve District Bank. National banks, savings associations, and FDIC-supervised banks should contact the FDIC's Data Collection and Analysis Section in Washington, D.C., by telephone at (800)688-FDIC (3342) or by email at

Judith E. Dupré
Executive Secretary

Attachments: Initial Paperwork Reduction Act Federal Register Notice - PDF (PDF Help)

Distribution: FDIC-Supervised Banks and Savings Institutions, National Institutions, State Member Institutions, and Savings Associations

Complete Financial Institution Letter: 

September 27, 2015 in Financial Regulation | Permalink | Comments (0)

Saturday, September 26, 2015

Malaysia's measures to combat money laundering and terrorist financing

The Asia/Pacific Group on Money Laundering (APG) and the FATF completed a joint assessment  of Malaysia 's anti-money laundering and counter-terrorist financing (AML/CFT) system. The assessment is a comprehensive review of the effectiveness of Malaysia's AML/CFT system and its level of compliance with the FATF Recommendations.

Overall, Malaysia has a robust legal AML/CFT framework with generally well-developed and implemented policies.

Malaysia is an observer to FATF and is working with the FATF to meet the criteria for membership. FATF logo

In line with these criteria, Malaysia must bring its level of compliance up to a satisfactory level. To strengthen its AML/CFT framework, it needs to take a number of actions, such as further risk assessments of terrorist financing and foreign sources threats, a greater focus on obtaining  convictions and confiscation and better use of financial intelligence by law enforcement agencies.

Key Findings

Malaysia’s robust policy framework for AML/CFT reϐlects strong political commitment and well-functioning coordination structures for AML/CFT and combating proliferation financing. Significant resources have been allocated to achieve the policy objectives. Coordination arrangements effectively support the implementation of activities to meet these policy objectives.

Malaysia has largely up-to-date AML/CFT statutory instruments, generally welldeveloped policies, institutional arrangements and implementation mechanisms. These elements provide the building blocks for overall good levels of compliance with the FATF Recommendations and a number of real strengths with effectiveness in AML/CFT measures.

Malaysia’s understanding of risk is sound, although improvements are needed in the assessment of TF risk to include more details for the private sector, and to deepen the assessment of ML risks from foreign sourced threats. Malaysia’s well-structured inter-agency cooperation framework has supported the assessment of ML/TF risk through two iterations of a national risk assessment (NRA) and other assessments, which have involved the private sector to some extent. Malaysia has integrated the outcomes of risk assessments into its policies and priorities and has reached out to reporting institutions with findings on risk, although the processes for disseminating risk findings should continue to be strengthened.

Malaysia develops and disseminates good quality financial intelligence to a range of LEAs. The well-resourced FIU produces high quality intelligence; however, the take-up of their products by LEAs is mixed, but improving. Improvements are needed to ensure ϐinancial intelligence is used to target investigations for at least all of the high-risk crime types. Financial intelligence has added to TF and CT investigations, CT preventive measures and the assessment of ML/TF risk.

Malaysia’s frameworks for ML investigations and prosecutions are generally sound but have produced minimal outcomes. Malaysia is not effectively targeting its high-risk offences (other than fraud) or foreign sourced threats in its prosecution of ML. While there are anumber of high value cases, most cases relate to low-medium level offending. The sanctions imposed for ML have been low, and have not been demonstrated to be effective. Malaysia has had a preference for pursuing other criminal justice measures rather than ML prosecutions, particularly conϐiscation.

Confiscation to combat tax and goods smuggling has been very successful through administrative recoveries by the Special Taskforce relating to strategically significant elements of the economy. The Taskforce has achieved excellent results, including an evident reduction in these types of offences. However, conϐiscation levels have been low in other high-risk areas (fraud, drugs and corruption) and in international matters, and the crossborder cash declaration regime is producing minimal results, which reduces effectiveness.

Despite the risk and context of TF in Malaysia, to date Malaysia has not prosecuted any TF cases. Malaysia has commenced 40 TF investigations with 22 still ongoing and LEAs make increasingly good use of ϐinancial intelligence to focus on terror groups and acts. Malaysia takes a security intelligence approach to terrorism prevention, rather than criminal justice action against the ϐinanciers. In a number of cases, Malaysia has demonstrated successes using other criminal justice and administrative measures to disrupt TF and terrorist activities arising from financial investigations and other strategies.

Malaysia’s legal and institutional framework to implement targeted financial sanctions (TFS) against terrorism is compliant and is being implemented with notable successes, including designating domestic and foreign entities under 1373, co-sponsoring UN designations and freezing assets of 1267 and 1373 entities. Reporting institutions (RI) are aware of their freezing obligations and freezing actions with respect to a wide range of assets and persons indirectly controlled by designees have recently occurred. Supervision of the implementation of TFS is taking place across most sectors, with the exception of certain DNFBPs.

Prevention of abuse of non-proϐit organisations (NPOs) for TF has been achieved through the implementation of a targeted approach to educate and oversee NPOs that are at risk. Assessment of risk, outreach, targeted controls on high risk activities (charitable collection), centralised controls on Zakat and targeted compliance monitoring and enforcement of regulatory controls add to the effectiveness of CFT for the NPO sector.

The legal framework for TFS against proliferation of WMD contains a significant legal gap in the delay of transposing UN designations into domestic law, which undermines effectiveness. Despite this, freezing results have occurred, supervision is taking place and vigilance measures are in place.

Malaysia’s legal framework for supervision is sound and all regulators apply a risk-based approach to supervision. Market entry controls are generally working well. BNM supervises the majority of RIs which carry the bulk of the ML/TF risk, and is an effective, well-resourced supervisor. SC’s approach is comparably sound and LFSA’s supervisory capabilities are improving. Supervisors have adequate resources, tools and well trained staff to assess and use risks to target supervision and remedial measures. There is a gap in BNM FIED’s available resources necessary for supervising Malaysia’s large DNFBP population. Supervisory interventions have further to go to ensure RIs deepen their risk-based approach to AML/ CFT implementation.

The regulatory framework for preventative measures is highly compliant, which sets a good starting point for RIs, however many sectors are taking longer to transition from a rules based to risk-based approach, despite their long-standing obligations. Supervisory findings show that key sectors have a mixed understanding of risk, and RIs do not always adequately implement CDD requirements on a risk-sensitive basis.

Malaysia’s controls on legal persons and arrangements to ensure that the ‘corporate veil’ cannot undermine AML/CFT preventative measures and investigations are still developing, but there are some notable strengths, such as the public availability of Malaysia’s legal persons ownership registers and the requirement for trustees to declare their trustee status to banks. Malaysia is not a major centre for the establishment of legal persons or legal arrangements.

Malaysia’s international cooperation has been aligned to its risk profile to some extent, but more needs to be done to increase the focus on the risks Malaysia faces from transnational crime. Supervisors, regulators and the FIU cooperate well with their counterparts, making and responding to a reasonable range of requests largely in keeping with the risks, which supports effectiveness. Criminal justice agencies generally respond well to LEA cooperation, MLA and extradition requests, but Malaysia receives far more MLA and LEA cooperation requests than it makes, which may be a product of Malaysia’s lack of focus on foreign threats. Malaysia has made very few MLA and extradition requests in the past ϐive years.

September 26, 2015 in AML | Permalink | Comments (0)

Friday, September 25, 2015

FATCA Webinar - Audio Recorded on YouTube


September 25, 2015 in FATCA | Permalink | Comments (0)

Switzerland Asks Non-Prosecution Agreement Resolution for All Its Banks this Year

Bern, 14.09.2015 - Federal Councillor Eveline Widmer-Schlumpf met the US Attorney General Loretta Lynch for bilateral talks on the implementation of the US programme for settling the tax Swiss logodispute with Swiss banks.

Under this US programme from 2013, Swiss banks that have to assume they violated US law can enter into a so-called Non-Prosecution Agreement with the US Department of Justice.

The talks between the two ministers addressed the issue of equal treatment of all banks with regard to determining fines and the required evidence of client asset taxation. The intention of concluding all Non-Prosecution Agreements with category 2 banks by the end of this year was also discussed. In this regard, it is important for Switzerland that each bank is granted fair and transparent negotiations. The treatment of employee data under the programme was likewise discussed.



State Secretariat for International Financial Matters  

September 25, 2015 in AML | Permalink | Comments (0)

Thursday, September 24, 2015

Texas A&M University School of Law Hires 12 New Faculty & Expands Programs

Texas A&M University School of Law is quickly distinguishing itself as an institution to watch. TAMU-Law-lockup-stack-SQUARE

At a time when most schools are cutting back, Texas A&M University has made an unparalleled investment in the future of legal education for Texas, the nation and beyond by attracting an unprecedented 12 new faculty members for its School of Law located inFort Worth.

Five of the new faculty focus on intellectual property issues, adding strength to the school's Center for Law and Intellectual Property and building on A&M's strong reputation in engineering and life sciences. These hires cover all aspects of intellectual property, including patents, copyrights, trademarks, and trade secrets. Together with two existing scholars in the field, A&M Law is now in contention to have one of the country's top intellectual property law programs.

"This extensive concentration of intellectual property faculty offers students comprehensive coverage, allowing them to develop specialized training based on their individual interests and career paths," said intellectual property expert and incoming professorPeter Yu. "Our newly expanded program offers an unparalleled focus and makes A&M Law immediately stand out in the intellectual property field."

Among A&M Law's seven additional hires are thought leaders with strong backgrounds in legal ethics, commercial law, legal writing, law and economics, tax and international law. They include the newly appointed President of Texas A&M University, Michael K. Young, whose two decades as a legal scholar and dean at Columbia Law included the development of internationally recognized programs in Japanese and Korean legal studies and authorship of numerous briefs, articles and books on U.S. trade law and policy.  Given his leadership, including presidency at two leading universities and service, it is fitting that he will hold tenure in both Texas A&M's School of Law and the George H. W. Bush School of Government & Public Service. 

"I'm pleased to be joining Texas A&M University at this exciting time of my career and their history," offered Young. "It is a wonderful bonus, to also join my colleagues in the transformation of this law school, legal education nationally and our contributions as scholars to the continued dynamic vitality of Texas."

"As not only a top tier, public research university, but also a land grant institution, we have a special obligation to bring the academy to the public, and these folks are going to help us expand our efforts to do that," Dean Andy Morriss said. "We're particularly excited to have long time bar leaders like legal ethicist Susan Fortney, former Uniform Law Commission Executive Director Bill Henning, and former American Society of International Law Executive Director Charlotte Ku joining us."

These incoming faculty join the existing academic team, now 55 members strong and punctuated by an ethos of market-disruptive thinking and scholarship. In 2015 alone, A&M Law faculty members have gained national attention for policy papers and commentary on topics including the intersection of water and energy law, developments in intellectual property, law reform in the Middle East, and the changing face of the death penalty.

And in an era when many law schools are cutting staff and faculty as enrollments fall nationally, A&M Law has only enhanced its commitment to lead by expanding curricular options, improving student services, attracting the very best talent and aligning to Texas A&M University's mission tenet of service to the state, nation and beyond.

One such example is a $370,000 grant awarded to the School of Law from the Access Group. With the grant, A&M Law's Milan Markovic will serve as principal investigator of the Texas Lawyers Study, examining professional satisfaction and income levels of nearly 88,000 members of the State Bar of Texas. This study will generate an extraordinary amount of data on the economics of the legal profession and the working lives of lawyers that can inform the decision-making of prospective law students and lawyers.

"We're proud of our work to date, and are inviting all to see how far we've come and to take a look at where we are heading," Morriss said. "By attracting new talent to compliment our strong foundation of scholars, A&M Law is leading by example."

September 24, 2015 in Education | Permalink | Comments (0)

Switzerland Money Laundering Changes Include Tax Crimes

The Financial Action Task Force on Money Laundering (FATF) has implemented the risk-based Swiss logoapproach in its review of the 40+9 FATF recommendations in 2012. It is calling for more transparency on beneficial ownership.

This means that identifying beneficial owners will become more complex in future. The requirements as regards “politically exposed persons” (PEPs) are being widened to include PEPs resident in Switzerland. In addition, tax crimes are for the first time included as "predicate offences" to money laundering.

After carrying out its consultations, in December 2013 the Swiss Federal Council adopted for submission to parliament the draft of the new Swiss Federal Act on the Implementation of the 2012 Revised Recommendations of the Financial Action Task Force (FATF). A partial revision of the Swiss Anti-Money Laundering Act concerning the Money Laundering Reporting Office (MROS) had already entered into effect on 1 November 2013.

In addition to enhanced information exchange, the revision also expanded the powers of the MROS to obtain information in the future from financial intermediaries. After lengthy discussions the Swiss Federal Parliament reached an agreement and approved the amended draft of the Federal Act with the final vote on 12 December 2014. The deadline for referendum expired on 2 April 2015.

The draft contains the following key changes: 

Alternative to cash ban

 | If in the future traders accept more than 100,000 francs in cash, they are also subject to anti-money laundering due diligence requirements (otherwise the transaction must be made through financial intermediaries). In official insolvency auctions a cash limit of 100,000 francs has likewise been introduced. 

Tax fraud as a predicate offence for money laundering

 | A key change is that tax evasion is now considered to be a predicate offence to money laundering. 

Transparency in bearer shares

 | In the future, anyone who acquires the bearer shares of a company whose shares are not listed on the stock exchange must report the purchase of the company and identify themselves. The company must also maintain a record of the owners.

One new mandatory requirement is that the beneficial owners must be determined (owners with more than a 25% stake) for operating legal entities.

Domestic PEPs

 | Now not only rulers abroad are considered to be PEPs, but also persons in Switzerland and from international organisations.

Discontinuance of automatic freezing of assets

 | Assets will no longer be frozen when the FI reports to the MROS; instead, assets are to be frozen only when the MROS informs the FI that the notification was forwarded to the law enforcement agency. But if there is a suspicion of terrorism, the assets must be frozen immediately.

Religious foundations

 | The revision requires that religious foundations must now be registered in the Commercial Register.

Entry into force in two steps

 On 1 July 2015:

  • Code of Obligations

  • Collective Investment Schemes Act

  • Federal Intermediated Securities Act

On 1 January 2016:

  • Amendments to the Swiss Civil Code regarding ecclesiastical and family foundations

  • Provisions on tax predicate offences

  • Amendments to the Debt Collection and Bankruptcy Act concerning the mode of payment

  • Anti-Money Laundering Act and Anti-Money Laundering Regulation SAAM

Consultation process documents
Consultation process response

September 24, 2015 in AML | Permalink | Comments (0)

Wednesday, September 23, 2015

Improving Co-operation between Tax and Anti-Money Laundering Authorities: Access by tax administrations to information held by financial intelligence units for criminal and civil purposes

Financial crimes, including tax crimes, threaten the strategic, political and economic interests of OECDboth developed and developing countries and undermine confidence in the global financial system. In a world of limited resources and increasing complexity government authorities must work closely together in a “whole of government” approach to best address these challenges.

Financial crimes, including tax crimes, threaten the strategic, political and economic interests of both developed and developing countries and undermine confidence in the global financial system. In a world of limited resources and increasing complexity government authorities must work closely together in a “whole of government” approach to best address these challenges.

This report uses survey data to analyse the levels of co-operation between the authorities combating serious financial crimes such as tax crimes, bribery corruption, money laundering and terrorism financing. More specifically, it assesses various models for the sharing of Suspicious Transaction Reports (STRs) by the Financial Intelligence Unit (FIU) with the tax administration, both for criminal and civil purposes. It finds that there are significant potential benefits from greater co-operation, with each authority pooling their knowledge and skills. The report subsequently recommends that subject to the necessary safeguards, tax administrations should have the fullest possible access to the STRs received by the FIU in their jurisdiction.

Vast amounts are lost to illicit financial flows, including tax evasion, money laundering, bribery and corruption. These crimes threaten the strategic, political and economic interests of both developed and developing countries. In a world of limited resources and increasing complexity, it is essential for government authorities to work closely together in a “whole of government” approach to best address these challenges.

Improving Co-operation between Tax and Anti-Money Laundering Authorities: Access by tax administrations to information held by financial intelligence units for criminal and civil purposes highlights the need for governments to maximise their effectiveness in tackling financial crimes and ensuring tax compliance and shows the benefits of greater co-operation between Financial Intelligence Units (FIUs) and tax administrations. It recommends that, subject to the necessary safeguards, tax administrations should have the fullest possible access to the Suspicious Transaction Reports received by the FIU in their jurisdiction.

This report was released at the Fourth OECD Forum on Tax and Crime in Amsterdam, an event which brought together over 200 senior officials and specialists from over 70 countries and international organisations, who collectively share responsibility for combating financial crime and terrorist financing in all its forms. Strengthening the links between criminal tax investigations and the fight against illicit financial flows such as tax evasion, bribery and corruption, money laundering, terrorist financing was a key topic of the agenda. Participants also stressed the need for capacity building to help developing countries to better fight financial crimes as part domestic resource mobilisation.  Discussions on the dark web and the use of analytics to detect and deter financial crimes illustrated the importance of technology as both a risk and part of the solution to tax crimes and other crimes with further work forthcoming.

Further details on the Fourth Forum on Tax and Crime, including the statement of outcomes, are available at:

Download Report-improving-cooperation-between-tax-anti-money-laundering-authorities

September 23, 2015 in AML | Permalink | Comments (0)