Switzerland Federal Council has asked its finance ministry to submit a consultation draft to meet its goal of preventing banks from accepting untaxed funds from their clients

New Delhi/Bern: Often accused of providing safe havens to black money from India and other countries, Switzerland has proposed a new bill to prevent its banks and other institutions from accepting 'untaxed assets' from their clients and put in place a stricter due diligence regime, reports PTI.

The Switzerland Federal Council, the apex decision making body of Swiss government, has asked its finance ministry, the Federal Department of Finance (FDF), to submit a consultation draft at the start of 2013 to meet its goal of preventing banks from accepting untaxed funds from their clients.

A decision to this effect was taken by the Federal Council at a meeting on Friday in Bern.

The move follows rising global pressure on Switzerland to act against its banks giving 'safe haven' to overseas entities in name of client confidentiality.

In India as well, the issue of alleged hoarding of black money in Swiss banks has been a matter of political debate.

While a revised tax treaty has come into force between the two countries for exchange of information on untaxed assets and money laundering related activities, the rules require sufficient information for any banking details to be shared and many requests face the risk of getting rejected in the name of 'fishing expeditions'.

The Swiss Federal Council said in a statement that it "is stepping up its efforts to combat abuses in the area of money laundering and taxation".

"With the planned implementation of the revised recommendations of the Financial Action Task Force (FATF), serious tax offences will be qualified as predicate offences for money laundering in future. In the event that they suspect money laundering, financial intermediaries should also report these cases to the Money Laundering Reporting Office Switzerland," it added.

The Federal Council further said the content of the proposed consultation draft and its schedule would be in line with the implementation of the revised FATF Recommendations.

"At the same time, the Federal Council took note of the FDF's appointment of a group of experts which is to draw up the basis for the longer-term orientation of the financial market strategy," it said.

The new bill incorporates other laws such as tax laws and the Code of Obligations (legislation on companies limited by shares) along with the Anti-Money Laundering Act. Besides, the Swiss government would work on a new set of principles of enhanced due diligence requirements to prevent the acceptance of untaxed assets by banks and other financial intermediaries.

The extent of the examination depends on the risk posed by the contracting party, which would be similar to the due diligence requirements for combating money laundering and terrorist financing. Financial intermediaries will be obliged to issue self-regulation provisions in compliance with specific legal parameters which are to be recognised and monitored by the supervisory authority.

There will also be self-regulation measures equivalent to legal provisions in terms of their impact, while a supervisory authority will be empowered to issue corresponding regulations in the absence of any self-regulation.

"Within the scope of the due diligence requirements to prevent the acceptance of untaxed assets, it is envisaged that the financial intermediary will be able to request a self-declaration from clients on the fulfilment of their tax obligations.

"The self-declaration will serve as an indicator of the tax-compliant conduct of the client. However, there is no self-declaration obligation," the Federal Council said.