Switzerland proposes severe punishment for bank secrecy breach

Switzerland proposes severe punishment for bank secrecy breach

In a fresh setback to India's efforts to get details of the so-called HSBC list from Switzerland, the Swiss government today pitched for better protection of bank client data and severe penalties for those violating the banking secrecy.

Switzerland government's apex executive body, the Federal Council, said in a statement that it supports a parliamentary initiative seeking severe punishment for those selling bank client data or benefitting from such activities.

In its pursuit to unearth the black money allegedly stashed by Indians in Swiss banks, Indian government has been seeking details for many months about over 700 accounts mentioned in ab 'HSBC list' of suspected tax dodgers. Switzerland has been refusing to cooperate saying it was a 'stolen list' and its local laws do not allow any assistance in cases involving any criminality.

This list of Indians with accounts at HSBC branch in Switzerland was received by India from French government through a bilateral treaty between two countries. France had got hold of this list after data was stolen by a disgruntled HSBC employee in 2011 and those names eventually found their way to tax authorities across the world including India.

Subsequently, India wrote to Switzerland to get further details about these accounts, as these pertained to people suspected to have taxes in India. However, repeated requests in this regard have been rejected by Switzerland on the pretext that the information was being sought on the basis of stolen data.

Advocating for better protection of bank client data, the Federal Council of Switzerland today said it supports the proposals made by the Economic Affairs and Taxation Committee of the National Council (EATC-N) in this regard.

The Federal Council is the highest decision making body of the Swiss government. This seven-member executive council constitutes the federal government of Switzerland and serves as the Swiss collective head of state, while each Councillor heads one of the seven federal executive departments.

The Council said the Parliamentary committee in its report "considers it unsatisfactory that people who pass on client data stolen from a financial institution or use it for their own benefit are not liable to prosecution.

"It thus recommends closing the existing loophole in the entire financial market sector. It should also now be possible to impose more severe penalties on whoever procures economic benefit from violating banking secrecy or the other professional confidentialities in the financial market sector."

"The Federal Council supports the proposals of the EATC-N. They improve the protection of clients' personal rights and strengthen their confidence in the Swiss financial centre. They also thereby ultimately contribute to improving competitiveness," it said in the statement.

With regard to Switzerland agreeing to a global framework for auotmatic exchange of information, to which India is also a signatory, the Council said that "the proposed legislative changes will not be rendered superfluous by the introduction of the automatic exchange of information (AEOI) because it cannot be assumed that all countries will conclude an agreement on the AEOI with Switzerland."

"In addition, the relationship between the client and the financial institution in Switzerland will not be affected by the AEIO," it added. India has asked Switzerland to join the Early Adopter Group of this automatic information exchange framework, but Swiss authorities are yet to respond to this request.

Finance Minister Arun Jaitley wrote a letter to the Swiss Finance Minister on August 1, 2014, inviting Switzerland to join the 'Early Adopter Group' to the new global standards.

"A request has also been made to Switzerland for entering into a Competent Authority Agreement on Automatic Exchange of Information as per the new global standards to enhance further cooperation between India and Switzerland in tax matters," Minister of State for Finance Nirmala Sitharaman said in a written reply to the Rajya Sabha yesterday.

She was answering a query on whether India will continue to put pressure on Switzerland to share information on alleged illegal funds stashed away by its citizen in Swiss Banks in line with a global declaration.

The Early Adopter Group comprising of 44 countries, including India, has committed itself to early adoption of Common Reporting Standard on Automatic Exchange of Information related with tax evasion.

Giving in to pressure from India and several other countries, Switzerland has made some key changes in its local laws governing assistance to foreign nations in their pursuit of black money allegedly stashed in Swiss banks.

These amendments, which have come into force this month, would allow India and other countries to make 'group requests' for information about suspected black money hoarders, while Swiss authorities would not give prior intimation to suspected individuals or entities before sharing their details.

Switzerland recently said it is committed to cooperate with the new government in India's fight against black money and has invited an Indian delegation to visit Berne for discussions in this regard.

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