Strengthen the Swiss financial centreOverview

SIFNEWSLETTER December 2016

The Federal Council presented its report on the current financial market policy for a competitive Swiss financial centre in October 2016. The business newspaper Finanz und Wirtschaft subsequently wrote, «The Swiss financial centre is going on the offensive». And that is precisely how the report in question is to be understood. Switzer-land has done a great deal in the financial and tax arena in recent years. We want to build on that and further strengthen it.

Switzerland‘s financial market policy will be shaped by five strategic thrusts in the future: while the implementation of internationally recognised standards will remain a key component of the policy, national leeway should be exploited more consistently and the framework conditions for the Swiss financial centre should be made forward-looking and efficient. This is particularly true with respect to new technologies against the backdrop of the rapid progression of digitisation in the finance business.

The Federal Council has recognised this and is striving for a future-oriented solution which is as comprehensive as possible for so-called fintech firms. These operate, for instance, in the area of mobile payment systems, virtual currencies and online lending between private individuals (peer-to-peer lending).

The recently presented easing should reduce barriers to market entry for such providers and increase legal certainty for the sector overall. No other country has a comparably innovative approach in terms of regulation and supervision. We are thus confident that we can develop a competitive advantage for ourselves in this area.

I hope you enjoy reading this newsletter and wish you a happy Christmas time.

Jörg GasserState Secretary

Market access Export-oriented Swiss financial centre Page 2 AEOI Switzerland is moving forward Page 3 FATF Good marks for Switzerland Page 4 Agenda Page 5

Contact/editor Communications, State Secretariat for International Financial Matters +41 58 469 79 47 info@sif.admin.ch

News from the State Secretariat for International Financial Matters SIF / Edition 4/2016 / www.sif.admin.ch

News from the State Secretariat for International Financial Matters SIF / Edition 4/2016 / www.sif.admin.ch 2

Market access

Export-oriented Swiss financial centre

Legally secure market access conditions for Swiss providers in major foreign markets are an import success factor for the future of the Swiss financial centre. This applies not only but especially for the cross-border wealth management business with private clients.

tion on the introduction of the automatic exchange of information (AEOI) in tax matters on a reciprocal basis was used to discuss international initiatives in the financial and tax spheres and regulatory issues, as well as to talk about closer bilateral cooperation in the area of market access.

The State Secretary likewise travelled to Argentina and Brazil in November to broach the issue of market access for financial service providers and to determine the framework conditions for invest-ments and structural reforms in the two countries. Talks took place in Singapore and Hong Kong back in the summer. The optimum framework condi-tions for supporting innovation in the financial sector and the importance of a level playing field when implementing international standards in the area of taxation were also discussed.

Beat Werder

Switzerland‘s neighbouring countries have traditionally been of great significance. Germany, France and Italy are among the large target markets for Swiss private banking. Countries in South America, the Middle East and the Far East should play a bigger role in the future.

The State Secretary for International Financial Matters, Jörg Gasser, met his counterparts from the United Arab Emirates (UAE) and Saudi Arabia, as well as representatives from these two coun-tries‘ supervisory authorities and central banks on a working visit to the Middle East in November 2016.

The aim of the working visit was to intensify dialogue and cooperation in financial and tax matters with these important partner states of Switzerland. Beforehand, Jörg Gasser made a working visit also to Israel, where the joint declara-

State Secretary Jörg Gasser (third from the left) with representatives of the Federal Administration and the Swiss Embassy during a visit to the United Arab

Emirates

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AEOI

Switzerland is moving forward

Switzerland has expanded the network of partner states with which it wishes to agree to the automatic exchange of information on financial accounts (AEOI) in recent months. Moreover, it has created the legal basis in order for the AEOI to be implemented in 2017.

In July 2014, the OECD Council adopted the global standard for the automatic exchange of informa-tion in tax matters (AEOI standard). The standard makes provision for the mutual exchange of information on financial accounts between states that have agreed to the AEOI (see figure). This information may be used solely for tax purposes. Over 100 states worldwide have since undertaken to introduce the AEOI.

Switzerland: AEOI from 2017A first group of countries started to collect data already this year. Switzerland is in the group of countries that intend to begin collecting data from 1 January 2017 and exchange it for the first time in January 2018. The Federal Assembly approved the legal basis back in December 2015.

Growing number of partner statesSwitzerland will introduce the AEOI with 38 states and territories on 1 January 2017. These include the 28 EU member states and Gibraltar, as well as the Channel Islands, Canada, Japan and Norway, for example. Switzerland will introduce the AEOI

with further countries on 1 January 2018. The Federal Department of Finance (FDF) initiated a consultation on the introduction of the AEOI with around 20 more countries in December 2016. The State Secretariat for International Financial Matters (SIF) continually updates the list of countries with which Switzerland is introducing the AEOI on its website.

In Switzerland‘s interestsSwitzerland has declared its willingness to adopt international standards with respect to transparen-cy and the exchange of information. The AEOI standard is one of these. Switzerland contributed actively to the elaboration of the standard, seeking to ensure that it applies globally and that all major financial centres, in particular, implement it. By moving forward and introducing the AEOI stan-dard, Switzerland is boosting the competitiveness, international credibility and integrity of the Swiss financial centre. And that is good not only for the financial sector, but for the country as a whole.

Ramona Fedrizzi

Report on international financial and tax matters 2016

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information in tax matters (AEOI standard). Swit-zerland actively participated in the development of the AEOI standard.

In addition to approving the AEOI standard, the OECD Council issued a recommendation in which the OECD member states and other states that endorsed the recommendation undertook to adopt the AEOI standard. The G20 finance ministers then confirmed the new AEOI standard during their meeting held in September 2014 in Cairns, Australia. By the end of 2015, 97 states had committed themselves to the exchange of information in accordance with the AEOI stand-ard: 56 from 2017 and the remaining 41, includ-ing Switzerland, from 2018. In addition, on the fringes of the plenary meeting of the Global Forum, 51 states signed the Multilateral Compe-tent Authority Agreement on the Automatic

Exchange of Financial Account Information (MCAA) which serves to implement the AEOI. In the meantime, 78 states have signed the MCAA. The Federal Council agreed to a declaration on Switzerland’s participation in the MCAA in November 2014.

ImplementationImplementation can proceed based on two mod-els. Firstly, it is possible to agree to AEOI imple-mentation in bilateral treaties (model 1). Sec-ondly, the automatic exchange of information can be implemented on the basis of the MCAA (model 2).

The MCAA is based on the OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters (administrative assis-tance convention)2.

2 Switzerland signed the administrative assistance convention in October 2013. The convention provides a framework for tax cooperation between states and is comparable with a modular system. In addition to the exchange of information on request and the spontaneous exchange of information, in particular the AEOI can be agreed to under the convention. However, the AEOI is not mandatory. The application of the AEOI in particular requires an additional agreement between two or more contracting states.

How the automatic exchange of information works

– Account number

– Name, address, date of birth

– Tax identification number

– Interest, dividends

– Receipts from certain insurance policies

– Credit balances on accounts

– Proceeds from the sale of financial assets

Bank in country B discloses financial acc. data to authorities incountry B

Authorities in country B automatically forward information to authorities in county A

Authorities in country Acan examine foreignfinancial account data

Taxpayer in country A has a bank account in country B

This information is exchanged:Country BCountry A

Fig. 18

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FATF

Good marks for Switzerland

The Financial Action Task Force (FATF) published the mutual evaluation report on Switzerland on 7 December 2016. It gave Switzerland a good report for its anti-money laundering and counter-terrorist financing system.

The FATF is an intergovernmental body that was set up in 1989 with the aim of combating money laundering and terrorist financing. It has issued 40 recommendations, which form the international anti-money laundering and counter-terrorist financing standards. The FATF regularly evaluates how its member states are implementing the standards.

Switzerland‘s mutual evaluationIn what was the fourth mutual evaluation report on Switzerland, the FATF set out how Switzerland implements the international anti-money laun-dering and counter-terrorist financing standards and determined compliance with the standards. The FATF gave Switzerland a good report overall: compared with the other countries evaluated, Switzerland‘s performance is above average with respect to the legal and institutional implementa-tion of the standards, as well as the effectiveness of the measures taken.

To be continuedEach report contains recommendations with approaches for how the anti-money laundering and counter-terrorist financing system could be improved. After its evaluation, each country is subject to a follow-up process during which the FATF monitors the progress made on implementing these recommendations. The follow-up process planned for Switzerland is also applied to most of the other countries already evaluated.

End of one evaluation, start of anotherIn February 2018, Switzerland will have to demons-trate to the FATF what it has done to improve its system since the evaluation. At the very least, it will have to outline the main projects with which it intends to eliminate the criticised legislative gaps. Moreover, the FATF expects Switzerland

- to have eliminated most – if not all – of the legislative gaps criticised at the time of the mutual evaluation no later than three years following submission of the report,

- to have remedied the effectiveness shortcomings identified no later than the next evaluation, which takes place five years after the mutual evaluation.

The State Secretariat for International Financial Matters (SIF) will carry out an in-depth analysis of the recommendations contained in the mutual evaluation report together with the other units of the Federal Administration affected in order to determine the need for regulatory action and the consequences. The aim is to submit to the Federal Council a proposal regarding how to proceed that takes optimum account of the FATF‘s recommen-dations and Switzerland‘s interests in the summer of 2017.

Sylvain Grünig

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Agenda

17 to 20 January 2017World Economic Forum (WEF), Davos

25 to 27 January 2017OECD Fiscal Committee / Inclusive Frame- work on BEPS, Paris (France)

27 to 28 February 2017Plenary of the Financial Stability Board, Cape Town (South Africa)

27 February to 17 March 2017Federal Assembly spring session, e.g. probably with the Financial Services Act (FinSA) and theFinancial Institutions Act (FinIA), the country-by-country reports and the revision of the Federal Act on International Monetary Assistance

17 to 18 March 2017G20 finance ministers and central bank governors meeting, Baden-Baden (Germany)

21 to 23 April 2017G20 finance ministers and central bank governors meeting, Washington D.C. (USA)

21 to 23 April 2017Annual meeting of IMF and World Bank, Washington D.C. (USA)

The SIF

The State Secretariat for International Financial Matters (SIF) defends the interests of Switzerland in international financial and tax matters and partici-pates in international negotiations. The SIF informs yearly in four newsletters about its operations. The newsletters are available in German, in French and in English.

Recent publication

In October 2016, the Federal Council adopted a report and laid the foundations for a future-oriented financial market policy. The focus is on five strategic directions that should enable the Swiss financial centre to boost its competitiveness. The framework conditions for Switzerland‘s financial centre should be designed in an optimal way and existing national regulatory leeway should be used. Alignment with international-ly recognised standards will remain a key component of the policy.