International Pressures on Switzerland: Only A First Step? (21 May 2012, FTSE Room, Capital Tower)


The speaker for the seminar Jan Langlo, Senior Wealth Planner with Rhone Trust and Fiduciary Services SA spent a good hour giving the audience the background to the Swiss challenges in the last three years relating to mounting international pressures to exchange more tax information. This included (i) the application of the OECD standard on the exchange of tax information, (ii) the resolution of the Swiss banks' tax issues with the United States, (iii) the implementation of FATCA, (iv) the constant push of the European Union in favour of an automatic exchange of information and (v) the introduction of a criminal offence related to direct taxes as a prelude to money laundering.


Jan highlighted that since March 2009, Switzerland has negotiated or revised more than 40 DTAs that include the administrative assistance clause according to Article 26 of the OECD Model Tax Convention. Switzerland in its first phase of the peer review exam by the Global Forum, may well have to recognize that all countries may identify their taxpayers << typically by their names >> but also by other means such as their address, their date of birth or their account number, as long as there can be no doubt about the result. As for its revised DTA with the United States, approved by the Swiss Parliament and signed on 23 September 2009, the DTA still has not been ratified by the United States. Switzerland on the other hand has ratified it and even unilaterally modified its interpretation thereof to include group requests (as in the 1996 DTA). But at present, The IRS and DOJ have their eyes set on at least 11 other Swiss banks, among which Credit Suisse, which are suspected of helping US taxpayers avoiding US taxes.

As for the impact of the FATF Recommendations, Jan said that this include, among others, the obligation for each Member State to have in its internal law at least one tax offence that is a predicate to money laundering, both for direct and indirect taxes. Hence, this will force Switzerland to create a new tax crime, since currently only a qualified tax fraud in the field of indirect taxes is punishable by more than 3 years of imprisonment, which makes it a predicate offence to money laundering. In a recent announcement on 22 Feb 2012, the Swiss Federal Council reported that it will propose concrete strategies for a tax-compliant Swiss financial centre by Sep 2012. In rounding of his presentation, Jan also pointed to similar developments experienced by Singapore, e.g. Singapore also signed around 30 DTAs with an EOI provision under the OECD standard, but on a positive note, highlighted the differences to the TIEA (unlike Switzerland).

Discretions in Trust Administration Financial abuse risk and management right succession (27 April 2012, SGX Auditorium)

Our April STEP session, held at the SGX Auditorium,, featured Michael Perkins speaking on the subject of discretions in trust administration. Michael shared with our audience his vast experience on the management of personal and family dynamics from the trustee's perspective. His presentation offered interesting insights into key areas that trustees should analyse when faced with the family's expectations of the trust and the trustee, allowing for better planning and positioning as the structure matures.

"Trustee discretions are granted under the trust deed and apply normally irrespective of the type of trust property. Family Business equity is of course one type of trust property that can be affected.

The purpose of a fully discretionary trust is a function of the policy of the trustee rather than the language of the trust instrument. This can lead to a substantial lack of predictability in the operation of the trust as decision making shifts across generations. It is in this context that financial abuse risk is often first introduced to trust operations.

Trust drafting practice for private clients is moving away from a fully discretionary model to a more qualified maintenance trust model. This approach can reduce financial abuse risk but raise relational property claim risk.


These concerns can be alleviated by introducing family governance as an activity for the common interests of the family enterprise. Mediation and collaborative driven practice approaches are useful in this work. STEP WW through its Business Family Special Interest Group and the Americian Bar Association International Dispute Resolution Committee are working on this issue at present.

Mediation is increasingly been used in Australia to limit the referral of disputes to Court and enhance the parties ability to resolve disputes themselves. Collaborative dispute resolution practice is an aspect of this field. Where privacy is sought by a family, mediation can be most useful. The current case of the Rinehart family in Australia is an example of a family whose dispute has now come into the public domain and the family members are now exposed to heightened security risks."

The STEP Family Business Advisers certificate is a new initiative.  I am copying this message to Nigel Race at STEP WW so he can give us a view whether this certificate could be discussed in Singapore in April.

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