KYC & AML Compliance

What is the Automatic Exchange of Information on Financial Accounts?

The Automatic Exchange of Information on Financial Accounts (AEOI) is a global regulatory standard enabling the tax authorities of different countries to automatically exchange information on financial assets held abroad by non-residents.

The standard was introduced by the Organisation for Economic Co-operation and Development (OECD) to combat cross-border tax evasion and improve tax transparency between participating states regarding their taxpayers. Financial institutions such as banks must collect and report to local tax authorities information on account holders who are tax residents of an AEOI participating state including information on their identities, account(s), account balances, interest income, dividends and proceeds from the sale of financial assets. Then, on an annual basis, the tax authorities automatically exchange this information with the other tax authorities of the AEOI partner states, a list of which is available on the OECD website.

Does Switzerland apply the AEOI?

Switzerland participates in the AEOI with many countries on the basis of the Multilateral Competent Authority Agreement and on the basis of bilateral agreements . Although the list of AEOI partner countries is available on the OECD website, Switzerland only exchanges information with countries that have signed a specific agreement with it. The list of Switzerland’s partner countries can be found on the website of the State Secretariat for International Finance (SIF) .

The Swiss legal provisions relating to AEOI came into force on 1 January 2017 with the Federal Act and its implementing ordinance and the Directives of the Federal Tax Administration (FTA) , regulations to which the Bank is subject.

The obligations arising from this regulatory framework apply to all clients using banking services, whether they are individuals or legal entities. Clients are required to fill in a declaration form containing basic data such as name, company name, address, tax identification number and country of tax residence, as well as information about the controlling person.

What is the impact of the AEOI on individuals?

Individuals who are holders of an account provide the Bank with a duly completed form containing their tax identification number, which the Bank uses to determine whether or not the client must be reported to the Federal Tax Administration (FTA) in accordance with the criteria set out in the regulations. If this is the case, the information is sent to the FTA, which then forwards it to the tax authorities in the partner countries (countries with which Switzerland has signed an agreement). In the case of a joint account, each account holder must complete a form.

What is the impact of the AEOI on legal entities?

Legal entities, similar entities and trusts are subject to the same documentary obligations as individuals and must provide information on their tax residence and tax identification number. The tax residence of legal entities is determined in accordance with national legislation and, in the event of a conflict between several jurisdictions of activity, on the basis of the applicable double taxation agreement (DTA).

Where the legal entity is considered to be a passive non-financial entity, an additional form concerning the individuals exercising effective control must be completed, with the contact details and tax identification number of each of them.

Will my data be disclosed?

To be subject to disclosure, the client must hold assets with a financial institution located in a country other than his or her jurisdiction of residence, and the two countries concerned must be AEOI partner states. No information shall be transmitted, however, if the client holds assets with a financial institution located in his country of residence.

FATCA

What is FATCA?

The Foreign Account Tax Compliance Act (FATCA) is a US law aimed at combating tax evasion by US persons holding financial assets outside the United States. Implementing FATCA has been made possible through the conclusion of an intergovernmental agreement (IGA) with the United States, which exists in the form of two models (Model 1 & Model 2 IGA). The primary differences between Model 1 and Model 2 under FATCA lie in the manner and place of exchange of information.

In Model 1, information is exchanged between governments. Financial institutions report information about US account holders to their local tax authority, which in turn shares it with the US Internal Revenue Service (IRS). This model can be reciprocal (Model 1A), where data is exchanged in both directions, or non-reciprocal (Model 1B), where foreign information is shared with the United States only.

On the other hand, Model 2 requires financial institutions to deal directly with the IRS. This model includes obtaining consent from account holders and allows for aggregate reporting, followed by specific data requests from the IRS in the form of a bulk request. Model 2 imposes a heavier reporting burden on financial institutions and does not provide for the reciprocal exchange of information as in Model 1A.

The current Model 2 IGA, concluded between Switzerland and the United States, entered into force on 2 June 2014 and the corresponding FATCA implementation act entered into force on 30 June 2014. However, the Swiss Federal Council recently approved the transition to a Model 1 IGA with entry into force on 1 January 2027. This transition to Model 1 will facilitate the exchange of information in both directions and streamline the reporting process by aligning Switzerland with global standards.

What is the impact of FATCA on the Bank’s clients?
To meet FATCA obligations, the Bank must identify all its new and existing clients as natural persons, legal entities or other entities in order to determine their status under FATCA and identify potential US account holders.

For natural persons identified as US Persons :
By definition, a US person includes US citizens, green card holders and certain individuals who spend significant time in the United States. Clients identified as US persons must provide additional documentation to ensure compliance with FATCA. Information about them, such as account balances, income generated by their accounts and personal data, is to be reported to the IRS as required by law.

For natural persons identified as non-US Persons :
When clients are identified as non-US Persons, no additional steps are required. However, should there be a change in circumstances or an indication of a connection to the US, the client will have to submit new documentation in order to be once again considered compliant.

For US legal entities :
US legal entities, such as companies, partnerships and trusts, must identify themselves as such to the Bank and provide information on their beneficial owners (the natural persons holding control). .

For non-US legal entities :
Even if they are not American, entities must comply with documentary requirements to identify possible links with the United States. To achieve this, they must provide information on their structure, activities and beneficial owners.