Will new UK-Switzerland Tax Agreement cause Capital Flight – the recent announcement of a new agreement between the United Kingdom and Switzerland, regarding Britons with Swiss bank accounts, though not effective until after ratification by both countries, and then not until 2013, may cause capital flight, not only by tax evaders, but from accounts managed by money launderers who fear that even criminal profits that have been thoroughly “cleaned”  could be identified to HM Revenue & Customs, and become the subject of a criminal investigation.

Remember, money launderers also practise risk management, for losses that they incur could result in their having to personally restore lost funds of criminal clients, or even their possible deaths, events which they obviously do not relish. They will, therefore, move client funds away from potential disclosure and exposure.

The rule reportedly provides for a one-off payment, of 19-34%, from Swiss accounts of British nationals, to settle all their past tax liabilities, and the Swiss will make an up-front advance payment of CHF 500m, apparently as a gesture of good faith. The catch, however, is that the accounts must have been open on 31 December 2010 AND 31 May 2013. Thereafter, it is reported that a 48% withholding tax on income will be remitted to the UK, 27% on capital gains.

Thus, one should expect a significant amount of funds which are criminal proceeds to exit Swizerland as soon as the money launderers controlling the accounts learn of the new Anglo-Swiss agreement.

Here’s the problem;

Since a large percentage of these suspect funds may have been quietly residing in Switzerland for several years, unknown to UK law enforcement agencies, when moved it may appear to be completely legitimate capital. Financial institutions that accept it without an enhanced due diligence investigation run the risk of a problem, involving this new, affiuent, client, down the road.

Whilst I never approve of inflexible profiling, I suggest that any and all large funds transfers, or transfers of assets, from Switzerland, receive serious scrutiny during the remainder of 2011. True, the vast majority of such transfers will be found to be legitimate, but you do not want to let in criminal proceeds masquerading as simply repatriated Brtish assets.

http://www.world-check.com/articles/2011/09/03/will-new-uk-switzerland-tax-agreement-cause-capita/