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Sebastian Beer, Maria Delgado Coelho, and Sebastien Leduc
We analyze the impact of exchange of information in tax matters in reducing international tax evasion between 1995 and 2018. Based on bilateral deposit data for 39 reporting countries and more than 200 counterparty jurisdictions, we find that recent automatic exchange of information frameworks reduced foreign-owned deposits in offshore jurisdictions by an average of 25 percent. This effect is statistically significant and, as expected, much larger than the effect of information exchange upon request, which is not significant. Furthermore, to test the sensitivity of our findings, we estimate countries’ offshore status and the impact of information exchange simultaneously using a finite mixture model. The results confirm that automatic (and not upon request) exchange of information impacts cross-border deposits in offshore jurisdictions, which are characterized by low income tax rates and strong financial secrecy.
International Monetary Fund. Legal Dept.
This Technical Note evaluates the state of Anti-Money Laundering and Combating the Financing of Terrorism in Liechtenstein. Liechtenstein has made significant steps and achieved considerable progress since the last mutual evaluation, particularly in bringing its legal framework more closely in line with the Financial Action Task Force recommendations, consolidating an overall robust institutional framework for combating money laundering and terrorist financing and moving toward greater transparency. Domestic cooperation is robust, and key stakeholders enjoy the trust of the financial and nonfinancial sectors. However, effective implementation is uneven and not always optimal. Liechtenstein’s proactive use of the in rem regime of confiscation of criminal proceeds has proven to be quite effective.
International Monetary Fund. Monetary and Capital Markets Department
This Detailed Assessment of Observance on the Insurance Core Principles on Switzerland analyzes that the insurance industry in Switzerland is well developed having among the highest insurance penetration and expenditure per capita in the world. The sector is dominated by a few players writing significant international business. The life sector is dominated by two players, responsible for 54 percent of the business and the top 10 life insurers account for 97 percent of the market. The industry has weathered the 2008 crisis well; however, the current low interest rate environment is affecting the sector. The lack of availability of Swiss government bonds to match long term liabilities of life insurers and pension funds could be a source of vulnerability. The long-term nature of the liabilities of life insurers and pension funds could in principle be matched by investment in Swiss government securities. Supervision focuses on ensuring sufficiency of liquid assets to meet policy liabilities. Policyholders have priority claims over the tied assets. In addition, robust solvency requirements ensure there is enough capital to safeguard the insurers’ financial soundness under adverse conditions.
International Monetary Fund
Liechtenstein’s financial sector business has created money laundering risks. The investigative powers of the law enforcement authorities are comprehensive enough to enable them to conduct serious investigations in an effective way. Money laundering is criminalized broadly in line with the international standard. Liechtenstein relies on its trust service providers to obtain, verify, and retain records of the beneficial ownership and control of legal persons. Liechtenstein should conduct a full review of its laws concerning non-profit organizations to assess their adequacy for combating the financing of terrorism.
International Monetary Fund
This paper reviews Observance of Standards and Codes on the Financial Action Task Force (FATF) Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) for Switzerland. The paper discusses that The Federal Banking Commission (CFB) is the oversight body for banks, securities dealers, and fund managers in Switzerland. The intermediaries under its control may also join a self-regulatory organization that can set minimum standards. Nevertheless, the power to specify the rules for implementing the LBA (Loi sur le blanchiment d’argent) and to enforce those rules is essentially reserved to the oversight authority.
International Monetary Fund
This report on the offshore financial center program contains technical advice and recommendations given by the staff team of the International Monetary Fund in response to Liechtenstein’s request for technical assistance. It provides detailed assessment of observance of the Basel Core Principles for effective banking supervision, implementation of the International Organization of Securities Commissions (IOSCO) Objectives And Principles Of Securities Regulation, and observance of the International Association of Insurance Supervisors (IAIS) core principles. It also provides the methodology for Assessing Compliance with Anti-Money Laundering and Combating the Financing of Terrorism Standards, endorsed by the Financial Action Task Force.