Switzerland Threatens Tax Cheats Using ‘Wrappers’

April 7 (Bloomberg) -- Swiss regulators are probing whether investors are buying life insurance to hide undeclared assets from tax authorities as the dispute over banking secrecy widens.

“We are checking selectively if there is a need for regulator action on the risk management of insurers and banks,” said Alain Bichsel, a spokesman for the Swiss Financial Market Supervisory Authority, known as Finma, in Bern. “We are warning of the risk of cross-border business.”

The concern is that so-called wrapper products, sold by insurers through units in Luxembourg, Liechtenstein and Singapore, are being used to conceal untaxed money. Finma’s review comes a year after Switzerland agreed to cooperate with international regulators to avoid being blacklisted by the Organization for Economic Cooperation and Development.

Swiss Life Holding AG doubled premiums from life policies that mask underlying bank deposits and client identities to about 5 billion Swiss francs ($4.7 billion) last year. Baloise Holding AG in Basel reported a similar increase in sales at its Liechtenstein life insurance unit.

An insurer that accepts premiums “without checking whether it comes from untaxed money makes itself guilty of assisting foreign tax evasion,” said Walter Frei, a partner at Zurich- based law firm Bill Isenegger Ackermann AG, referring to the insurance wrappers. “It is nothing but old wine in new bottles,” he said. Frei represents some UBS AG clients whose account data Switzerland agreed to turn over to the U.S. last August.

Wrapper Evaders

When a client buys a wrapper, the beneficial ownership of the assets is transferred to the insurer while the funds often remain on the balance sheet of private banks. Insurers invest the premiums through advisers and clients receive benefits tied to the performance of the underlying investment. Taxes are minimized or deferred because life insurance policies are classified as non-income producing assets.

http://www.bloomberg.com/apps/news?pid=20601010&sid=aCjco55_cnMo

:shrug: