The European Union is considering keeping track of its citizens' wealth in an central register, something Swiss bankers should take seriously.

A tender for a feasibility study by the bloc on a potential asset register has sparked fears about the prospect of citizens having to account for every last cent.

If those fears turn out to be true, Swiss banks should also take fright.

After the EU interest payment agreement of 2005 and the automatic exchange of bank customer data (AEOI) that has been in force between Switzerland and the EU since 2017, the vestiges of privacy still defended by Swiss financial institutions would come under massive pressure.

There are even plans for the feasibility study on the asset register to look into how precious metals, digital currencies and art can be registered.

Storm in a Teacup?

Will Swiss banks by threatened with an «AEOI 2.0» and, if they reject it, a new version of the extremely costly tax dispute? Or is it just a storm in a teacup? In addition to these questions, there is a mega-trend that the Swiss financial sector cannot escape.

The EU asset register, as shown by the invitation to tender for the feasibility study from last August, is aimed at the «bad guys». Under its German president, Ursula von der Leyen, the European Commission wants to target criminals, not  law-abiding citizens. The register is intended to make the EU's fight against money laundering and tax evasion more effective.

This will be done by making the register accessible and interlinking existing sources on the assets of private individuals and companies in the various member states. This is to «accelerate the relevant authorities' access to financial information and to facilitate cross-border cooperation,» the call for tenders said.

Cash Limit of 10,000 Euros

While the establishment of a register based on this is hardly an obstacle from a purely technical point of view, it is already becoming apparent that the political and legal feasibility will become the crux of the matter.

The EU wants to spend 400,000 euros ($473,000) on the feasibility study. The preparatory work on the asset register follows the proposal for a new Anti-Money Laundering Authority, which the EU Commission presented in July as the heart of a legislative package to combat money laundering.

«Very Hypothetical»

The authority would monitor compliance with a proposed cash limit of a maximum of 10,000 euros for payments.

Veit Buetterlin from the consultancy Alix Partners in Zurich is not perturbed by this. As things stand now, the international expert on financial and economic crime considers the EU asset register to be «very hypothetical». «The envisaged EU asset register is only a feasibility study for the time being. Once it has been created, it doesn't mean that it will also be implemented.»

Mega-trend

However, he added: «The underlying goal of the register of assets, namely the international fight against tax evasion and money laundering, is likely to grow in importance.»

Buetterlin said money laundering and the fight against it was a mega-trend. Governments had realized the high social costs associated with it and how money laundering limited the effectiveness of policies, for example, financing terrorism.

«Switzerland cannot and does not want to escape this mega-trend,» he said.

All the more so since the international organization to combat money laundering, the Financial Action Task Force on Money Laundering (FATF), has taken on the registry issue. The organization whose standards Switzerland has adopted has opened a consultation on «Recommendation 24».

 International Coordination

This deals with greater transparency on company ownership among other things. An international company register is up for debate, which makes it clear who the owners are if the authorities have questions. Such registers sometimes exist at country level, for example in the U.K, where various authorities exchange data.

NGOs such as Transparency International strongly advocate an international company register because the reality is that money laundering often happens across national borders, while investigative bodies remain confined to their own jurisdictions.

«Better international coordination is a priority for organizations like the FATF - the call for a transnational asset register and the idea of a company register should also be understood in this context,» Buetterlin said.

Fear of Gray Listing

If the organization rushes ahead with the company register idea, Switzerland would find itself on the horns of a dilemma. The next «country reviews» by the FATF will take place in 2022, and there is again a threat of gray listing for those countries that fail to comply with its recommendations.

This would be a blot on the Swiss financial center’s copy book. There is no central and comprehensive register of company ownership in Switzerland, and its introduction and use would at least «require justification», as Buetterlin put it. Unlike in the EU and most EU countries, the Swiss law on data protection applies to natural and legal persons.

Companies can therefore invoke data protection rights. In Switzerland, a debate about «see-through entrepreneurs» might cause something of a stir.