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14th Aug 2022

EU bank transparency rules delayed

  • Luxembourg: the principality, together with Austria, are delaying bank transparency rules (Photo: Cesar Poyatos)

Finance ministers on Friday (15 November) failed to reach a political agreement to impose greater bank transparency rules.

Both Luxembourg and Austria opposed the measure, which would allow governments to collect information on income from foreign accounts.

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The political agreement on the draft proposal on taxation on savings income requires the full backing of all 28 ministers.

Luxembourg’s Luc Frieden defended his country position not to put a rapid end to bank secrecy.

“For some, they simply say that Luxembourg is a place where you can hide your money, undeclared money, and that was and is wrong,” he told reporters in Brussels.

Luxembourg wants greater bank account transparency rules but not until Switzerland, Liechtenstein, Monaco, Andorra, and San Marino also sign up.

EU leaders at a summit in May agreed to reach a political decision before 2014.

But Frieden, who is in his final days as finance minister, said “rules that have to be adopted, have to be international. The same is true if we want to make the fight against tax fraud efficient.”

All other member states want to impose an automatic exchange of information on personal savings accounts, under the European Commission revised taxation savings directive, before the end of the year.

Frieden said the next government in Luxembourg would instead apply the rules in the beginning of 2015.

EU taxation commissioner Algirdas Semeta, for his part, said Luxembourg and Austria need to recognise the global trend towards the automatic exchange of tax information.

The Organisation for Economic Co-operation and Development (OECD), the Paris-based economic club, and the G20 declared the system as the future international standard.

“The era of banking secrecy is coming to an end,” said Semeta.

He noted that Switzerland, Liechtenstein, and Singapore have signed agreements with the US. Switzerland also agreed to standards laid out by the OECD.

“The EU is no longer making the first move, the world is already moving and the EU must not be left behind,” said Semeta.

UK leads transparency campaign

Ministers also discussed ways to tackle fraud and money laundering.

Drug lords and other criminal gangs are taking advantage of murky ownership rules that allow them to “clean” dirty money in shell companies.

Anonymous shell companies are legal entities set up to hide the owner’s identities.

Also known as “phantom firms”, they are the most widely used method for laundering the proceeds of crime, corruption, and tax evasion.

But the UK, with the backing of France and Italy, want to stamp out the practice by disclosing the “beneficial owner” of a company when it is formed.

UK prime minister David Cameron announced in October that the UK would set up a central public registry of corporate beneficial ownership information, possibly next year.

Cameron, in a letter sent to EU council chief Herman Van Rompuy last night, said the new EU anti-money laundering directive should include rules that would require member states to do the same.

“I believe this will prove a significant step towards breaking through the walls of corporate secrecy,” noted the letter.

Financial Transparency Coalition, a group of pro-transparency NGOs, said such registries would “make it much harder for Europe's financial system to be abused.”

However, member states remain divided on the issue.

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