Swiss court forbids provision of UBS data to Dutch fishing requests. Yet banking secrecy has not been reinstated.

The phone has been ringing off the hook the past few months with calls from tax evaders who still wanted to make last minute use of the voluntary disclosure option. This was the result of articles about the Swiss bank UBS and then about Credit Suisse. Based on a ‘group request,’ banking information of Dutch account holders was supposedly being provided to the Swiss Federal Tax Authority, which in turn was transferring it to the Dutch Tax Authorities. A discussion broke out: is this fishing expedition excluded on the basis of the Dutch-Swiss treaty? Many tax evaders did not want to wait for the answer and decided to voluntarily disclose their Swiss equity to the Dutch Tax Authorities.

The national flag of Switzerland sticking in a pile of mixed european banknotes.(series)

The Switzerland Court: anonymous group requests are not admissible

In its ruling of last Monday, the Swiss federal administrative court in St. Gallen has now put a spanner in the works. The Dutch tax authorities had submitted the group request with reference to the Treaty with Switzerland for the prevention of double taxation. According the judgement of the Swiss court, it follows from provision XVI of the Protocol, which is part of the Treaty, that information requests can only be permitted if they pertain to identified individuals.

The judge quoted (§6.3) that the Protocol explicitly requires that the group request must meet sufficient specified information, in particular:

  • the person’s name and if known,
  • address,
  • account number,

but also other information to enable the identification of that person or group of people, such as:

  • date of birth,
  • civil status, and
  • tax identification number.

The group request by the Dutch tax authorities, however, did not even contain the names of the account holders involved in the investigation. Although the Swiss Federal Tax Administration (FTA) permitted this state of affairs, the court conclusively ruled (§ 9) that group requests without specification of the names that the investigation pertains to, are not permitted, based on the Treaty and accompanying Protocol. The ‘additional agreement’ that was entered into at the end of October 2011, and signed by Switzerland and the Netherlands in connection with the interpretation of the relevant provision from the Protocol and the ‘OESO commentary’ on the exchange of information between the Contracting States, has not led to a different ruling.

Reinstate Swiss banking secrecy?

Has this led to the reinstatement of Swiss banking secrecy? Certainly not. Although the Swiss court found the group request from the Dutch tax authorities to be too general, the Dutch court has approved this investigation methodology – which, in our opinion, (still) qualifies as a ‘fishing expedition’ – at national level.

The Tax authority will obtain the information it wants in a roundabout way. The Project Debit/Credit led by the Functional Persecution Office in Zwolle, for example, has ordered a credit card data provider to carry out a similar group request by the Dutch tax authorities. A banking secrecy that is respected abroad is undermined by this.

Through ‘information requests’ to (nearly) all processors of (credit and debit card) payment transactions active in the Netherlands, the Tax Authority has received transaction details about payment transactions that were carried out in the Netherlands with foreign debit or credit cards. during the period of 2009 through 2011. Using this transaction data, travel bureaus and car rental agencies, for example, have started ‘third party investigations’ to retrieve the identity of the card holder/user.

As a result of this, generously provided information, a number of criminal procedures have been instigated on these credit cards and the associated Swiss, Andorran and Luxembourg bank accounts. Those who (so far) are not included in the criminal proceedings, are being forced to submit proof against themselves through disclosure requirements and setting themselves up for a penalty or criminal case.

Not too late for voluntary disclosure

The Swiss tax authorities are expected to appeal the ruling by the court. Meanwhile, this ruling does offer support for anyone who has voluntarily disclosed or who is considering doing so; there is no reason to assume that the tax authorities would have tracked down these UBS (and Credit Suisse) tax evaders without voluntary improvement. For now, the phones can keep ringing.

Mr. drs. W. de Vries

Mr. K.M.T. Helwegen

 

The scope of the legal assistance during interrogation is not yet clear

The right of access to a lawyer during a police interrogation should be implemented into national legislation by 27 November 2016 at the latest. Before the legislator converted the Directive into national law, the Supreme Court ruled at the end of 2015 that as of 1 March 2016 an apprehended suspect is entitled to assistance from a lawyer during a police interrogation. Following this ruling, the Public Prosecutor published policy rules on the role of the lawyer during the interrogation. These policy rules make the right to be effectively involved in the interrogation is an illusion. The lawyer is unjustly allocated too few powers, making it impossible to guarantee fundamental aspects of the defence. Many lawyers believe that the way in which assistance is arranged during a police interrogation is a detrimental shortcoming that is contrary to Union Law. This has led to a proceeding at the District Court of The Hague. How legal assistance is to be provided during interrogation unfortunately still remains unclear. The interlocutory proceedings court has limited itself to putting a preliminary question to the Supreme Court concerning the scope of this right.

verhoorkamer

The minimum guarantees applicable to the right to legal assistance are laid down in an EU directive of 2013. One of these guarantees is the right to have a lawyer present during the interrogation. The EU directive explicitly states that a lawyer may effectively be involved in the interrogation. The EU directive builds on the case law of the European Court of Human Rights. This case law establishes standards for the right of access to a lawyer. The Supreme Court has already summoned the legislator in 2014 to expeditiously effect the implementation of the required statutory regulations for legal assistance during interrogation. A legislative proposal to implement the EU directive has been submitted to the House of Representatives. Before national legislation was established, the Supreme Court had already ruled that an apprehended suspect is entitled to a lawyer during a police interrogation. This also has positive consequences for FIOD cases. Because it is no longer a matter of doing a favour but rather an obligation to enable a lawyer to effectively participate in the interrogation. This enables us as a law firm to guarantee that the suspect’s interests within the criminal proceeding are represented fairly and diligently during questioning.

The full effectiveness of Union Law

The national law should be interpreted as much as possible in the light of the EU directive to guarantee the ensuing obligations.1 In so doing, the government should take appropriate measures to guarantee compliance with the obligation to legal assistance during interrogation. This obligation applies to all public authority bodies, including the legislator and the judiciary.2 It should follow from the definitive national legislation that a lawyer should effectively be involved in a (police) interrogation. However, the Directive has not yet been converted into national legislation. According to the Court of Justice, a Directive only extends to persons with legal rights via national law. This means that a suspect may not rely on these provisions from the Directive directly.

Powers too restricted for a somewhat discouraged counsellor

According to the Minister of Security and Justice’s response to the Parliamentary questions, the lawyer will be assigned a wide spectrum of powers and will have ample of opportunity to participate in the interrogation.3 If follows from the EU Directive that member states can take practical measures and that participation in an interrogation should be exercised in compliance with the procedures in the national law. The national procedures will, however, have to be without prejudice to the actual exercising and the essence of the relevant law.4 The minister does not address these restrictions of Union Law in his response to the Parliamentary questions. One might wonder whether a lawyer may in fact be given the opportunity to provide legal assistance during the police interrogation, if, among other things, commentary may only be made before and after the interrogation. The role of a lawyer is limited to the beginning and end of the interrogation and three specifically described situations (ban on exerting coercion, clarification of questions and continuation of interrogation cannot proceed due to suspect’s condition). How can a lawyer with such a subordinate and minor roll represent the interests of a suspect effectively during the interrogation?

Preliminary question to the Supreme Court

The judgement of the interlocutory proceedings court offers no solution. The scope of the right to the legal assistance with respect to the lawyer remains unclear. An important point in our opinion is that the ruling confirms that the Public Prosecutor’s policy letter limits the lawyer’s role during the interrogation.5 As the Directive has not yet been implemented into national legislation, the fulfilment of this right cannot be derived from the Directive. The question on which the interlocutory proceedings court must decide is therefore whether the temporary arrangements that have been made in response to the Supreme Court’s ruling (Legal assistance during interrogation ruling) are compatible with the standard established under the Supreme Court’s ruling on legal assistance during interrogation. This is why the interlocutory proceedings court is applying to the Supreme Court with a preliminary question as to whether the restrictions ensuing from the Public Prosecutor’s policy letter are compatible with the standard established under the Supreme Court (Legal assistance during interrogation ruling).

We cannot emphasise enough how important it is that the rights that ensue from the Union Law be effectively guaranteed. We believe that it is not only a duty, but also a counsellor’s obligation, to protect the fundamental rights of his client. This means that a counsellor should be able to intervene during the police interrogation if a lawyer deems this is necessary in the interests of the client. The Dutch Bar Association has drawn up a protocol and interpreted the scope of the right to legal assistance during interrogation, which we will observe for the time being.

1 See ground for the decision 20.

2 See ground for the decision 26.

3 See, among other things, the response to Parliamentary questions 8 and 9, which were submitted to the Minster of Security and Justice.

4 Recital 25 of relevant EU Directive

5 See ground for the decision 4.6.

Mr. drs. W. de Vries

12 tips for a visit from the FIOD, the Dutch fiscal intelligence and investigation service (for you as a service provider). What should you do (and why)?

An FIOD investigation may have far-reaching consequences for your customer. Not to mention that the possible consequences it may have for you as a service provider. Below you will find twelve tips on what to do if the FIOD suddenly comes knocking at your door.

Close-up Of Businessperson Holding Magnifier Over Money Wallet

You do not necessarily have to be a suspect to be confronted with a visit from the FIOD. Regardless of whether you are a suspect (or at risk of being one), as a rule, such a visit is unpleasant and even intimidating. Unlike, for instance, a tax inspection, the FIOD usually arrives unannounced. In this consternation, your initial reaction is to be cooperative. However, even if you are not regarded as a suspect, it is important that you know what to do.

Bear in mind that it is perfectly normal to only comply with a request or even a demand to provide information that you would not normally share with strangers when you are under an obligation to do so. Moreover, as a service provider you are obliged by your rules of professional practice or contract to maintain secrecy. Unless you are under a legal obligation, you shouldn’t even voluntarily cooperate under coercive force applied by investigation services.

Investigating officials like the FIOD should not be given the opportunity to use their powers beyond the scope for which they are intended.

TIP

  1. Escort the investigating officers to an empty room (where there is no administration lying about) and ask them to identify themselves.
  2. Call the manager, person in charge of the file and contact a lawyer.
  3. Do not (as yet) answer any questions.

Why:

Investigating officers that cannot identify themselves as such – also check that the ID is still valid – have no powers. They can be shown the door without any discussion.

Because this will only apply on very rare occasions, it is wise to realise that under Article 83 of the Dutch General Tax Act (AWR), FIOD officers have access to any location ‘to the extent that this is reasonably required for them to do their work’. When FIOD officers are escorted to a separate room to await the summoned manager and/or accountable person, there is generally no need for them to use their power to start browsing.

Leaving FIOD officers to walk about poses a risk. Pursuant to Article 81 of the AWR, the FIOD are authorised to confiscate objects at all times. The FIOD may even ask for these objects to be handed over to them. Even from a suspect. The less opportunity is given for extending the investigation the better.

TIP

  1. Keep desks tidy and filing cabinets locked.

Why:

The FIOD officials’ power to seize objects and gain access to anywhere is limited to the power to ‘browse’. This explicitly means that the power to search does not extend to ransacking the place. In case law, the term ‘browse’ is, however, stretched. ‘Browse’, for example, also means opening a cupboard or cabinet door. If objects are found other than the ones the investigating officers are looking for, these objects may also be seized.

It has already been stated above that as long as no opportunity is given for browsing, the officers may not proceed to do so. Also bear in mind here that saving (sub) files separately in networks, on servers and the cloud, prevents all data from being recorded in the search for that one component. In this context, please also refer to the Tax inspection guide.

TIP

  1. Determine your position. Are you a:
  • ‘third party’?
  • (potential!) (fellow) suspect?
  • (derived) professional entitled to privilege? 

Failure to comply with a request to submit is ‘failure to comply with an official order.’ This is a criminal offence. Although, as already mentioned, during an FIOD investigation of tax offences, a suspect may also be requested to hand over documents. A suspect may refuse if this order is given on the basis of Article 96a(3) of the Code Of Criminal Procedure (hereafter ‘Sv’), which does not specifically provide for the investigation of tax offences. Do not hesitate to consult a lawyer if there is any doubt about whether the investigation concerns a tax offence. In the case of a suspect, a further request may not be made to obtain (digital) data on the basis of Article 126nd(2) of the Sv. Under Article 126nh(2) of the Sv, a suspect may not be forced to decrypt code-protected (digital) data. For this reason alone, it is good to be clear whether you qualify as a suspect.

Not least because the prosecution policy of different Functional Prosecution Offices increasingly focus on so-called ‘facilitators’ over the past few years, it is important that you realise that as a service provider you may be taken as a suspect along with your client in a criminal investigation (Also read my blog on this: Co-perpetrators: accountants and other riffraff beware!). Whether as a manager or even as an employee of the suspected natural person you are entitled to the same rights as the suspected natural person, his affairs will have to be assessed on a case-to-case basis. If you have difficulty determining this, it is important that you seek the assistance of a lawyer the moment you are confronted with such requests.

If you have performed services by order of or in cooperation with a professional entitled to privilege, such as a lawyer, you may be obliged not to cooperate as a derived professional entitled to privilege.

If you have difficulty determining your position, do not hesitate to request deferment and find out, and, if necessary, engage a lawyer to represent you.

 

  1. Ask what they are looking for and where and what the object of suspicion is
  2. Ask for written requests and authorisations.

Why:

There is a significant difference between requesting ‘tangible’ objects and recording ‘digital’ data.

Objects may be demanded (AWR, Art. 81, Sv, Art. 94, 94a) for:

  • the process of establishing the truth (investigation relating to suspicion);
  • proof of illegally obtained advantage
  • as capital lock-up for a financial penalty/confiscation of illegally obtained assets (read more about this in this blog: ‘Does reaping benefits in a roundabout way led to double trouble?’)
  • as capital lock-up for confiscation/removal from circulation.
  • When FIOD officials record data be aware that a distinction is made between:
  • identification data (‘who are you?’);
  • other identification data;
  • sensitive data (race, religion, political persuasion, sexual preference).

Depending on the extent to which the recording of data intrudes on the privacy of individuals, stricter conditions will be set for exercising the method of coercion. Be aware of why something is being asked.

TIP

  1. Only provide what is specifically demanded.
  2. Check (yourself) whether you have the requested information available.
  3. Make a note of what you hand over (do this together).
  4. If necessary, ask for an extension of the term in which information has to be provided.

Why:

You cannot hand over objects or data that you do not have in your possession. There is no obligation to tell investigating officers where they might be able to find the objects or data they are looking for. Nor is there any obligation to inform investigating officers of any other matters that might be interesting for their investigation.

An order to decrypt requesting, for instance, to make encrypted digital data accessible for security reasons, may only be given to the person that encrypted the data. Knowing how to decrypt does not constitute an obligation to proceed to do so. Bear in mind that if decryption is not possible, this may give cause to seize the entire server.

TIP

  1. Questioning as suspect or witness (hearing)? No obligation to answer!

Why:

As a suspect, you do not have to cooperate on your own conviction. You therefore do not have to answer questions that are put to you.

A professional entitled to privilege, derived or otherwise, may decide to invoke this right to refuse to answer any questions put to him/her.

However, third parties or professionals that have a (derived) entitlement to privilege that do not invoke their right of nondisclosure are not obliged to answer questions put to them by FIOD officials or an attending prosecutor. An obligation to answer the questions asked only exists after a person (not being a suspect or a (derived) professional entitled to privilege is summoned by a (supervisory) judge to make a statement as a witness. Bear in mind that in many cases whereby as a service provider you have made a non-disclosure agreement with your clients, you are obliged to remain silent until you are summoned! If it should come to a hearing, read our hearing tips.

This blog can also be downloaded as a Guide via our website.