Scott Michel Comments on Attorney Confidentiality FATCA Exemption

Scott D. Michel  spoke with Daily Tax Report concerning an agreement between Switzerland and the U.S. to exempt financial institutions from certain FATCA reporting requirements regarding confidential client accounts held by Swiss attorneys. The new exemption applies to client funds held in escrow accounts by Swiss attorneys and notaries in the ordinary course of business, e.g., prior to the distribution of an estate, after the settlement of a lawsuit and the like. For the full story, please visit Daily Tax Report's website (subscription required).

Excerpt taken from the article.

"This is not about what we would consider in the U.S. to be matters protected under the attorney-client privilege," said Scott Michel, a partner at Caplin & Drysdale Chartered in Washington. "It's more about the fact that Swiss lawyers engage with their clients in perfectly legal but confidential transactions."

The new amendment to Annex II of FATCA specifies that Swiss banks don't have to identify the clients of accounts held by lawyers or notaries as long as they provide written verification that the accounts fall under the scope of application of the exception clause.

Not a ‘Loophole.'

Switzerland's State Secretariat for International Financial Matters (SIF) said the new exemption will "absolutely not" enable lawyers to facilitate tax evasion.

"The lawyer or notary has to declare in writing that the accounts fulfill the requirements," SIF spokeswoman Anne Cesard told Bloomberg BNA. "It would constitute a criminal offense under Swiss law to provide false information."

Michel told Bloomberg BNA that he didn't expect the exemption to attract abuse. "I don't think this is a huge loophole that you would see banks or lawyers try to drive a truck through," he said