When Dutch Historian Rutger Bregman insisted, ‘we have to talk about taxes, taxes, taxes’, emphasising the importance of the wealthy paying their fair share, hundreds of thousands of people sat up and listened. His speech at The World Economic Forum in Davos at the end of last month has gone viral. People in their hundreds of thousands have applauded his straight talking and bringing the issue that some had thought wasn’t being taken seriously enough to the fore.
Many firms may have felt they were past the worst of their financial issues but Bregman’s widely publicised speech alongside further announcements of penalties (only last week it was reported that UBS has been hit with a penalty of 4.5 billion Euro for tax evasion and a US firm has recently been fined $5.1 USD billion) has got the world talking about tax once again.
As Bregman said in his speech, the reluctance to speak openly about tax evasion as a major issue for the world’s economy was like, ‘being at a firefighter’s conference and no one being allowed to talk about water’, but the reports of huge penalties for major banking groups show that regulators and governments are indeed focusing on financial conduct and tax fraud in particular.
It is believed that $170 billion is lost to tax havens every year, denying governments funds that could benefit wider society. When we speak to people working in Anti-Money Laundering (AML) we see that there is a common misconception that banks are knowingly being complicit in tax evasion. Most banks are diligently checking sources of wealth as part of the Know Your Customer (KYC) regulation, but some clients are getting smarter and more sophisticated in concealing the truth.
In order to avoid tax fraud, financial institutions need to continue to step up their efforts to better understand and report their client’s source of funds and wealth, ensuring compliance with ever stricter governance and regulations. We believe that this renewed pressure and scrutiny in tax related regulation will see a resurgence of associated roles in the market, first and foremost in private banking and trust and fiduciary firms.
If you need our support in building out your teams to have the best possible safeguard against tax evasion, or if you’re wanting to move into this area please get in touch.