End to bank secrecy coming to ‘South America’s Switzerland’

An end to long-standing and well-known bank secrecy rules is seen coming to Uruguay, the small-ish country nestled between Argentina and Brazil which is often described as the Switzerland of South America. 

A bill has been sent to the country’s lawmakers that would force the country’s banks to automatically provide Uruguay’s Dirección General Impositiva (DGI), or tax authority, with information on the accounts of all the individuals and companies they held, including those belonging to foreigners. At present, a court order is required for this information.

The plan is not completely unexpected, as countries across the globe are moving towards adopting a global system of automatic information disclosure that is being promoted by the Organisation for Economic Cooperation and Development, known as the Common Reporting Standard.

Along with more than 100 other countries, including Argentina, Uruguay has signed the OECD’s Convention on Mutual Administrative Assistance in Tax Matters, which indicates a commitment to participate in the new world order of automatic exchange of information, or AEOI. It has not, however, indicated a date for its implementation of the CRS.

And even if it’s not a surprise, Uruguay’s plan to scrap its bank secrecy rules is seen likely to “put pressure on the US$3.3bn held by Argentines in Uruguay”, a recent report in the online edition of the English-language Buenos Aires Herald noted.

The Tax Justice Network has said more than 60% of non-resident account holders, as of June 2013, were Argentinian. In a report issued last September, the anti-tax evasion advocacy group gave Uruguay a “secrecy score” of 71, out of a possible 100, although it noted that it also accounted “for less than 0.1% of the global market for offshore financial services, making it a tiny player compared with other secrecy jurisdictions”.

Uruguay was prominently mentioned a number of times in the Panama Papers, including on a list of the “Top 10 countries where intermediaries operate”. (It was tenth, behind Hong Kong – at the top – the United Kingdom, Switzerland, the US, Panama, Guatemala, Luxembourg, Brazil and Ecuador.)

Pressure on Argentinians’ secret bank accounts in Uruguay  is already being applied from Argentina itself, with a tax amnesty scheme currently under way, as it, too, moves towards introducing the Common Reporting Standard.

The Buenos Aires Herald said tougher rules have already been implemented in Uruguay, requiring anyone looking to open a bank account now to “explain where the money came from, have a legal residence in the country, and valid identification”.

ABOUT THE AUTHOR
Helen Burggraf
Helen Burggraf is the editor of International Investment. A US-trained journalist, she has worked in Rome, New York City and London, covering everything from the fashion and retailing industries to the global drinking water and water-treatment sector, private equity, and most recently, the international cross-border financial services/advice industry.

Read more from Helen Burggraf

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