Michelle Visbal
Serrano Martinez CMA, Bogotá
mvisbal@serranomartinezcma.com

Report on a joint Private Client Tax Committee and Taxes Committee session at the 2024 IBA Annual Conference in Mexico City

Monday 16 September 2024

Session chair

Jennifer Migliori Duane Morris, Miami, Florida
Natalie Peter Blum & Grob, Zürich

Speakers

Percy Castle Alvarez-Maza DS Casahierro, Lima
Dirk-Jan Maasland Loyens & Loeff, Amsterdam
Katharina Schindler Schindler Rechtsanwälte, Vienna
Michael Schmidt Schmidt Tax Law, Frankfurt

 

Introduction

Mandatory reporting obligations adopted by different jurisdictions have created tensions between fundamental principles such as solicitor-client privilege, confidentiality and transparency. As countries implement stricter reporting regimes, different parties face challenges balancing compliance with these principles. The panel discussed the approaches and current developments in different countries on these topics, exploring matters such as how regimes vary across jurisdictions, and focusing on areas like anti-money laundering (AML), ultimate beneficial owner reports, cooperation and whistleblowing.

Panel discussion

The Anti-Money Laundering Directive

One of the main objectives of the fifth European Union Anti-Money Laundering Directive is to combat money laundering through the identification and monitoring of unusual and/or rare transactions.

In the case of the Netherlands, under the Dutch Prevention of Money Laundering and Financing of Terrorism Act (WWFT), unusual transactions that may suggest certain connections to money laundering must be reported. Attorneys, civil law notaries and tax lawyers fall under the scope of individuals or entities subject to these reporting obligations. In general, the Financial Intelligence Unit and the Dutch Chamber of Commerce have access to this information. This information is also compared with ultimate beneficial ownership reports for purposes of transparency. It was indicated that the ultimate beneficial ownership register used to be public, but after 2022 the register became closed due to a court ruling.

With respect to Germany, the directive has also been implemented: notaries, lawyers and tax advisers that are qualified as ‘obliged persons’ are subject to comply with this report. Obliged persons must report suspicious activities and discrepancies related to the transparency register. It was pointed out that the reported information is available for the Financial Intelligence Unit as well as for governmental entities.

In the case of Austria, although it has not enacted its own AML and transparency regime, certain relevant provisions can be found on internal legislation and professional codes of conduct. For example, there is an ultimate beneficial owner register where corporations, partnerships, trusts, private foundations and other structures managed from Austria are subject to compliance with reporting obligations. The information reported is available for those who perform AML and terrorism financing checks, as well as for tax and criminal prosecution authorities. Individuals or entities may be granted access if a legitimate interest is demonstrated. It was also indicated that access was very broad to begin with before being reduced.

Finally, regarding Peru, it was mentioned that the country has very strict regulations in this matter; however the rules are not the same as the ones implemented by the above European jurisdictions. Preventive measures to avoid money laundering and terrorism are in place. The compliance officers of businesses related to construction, real estate, lawyers, accountant and notaries (among others), must report suspicious or unusual transactions. The Peruvian Financial Intelligence Unit and government entities may have access to this information. It was noted that Peru has enacted an ultimate beneficial ownership regime inspired by European legislation.

Sixth EU Directive on Administrative Cooperation (DAC6)

DAC6 tries to increase transparency and promote exchange of information with respect to potentially aggressive and/or abusive cross-border tax structuring. There have been discussions regarding the scope of application of attorney-client privilege with respect to lawyers and tax advisers.

In the case of the Netherlands, under the Dutch Mandatory Disclosure Rules, information about certain cross-border arrangements and intermediaries must be reported. This information shall be reported, for example, by an intermediary who has a nexus with the Netherlands, a taxpayer who is considered an intermediary, or even a relevant taxpayer. Lawyers admitted to the bar in this jurisdiction as well as civil law notaries may claim an exemption to report. Authorities of EU Member States as well as the European Commission may have access to this information

From a German perspective, the intermediary, usually a lawyer or tax adviser, who has a nexus with Germany is subject to report. It was indicated that there is no exemption for lawyers and tax advisers. In this context, they are required to file the information and facts about the cross-border arrangement. The information is available for authorities of EU Member States as well as the European Commission. Fines may be imposed for deliberate or reckless violation of this obligation.

With respect to Austria, reporting requirements have also been adopted. Intermediaries, such as attorneys, tax advisers, notaries with an Austrian nexus and any person involved in the implementation of the structure may be subject to comply with reporting obligations. Austrian tax authorities and competent authorities of all EU Member States may have access to information. Fines may be imposed for negligence or non-intentional compliance.

In the case of Peru, it was indicated that professional secrecy is constitutionally protected, not only for lawyers but for all kind of professionals. In this case, there are other types of reporting obligations, such as the direct and indirect transfer of shares or the ultimate beneficial ownership reports.

Whistleblower rules

The Netherlands has adopted a Dutch Whistleblower Protection Act, where wrongdoing or suspicious wrongdoing may be reported. There is no obligation to report and failure to report does not imply the imposition of sanctions.

A Whistleblower Protection Act has also been adopted in Germany. Reported information may include violations of German criminal laws, laws protecting life, health and employee rights, stockholder rights, and tax laws infringements of EU laws and regulations. There is no legal obligation to report but there is a legal obligation for employers to set up a system that permits whistleblowers to disclose the knowledge or suspicion of wrongdoing in a protected surrounding.

Austria has also adopted a Whistleblower Protection Act. There is no obligation to report but a whistleblowing system must be implemented in consideration of the number of employees a company has or for certain industries. Authorised entities have access to this information; fines may be imposed in the event of recurrence.

Finally, with respect to Peru, it was indicated that counsel does not have the obligation to disclose information before the tax authority. However, there is a local anti-avoidance clause under which advisers, directors and legal representatives may become liable.

Conclusion and final remarks

Although there are directives that are applicable across European jurisdictions, this does not mean all jurisdictions apply the laws the same way. Certainly, client-attorney privilege is treated differently in the different jurisdictions: this has an effect in the application of the different rules.

There is also debate over whether this principle should only be applicable to lawyers, not to tax advisers.

Finally, it is important to highlight that lawyers must be aware of their confidentiality obligations and compliance in order to understand this new stricter reporting landscape and avoid breaching their obligations.