How to determine and verify the effective domicile, head office and tax residence of your clients?

> Contracting parties – natural persons and legal persons (art. 7 CDB)
> Sanctions targeting Russian clients: which residence matters? Which supporting documents?
> Why tax residence does not always correspond to civil domicile or CDB domicile

CONTRACTING PARTY – NATURAL PERSON

Effective residential address (art. 7 CDB)

How to determine the effective residential address of the contracting natural person (art. 7 CDB)

The effective residential address is deemed to be the place where the contracting party resides with the intention of settling there (art. 23 Swiss Civil Code).

• Domicile and residence: are they the same?
• How can one determine the “intention” of the contracting party? What does “to settle” mean – reside, live, work…?
• Main residence and secondary residence:
  • Is the effective residential address necessarily the main residence?
  • Can the effective residential address be neither?
  • Can the effective residential address be what was previously a secondary residence if the contracting party decides to make it their main residence with the intention of settling there?
• Complex situations: multiple domiciles, no fixed domicile (globetrotting client…)

Sanctions against Russia

Russian clients who may fall under sanctions: which residence should be taken into account? When should changes of residence after the entry into force of sanctions be accepted?

• Main residence, secondary residence? Temporary residence as well?
• Change of residence of a client resident in Russia
• Which documents may be accepted to validate a change of residence/domicile?
• What proof of use of the secondary residence should be requested: payment of taxes, utility bills, title deed to the secondary residence, CRS self-certification, client declaration of intention to reside long term…
• To attest residence in the EU, which documents should be required: entry visa, renewal of residence permit? What are the rules? What is the practice of banks?
• To attest residence in Switzerland, which documents should be required?
• In order to take into account the temporary residence of a Russian client, must the client’s tax residence also be the country of temporary residence?

What additional clarifications are required in case of anomalies? What types of anomalies must be managed?

• Examples of anomalies:
  • inconsistencies between declared domicile and documents provided,
  • implausible or incompatible address in light of the client profile,
  • multiple contradictory domiciles,
  • address linked to a third party without justification,
  • address inconsistent with lifestyle or financial situation,
  • non-verifiable address,
  • red flags related to correspondence.
• What should be done in case of anomalies? Should one:
  • trigger clarification under art. 18 CDB?
  • document doubts regarding the accuracy of the information?
  • strengthen the plausibility assessment of the profile?
  • refuse onboarding or initiate an exit?
• Example of a standard checklist for identifying anomalies for individuals.

Tax residence

Why and when must tax residence be verified?

• Convergence between AML and tax controls regarding tax residence – what is meant by this convergence, exacerbated by the data also to be included in CRS/FATCA documentation?
• Is there an explicit obligation to collect tax residence at onboarding? Must a financial institution verify the address indicated on the CDB form?
• Is there an obligation to review tax residence in case of red flags (change of address, activity, atypical flows)?

When does taxation complicate the CDB analysis for natural persons?

• How is tax residence of a natural person determined under OECD conventions?
• Why does tax residence not always correspond to civil domicile or CDB domicile?
• In which cases does a tax inconsistency become an AML risk signal?
• Which client profiles make the analysis particularly complex (multi-residence, mobility, international clients)?
• Which tax elements may be used to assess file consistency without creating an additional CDB obligation?

CONTRACTING PARTY – LEGAL PERSON

Effective seat of a legal person (art. 7 CDB)

How to determine the effective seat of a legal person without limiting oneself to the register (art. 7 CDB)?

• Why is the commercial register only a starting point?
• How to identify the effective administration within the meaning of the CDB?
• Which indicators make it possible to locate the real economic and operational center?
• In which cases does plurality of locations become a CDB anomaly?

Practical illustrations of the terms of art. 7 CDB relating to the effective seat

• How to determine the place of effective administration of an entity within the meaning of art. 7 CDB?
• To what extent does the economic and operational center allow identification of the place of effective management?
• Where is the entity’s management actually exercised beyond formal governance bodies?
• Where are day-to-day business operations conducted within the corporate purpose, and which decisions are decisive in this respect?
• How to identify the principal place of management when several decision-making locations coexist?

What additional clarifications are required in case of anomalies? What anomalies must be managed?

• Examples of anomalies:
  • implausible or atypical address for a company,
  • non-verifiable address,
  • inconsistencies between different company addresses (e.g. registered seat ≠ operational address ≠ billing address without explanation),
  • address linked to a third party without justification (c/o, notary, lawyers…),
  • multiple address changes, red flags linked to correspondence,
  • indications of fictitious domicile or shell company.
• What should be done in case of anomalies?
• Example of a standard checklist for identifying anomalies for legal entities.

Tax residence

When do the effective seat and tax residence of companies not coincide?

• How is tax residence of a legal person determined (incorporation or place of effective management)?
• In which cases can a company have dual tax residence?
• Are there companies without tax residence, and why is this problematic?
• How should fiscally transparent entities be treated under CRS and CDB?
• Why are certain structures formally compliant but intrinsically unstable?