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* Cash payments to be capped at 100,000 Sfr
* Money laundering, terrorist financing the main targets
* Swiss seek to shake off image as haven for untaxed assets
ZURICH, Feb 27 (Reuters) - Switzerland said on Wednesday it would crack down on large cash purchases of real estate and other luxury goods as it seeks to step up the fight against money laundering and untaxed assets.
The government wants to limit cash payments for property or other assets such as art, jewellery or gold to 100,000 Swiss francs ($107,400), with payments of larger amounts made through financial bodies subject to anti money-laundering laws.
The draft legislation, which will be under discussion until June 15, is part of efforts to bring Switzerland into line with revised recommendations from the Financial Action Task Force, an inter-governmental body which seeks to combat financial crime.
The government also proposed draft legislation to implement a "white money strategy" announced in December to try to clean up the country's image as a haven for untaxed assets.
"With these bills, the Federal Council is underscoring the importance that it attaches to preserving the integrity of the financial centre," the government said in a statement.
Strict bank secrecy has helped Switzerland build up a $2 trillion offshore wealth management industry but pressure from U.S. and German tax investigations, among others, has forced it to take steps to make sure clients pay their home country taxes.
The government said financial intermediaries will have to be tougher in ensuring clients' assets are tax compliant. Red flags could include a client's wish to make transactions using complex financial setups without any clear reason, the government said.
In such cases, it said, financial advisers should refuse to accept assets from the client, require proof of tax compliance within a reasonable time-frame, and ultimately terminate the relationship if the client fails to provide such proof.
The Swiss Bankers Association said it welcomed the new proposals, although it argued it would be impractical to attempt to apply them to existing bank clients.
"The 'white money' strategy is forward looking and is designed to prevent the inflow of untaxed new money, it cannot be applied retroactively," the SBA said in a statement.
"No bank in the world can know every tax regime and thus guarantee the total tax compliance of its customers," it said.
The government also said it would broaden the scope for legal investigators to intercept telephone and Internet communications during investigations into serious crime. ($1 = 0.9315 Swiss francs) (Reporting by Martin de Sa'Pinto; Editing by Alistair Lyon)