Saturday, 29 December 2012

Swiss bank UBS fined $1.5 bln for Libor fraud

UBS has been fined $1.5  billion by British, Swiss and US regulators to settle charges of  manipulating  global benchmark  interest rates. REUTERS photo
UBS has been fined $1.5 billion by British, Swiss and
US regulators to settle charges of manipulating global
benchmark interest rates. REUTERS photo
GENEVA - The Associated Press

Switzerland’s UBS AG agrees to pay a $1.5 billion fine to international regulators following a probe into the rigging of a key global interest rate

Swiss banking giant UBS AG admitted yesterday to fraud and agreed to pay some $1.5 billion to U.S., British and Swiss authorities in a probe into the rigging of global benchmark interest rates.

The settlement caps a tough year for Switzerland’s biggest bank, which is one of several leading banks that has been under investigation over allegations of manipulating the benchmark LIBOR interest rate, short for London interbank offered rate. It is used to set the interest rates on trillions of dollars in contracts around the world, including mortgages and credit cards.

The rate is a self-policing system and relies on information that global banks submit to a British banking authority. American and British regulators have already fined Britain’s Barclays $453 million for submitting false information between 2005 and 2009 to keep the interest rate low.

UBS said some of its employees tried to rig the LIBOR rate in several currencies, but that its Japan unit, where much of the manipulation took place, entered a plea to one count of wire fraud in a the proposed agreement with the U.S. Justice Department.

The statement from the UBS board of directors said some of its personnel had “engaged in efforts to manipulate submissions for certain benchmark rates to benefit trading positions.”

‘Misconduct did not reflect bank’s values’

The bank also said some of its employees had “colluded with employees at other banks and cash brokers to influence certain benchmark rates to benefit their trading positions” or had given “inappropriate directions to UBS submitters that were in part motivated by a desire to avoid unfair and negative market and media perceptions during the financial crisis.”

Sergio Ermotti, who was appointed chief executive officer of UBS AG in November 2012 in the wake of a major trading scandal, said in the statement that the misconduct did not reflect the bank’s values or standards.

“We deeply regret this inappropriate and unethical behavior. No amount of profit is more important than the reputation of the firm, and we are committed to doing business with integrity,” he said.

With more than $2.4 trillion in invested assets, Zurich-based UBS is one of the world’s largest managers of private wealth assets. At last count, the bank had 63,745 employees in 57 countries but said it aimed for a headcount of 54,000 in 2015. Along with Credit Suisse, the second-largest Swiss bank, UBS is on the list of the 29 “global systemically important banks” that the Basel, Switzerland-based Bank for International Settlements, the central bank for central banks, considers too big to fail.

In 2008, UBS was forced to seek a bailout from the Swiss government when it was hard hit by the financial crisis and its fixed-income unit had more than $50 billion in losses. U.S. authorities fined UBS $780 million in 2009 for helping U.S. citizens avoid paying taxes.

The U.S. government has since been pushing Switzerland to loosen its rules on banking secrecy and has been trying to shed its image as a tax haven, signing deals with the United States, Germany and Britain to provide greater assistance to foreign tax authorities seeking information on their citizens’ accounts.


Saturday, 15 December 2012

Swiss banks face more pressure after German setback

Trams drive past the offices of Swiss banks UBS (L) and Credit Suisse at Paradeplatz square in Zurich August 10, 2012. REUTERS/Arnd Wiegmann

ZURICH | Fri Dec 14, 2012 2:39pm GMT

(Reuters) - Switzerland's banks have suffered a major setback in their fight to maintain client secrecy after Germany rejected a key tax pact to sweep Swiss accounts clean of tax dodgers.
Switzerland is trying to protect its $2 trillion (1.23 trillion pounds) offshore banking industry by striking deals with European neighbours that allow their citizens to pay tax on secret Swiss accounts without revealing their identity.

The German deal's failure -- even as others with Britain and Austria go ahead -- is a big blow to the Swiss government because the northern neighbour has traditionally been the biggest foreign market for Swiss private banks, which hold an estimated 150 billion Swiss francs ($161 billion) in German assets.

"Switzerland still hasn't solved the problems of its past, which means it should put together a Plan 'B' as quickly as possible," said Heiko Kubaile, partner at KPMG in Zurich and head of German tax and legal.

Swiss officials are struggling to reconcile strict national laws protecting banking secrecy with intense international pressure to get at lost tax revenue.

Switzerland remains embroiled in a long-simmering tax dispute with the United States targeting Credit Suisse (CSGN.VX) and a host of other banks suspected of helping clients dodge U.S. taxes.

Switzerland has agreed to allow foreign governments to get information on groups of bank clients based on suspicious behavioural patterns, such as using a bank-provided mobile phone, bringing itself into line with standards laid out by the Organisation for Economic Cooperation and Development on group requests.

But that isn't likely to stop influential European neighbours like France and Germany from doing everything in their power -- including purchasing leaked bank data -- to claw back tax income.

"International pressure will increase, and I say this without any ridicule, malice or an excursion into Western movies," said Germany's Peer Steinbrueck, the opposition Social Democrats' (SPD) candidate for German chancellor in next year's elections.

Steinbrueck famously referred to the Swiss as Indians running from the cavalry when he cracked down hard on bank secrecy as finance minister in Merkel's 2005-09 "grand coalition" government.

Switzerland is sticking with the withholding tax model to clean up its past, finance minister Eveline Widmer-Schlumpf said this week.

"We don't have another short-term option that conforms with the laws of our country to let the past be the past," Widmer-Schlumpf told Swiss television.

In saying so, she implicitly rejected again an automatic exchange of information, which is commonplace in parts of the European Union though some member states are resisting it.

Experts say the automatic option is a less attractive one because it means more work for cash-strapped foreign governments, many of which had hoped to fill budget holes quickly with advance payments from Switzerland.

A recent study by the European Policy Forum, a London-based think tank, argues that an outright exchange of information on taxing savings hasn't worked within the EU because data cannot be effectively used by fiscal authorities.

By contrast, Swiss upfront payments from withholding tax deals have allowed Britain's finance minister to say he expects to take in 5 billion pounds ($8.1 billion) over the next six years through the deal, part of an effort to counter a shortfall in tax revenue caused by economic weakness.

Germany is forfeiting 2 billion Swiss francs in upfront payments from Switzerland as a result of rejecting the deal.

Now, Switzerland faces scrutiny on how it deals with foreign pressure, and in particular how it puts the group request rules, laid by the OECD, into place.

Swiss banks are suffering heavy outflows in Europe due to the tax pressure, though bigger players are countering the withdrawals with inflows from Asia, the Middle East and South America.

UBS has said it could see withdrawals of 12-30 billion francs from total European assets under management of over 300 billion, while Credit Suisse put its own outflows at up to 35 billion francs in coming years.

UBS has already taken steps: earlier this month, the bank said it will cut up to 35 German jobs when it closes branches in Dortmund, Essen, Rosenheim and Wiesbaden, part of efforts to bolster profitability.

The German deal's failure means there increasingly is no way out for wealthy Germans who are hiding money in Switzerland.

"Taking money elsewhere and continuing to hide is an illusion. Very few clients will choose that route for their money," said Hans-Joachim Jaeger, Zurich-based tax expert with Ernst & Young.

German officials are preparing for a flood of wealthy Germans -- who had held out the hope a withholding tax deal would regulate their undeclared assets -- to turn themselves in.

A flourishing trade in leaked bank client data to get at the names of alleged tax dodgers -- which has become commonplace in recent months -- is also likely to continue.

Switzerland is slated to unveil specifics of a clean money strategy to sweep undeclared assets out of the country, which could include beefed-up client disclosure requirements by banks.

(Additional reporting by Oliver Hirt; Editing by Carmel Crimmins.)

German-Swiss tax deal sinks at last-ditch meeting

Happier times: Eveline Widmer-Schlumpf after signing the German-Swiss tax deal with German Finance Minister Wolfgang Schäuble last year
Happier times: Eveline Widmer-Schlumpf after signing the German-Swiss tax deal with German Finance Minister Wolfgang Schäuble last year (Keystone)

Representatives from both chambers of Germany’s parliament have failed to reach an agreement on a German-Swiss tax accord, effectively ending any chance of ratification after the opposition refused to review its position.

A mediation committee met on Wednesday to seek a compromise that would have allowed the accord  aimed at legalising undeclared assets held by Germans in Swiss banks to take effect next month.

Late in November, the centre-left German Social Democrats and Greens effectively blocked the deal by voting against the agreement in the Senate where they hold the majority, claiming notably the accord had too many loopholes and let off those who had failed to pay their taxes too easily.

The lower house of the German parliament, where Chancellor Angela Merkel’s coalition has the majority, approved the deal in October.

"We regret that Germany has not ratified the withholding tax agreement signed between Switzerland and Germany,” said Swiss President Eveline Widmer-Schlumpf after the decision.

In a statement, the State Secretariat for International Financial Matters said the status quo with Germany was less than satisfactory, with Switzerland’s northern neighbour relying on CDs containing data acquired illegally and then requesting administrative assistance to track down tax evaders.

It also pointed out that Germany would be losing money as a large share of outstanding tax would be subject to the statute of limitations.

The accord would have imposed a retroactive levy of up to 41 per cent on capital in offshore bank accounts held by Germans, imposed a tax on future interest income, while allowing account holders to remain anonymous.

Revenue from tax arrears under the deal would have been worth €10 billion ($12 billion), plus an additional €700 million annually from withholding tax  according to German government estimates, although the opposition contested the figures.

The Swiss bankers Association said it regretted the accord had been rejected because of “domestic policy reasons in Germany”, adding that deal was “a fair, optimum and sustainable solution to definitively settle bilateral tax issues”.

Political reaction

Switzerland had already approved the tax accord with Germany despite some opposition from the rightwing and left.

The centre-right Radicals said that Germany had missed the opportunity to sign a “good and fair tax deal” with Switzerland. They also demanded that the government stick with its current strategy and not return to the negotiating table with the Germans, or otherwise risk becoming “a pawn in Germany’s electoral debate”.

Widmer-Schlumpf confirmed there would be no further talks concerning the deal, admitting that it was dead and adding there was nothing left to discuss. She did not rule out fresh talks at a later date, but not in the next 12 months.

“We are neighbours, so we have to find solutions,” she added.

The centre-left Social Democrats said on the other hand that the rejection of the deal was proof that allowing account holders to remain anonymous while imposing a withholding tax was “a dead end”.

They called on the cabinet to consider the automatic exchange of bank data, which could provide a definitive solution to the various disputes with other countries over banking secrecy.

The rightwing Swiss People’s Party, which had not been in favour of the accord, was not unhappy about the outcome. Its secretary-general Martin Baltisser said nothing had changed for Switzerland, and that Germany would be able to continue requesting administrative assistance. and agencies

Switzerland Amends Banking Law To Expose Illicit Accounts

Published On: Tue, Dec 11th, 2012
The Switzerland Ambassador to Nigeria, Hans-Rudolf Hodel on Tuesday said his country has amended its bank secrecy laws making it more legally responsible to disclose suspicious funds lodged in the country’s financial institutions.

Mr Hodel, who was speaking at a seminar in Abuja on money laundering and terrorism in West Africa, said with the rise in the financing of global terrorism, individuals and groups can no longer loot money and dump in Swiss accounts without fear of discovery as the authorities are now authorised to raise alerts on suspicious transactions.

“We still have a bank secrecy law but it is very relative because as soon as there are suspicions of illicit fund be it for trafficking, terrorism or whatever criminal act, the bank secrecy is lifted and the accounts are seized,” the Ambassador said.

Mr Hodel said Switzerland is currently engaged in activities that will strengthen regional capacity and cooperation in dealing with the financing of terrorist groups.

Other experts present at the event pointed out that the quickest way to kill terrorism is to cut off its life source which is funding.

Bank secrecy is a legal principle under which banks are not allowed to provide to authorities personal and account information about their customers unless certain conditions apply (for example, a criminal complaint has been filed).

Created by the Swiss Banking Act of 1934, which led to the famous Swiss bank, the principle of bank secrecy is always considered one of the main aspects of private banking. It has also been accused by civil society organisations and governments of being one of the main instruments of underground economy and organized crime.

Former bank employees from banks in Switzerland (UBS, Julius Baer) and Liechtenstein (LGT Group) have testified that their former institutions helped clients evade billions of dollars in taxes by routing money through offshore havens in the Caribbean and Switzerland. One of these, Rudolf Elmer, wrote in the New York Times, “It is a global problem…Offshore tax evasion is the biggest theft among societies and neighbour states in this world.”

The Swiss Parliament ratified on June 17, 2010 an agreement between the Swiss and the United States governments allowing UBS to transmit to the US authorities information concerning 4,450 American clients of UBS suspected of tax evasion.

Hollande rules out tax amnesty with Swiss

Puzzled: Eveline Widmer-Schlumpf failed to convince François Hollande of the Rubik accords
Puzzled: Eveline Widmer-Schlumpf failed to convince François Hollande of the Rubik accords (Keystone) and agencies

There will be no fiscal amnesty as part of any agreement on banking secrecy with Switzerland, said French President François Hollande on Friday after meeting Swiss Finance Minister Eveline Widmer-Schlumpf.

Switzerland had wanted – via a so-called Rubik accord – to regulate the previously non-declared, untaxed funds deposited by foreign nationals in Switzerland while preserving client anonymity.

“There cannot be a tax amnesty,” declared Hollande at a press conference in Paris.

For her part, Widmer-Schlumpf, who also holds the rotating Swiss presidency this year, said the Rubik accords were not so much an amnesty as a compromise “which allows tax payers with accounts in Switzerland to be taxed with a fine”.

Hollande said France wished to make progress on other issues – such as cooperation in the search for tax information, the status of the binational airport at Basel or the agreement on inheritance – before dealing with the Rubik dossier.

Beyond tax matters, Hollande said one of the reasons for the meeting was to strengthen bilateral relations which had been damaged by arguments over banking secrecy going back to his predecessor, Nicolas Sarkozy.

The Swiss government, according to Hollande, had been “needlessly shocked or attacked by surprise by the previous presidency”.

He also jokingly denied rumours that French tax agents were pretending to take holidays in Switzerland in order to check up on French tax payers.

A Swiss finance ministry spokesperson said Hollande had agreed to visit Switzerland "in the coming months", although no date had been set.


Switzerland has come under increased pressure to hand over names of alleged tax cheats from countries such as Germany, France, Italy and Britain.

In response, the Rubik principle was devised by the Association of Foreign Banks in Switzerland, and aims to separate income from wealth and hand over tax at source to third countries, while keeping the Swiss bank account holder’s anonymity.

Rubik deals have been signed with Austria, Germany and Britain but are subject to parliamentary approval in all the countries involved. Last month, the German upper house of parliament, dominated by opposition parties, the deal. and agencies

£40bn held in Swiss bank accounts by UK taxpayers

Man and woman silhouette  

An estimated £40bn is being held in Swiss bank accounts by UK taxpayers.
The estimate, the first to be published, is contained in the documents accompanying the Autumn Statement.
A breakthrough tax agreement with the Swiss government comes into force on 1 January 2013.

It is hoped that this will flush out £5.3bn in extra tax over the next six years, from UK citizens who have been hiding money in Swiss bank accounts.

"I am staggered at the sums, it is a huge amount of money, absolutely enormous," said Ronnie Ludwig at accountants Saffery Champness.

"It makes me wonder how much is stashed away in other tax havens."
'Significant step forward'
The deal with the Swiss government was first struck in August 2011.

The country has, until recently, been one of the world's top tax havens with a long tradition of total secrecy for its banks' customers.

This has crumbled under international pressure in the past two years.
The UK's deal will see the Swiss government make a payment of half a billion Swiss francs, to cover past unpaid taxes due to the UK.

"This is the largest tax evasion settlement in UK history, marking a significant step forward in the battle against those who seek to evade UK tax," said the Treasury.

In addition, on behalf of the UK tax authorities, the Swiss government will collect:
  • A one-off levy on existing Swiss assets owned by UK residents, worth between 21% and 41% of the assets
  • A withholding tax on future income and gains, at rates ranging from 27% to 43%
  • A 40% per cent inheritance tax on Swiss assets for UK investors.
The UK government admits it may not be able to pin down who, exactly, owns all the money in Swiss banks, and also expects some of the assets to be moved.

So it thinks the amount that will be taxed will in fact be £25bn.

"An adjustment has also been made to account for identification failure," the Treasury admits.

There is, however, a word of warning: the deal may require a referendum of the Swiss people to ratify it.
"The final stage of the ratification process is expected to be concluded shortly, but there remains a possibility that the Swiss government will have to hold a referendum on the agreement," says the Treasury.
"This is therefore a significant fiscal risk to the forecast."

The Treasury also added: "The estimated revenue raised by this measure is also highly uncertain as there is little hard information about the value of UK individuals' financial assets in Switzerland, and how these individuals will respond to the policy."

Sunday, 11 November 2012

Tax evasion scandal not over for Swiss banks

UBS's offices in Frankfurt: a German probe into the bank could not come at a worse time
UBS's offices in Frankfurt: a German probe into the bank could not come at a worse time (OKAPIA)
by Matthew Allen,

The revelation of a tax evasion probe in Germany and the guilty plea of a former banker in the United States this week shows that Swiss banks are not yet off the hook from ongoing global investigations.

The timing of the German probe into UBS could not come at a worse time, with the country’s parliament due to decide on a contentious tax treaty with Switzerland in two weeks. At the same time, a former UBS banker has implicated ex-colleagues during his testimony to a US court.

UBS has confirmed media reports on Thursday that prosecutors from the German city of Mannheim opened an investigation earlier this year and conducted searches of its offices in Frankfurt.

It is not yet clear whether any alleged offences took place after Switzerland and Germany agreed in principle last year to a treaty that promises to clear up cross-border tax evasion.

In any case, critics of the “Rubik” treaty – including influential German political parties – have derided the withholding solution as being too soft on tax dodgers. Politicians will vote on whether to accept the deal later this month.

Allegations flood in

On Tuesday, UBS received further bad news when a former advisor to wealthy clients admitted to his part in aiding tax dodgers. He had been held in the US under house arrest since January 2011.

The banker, who had also worked for Credit Suisse, implicated five more “egregious” UBS colleagues during his confession to a US court. He was released having been deemed to have served his sentence while under arrest.

Other fresh allegations of Swiss bank complicity in tax evasion scandals continues to come in thick and fast.

Suspicions do not fall on UBS alone. The French and German authorities conducted a series of raids on the offices of Credit Suisse in the summer while a Greek investigative reporter recently published a list of suspect accounts housed at HSBC’s Geneva private bank.

The US has several Swiss banks under the microscope, not least Wegelin, which collapsed in January under the weight of evidence from an investigation that has yet to reach a conclusion.

End is nigh

The ferocity and endurance of the global campaign against tax evasion prompted UBS chief executive Sergio Ermotti to pronounce banking secrecy dead last month.

“I have said for a long time that banking secrecy, as we knew it ten years ago, is over,” he told the Tages-Anzeiger newspaper, adding that a “new strategy” was needed.

His comments would have infuriated rightwing politicians who refuse to let Switzerland’s cherished banking secrecy depart without a struggle.

Last month, an attempt to force a nationwide vote on scrapping the Rubik tax deals narrowly failed to pass muster. But pressure groups continue in their efforts to force Switzerland to fight outside pressure on its financial system.

Matthew Allen,

HSBC investigated by Jersey regulators

Inquiry follows leak of names of thousands of account holders said to include individuals with history of drug and gun crime
HSBC's Jersey headquarters
An HSBC office in St Helier. It is one of the biggest 
banks on Jersey. Photograph: Alamy
Financial regulators in Jersey have launched an inquiry into HSBC, one of the biggest banks on the island, following a leak of the names of thousands of bank account holders said to include individuals with a history of links to drug and gun crime.

The move follows confirmation that UK tax authorities had also begun eagerly working through the list looking for possible evidence of discrepancies in British offshore depositors' tax affairs.

The leak is highly embarrassing for Jersey, which claims to have comparatively tough regulations for its licensed banks, requiring them to know who their customers are and where their funds come from.
"Jersey has got some of the toughest anti-money laundering regulations in the world, as assessed by the IMF [International Monetary Fund]," said Jersey treasury minister Philip Ozouf. "There are many jurisdictions with banking secrecy and much lower standards than we have. We are a global leader in this area."

Geoff Cook, chief executive of the island's powerful lobby group Jersey Finance, said: "This is a serious
matter and we note HSBC's immediate commitment to co-operating with any investigations carried out by the relevant authorities and welcome the clear position taken by the JFSC [Jersey Financial Services Commission, the island's financial regulator] that any failure to adhere to Jersey's clear standards will be robustly investigated and acted upon."

Before joining the financial lobby group Cook was head of wealth management for HSBC and before that worked as deputy chief executive of the bank's operations in Jersey.

HSBC has come in for sharp criticism over failures in its scrutiny of depositors, particularly in relation to organised crime. This week the company said it was braced to receive a fine which could be more than $1.5bn (£938m) from the US authorities. This penalty follows a finding by a Senate committee that the bank had exposed the US financial system to "a wide array of money laundering, drug trafficking and terrorist financing risks due to poor anti-money laundering controls".

Friday's disclosures in the The Telegraph added to the bank's woes as the newspaper named a handful of individuals, with a history of criminal links, who it said were on the leaked list of HSBC Jersey clients.
The paper reported that the onetime owner of a farm near Lewes in East Sussex, where an outbuilding had been used as a £600,000 cannabis farm four years ago, held an account with HSBC Jersey in which more than £250,000 was held. Daniel Bayes' account was said to have been registered to the same address.
It was widely reported in 2009 that Bayes have played a leading role in the cannabis farm – though it was his father, Brian Bayes, who was convicted of managing the operation and of laundering £66,000. Daniel was said to be in Venezuela during the trial and could not attend court because his wife was ill. In sentencing, the judge said: "It is a matter for your son's conscience, not yours. To expose his parents like this is monstrous."
Jersey politicians and regulators point to high-profile convictions, such as that of drugs baron Curtis Warren three years ago, as evidence of their uncompromising approach to organised crime.

HSBC is one of the biggest banks on Jersey, its headquarters on the esplanade dominating the seafront skyline. It routinely caters to many British expats working overseas, notably in the far east, where the bank also has strong ties and there is a substantial British workforce. Many expats use offshore bank accounts at HSBC and elsewhere to legitimately hold their overseas earnings without exposing them to UK tax.

The leaked list of HSBC clients is reported to include names from the oil and mining industries as well as doctors and some celebrities – all groups which typically have significant overseas earnings. "Types and rates of tax vary between countries, so you'll need to understand your tax obligations (at home and abroad) and how to make the most of potential tax efficiencies," the bank advises potential customers moving overseas on its website.

The leaked list of clients has only very recently been sent to Revenue & Customs, where investigators are looking to check that leaked details correspond with the declared tax affairs of the individuals concerned. It is not yet clear whether the information will provide as much evidence of large-scale evasion as the leaking of the so-called "Lagarde list" of HSBC's Swiss clients, some 2,000 of which were British.

That leak, in 2008, is said to have led to hundreds of private settlements with HMRC, but only one prosecution. Tax authorities have argued a pragmatic approach to settling provides the best value for the taxpayer.

The latest leak from Jersey is said to list the identities of 4,388 people giving addresses in Britain who together hold £699m in offshore current accounts. These people may also hold other offshore investments which remain beyond the view of UK tax authorities; however, most are unlikely to be super-rich clients of the kind known to have large fortunes stored in offshore trusts.

Nevertheless, Phil Berwick, a director at law firm Pinsent Masons said it was "inevitable" that HMRC would be looking to use its criminal powers against some of people named on the list. "If people with offshore accounts suspect that they might have a problem, they need to be pro-active. They need to approach HMRC before HMRC approaches them – possibly in the form of a raid of their home or business. HMRC has taken a very interventionist approach in the past year, more than doubling the number of raids they carry out."

A statement from the JFSC suggested the regulator was most urgently seeking to establish that HSBC had not breached rules on who can hold a bank account and where funds can come from. John Harris, chief executive of the regulator, said "The commission is unable to discuss individual licence holder matters but any concerns regarding the use of the banking system in Jersey involving money of criminal origin and failures to follow Jersey's well-known and clearly documented reporting obligations will be robustly investigated with any necessary follow-up action taken in consequence."

HMRC said in a statement: "Clamping down on those who try to cheat the system through evading taxes and over-claiming benefits is a top priority for us, and we value the information we receive from the public and business community."

The information is the latest in a string of illegal leaks of private offshore financial details from some of Europe's most controversial tax haven jurisdictions. HMRC is reported not to have paid for the information on HSBC accounts, though that could not be confirmed.

The bank insisted on Friday morning it had not been notified of any HMRC investigation. "Should we receive notification, we will co-operate fully with the authorities," HSBC said. "We are investigating the reports of an alleged loss of certain client data in Jersey as a matter of urgency."

The latest leaked information follows HMRC's receipt two years ago of the so-called "Lagarde list".

Meanwhile, in 2007 the German authorities paid to get hold of stolen trust company details from Liechtenstein relating to tens of thousands of secret structures. US and UK counterparts also paid for the information later. The offshore world reacted with outrage at these payments, describing them as illegal.

Sunday, 14 October 2012

Germany, Singapore ink deal against tax evasion

File picture of the skyline of Singapore's financial district across the Singapore River (AFP/File, Simin Wang)
BERLIN — Germany and Singapore agreed Sunday to improve cooperation to clamp down on tax evasion, the German finance ministry said in a statement.

Both countries have agreed to incorporate the latest Organisation for Economic Cooperation and Development (OECD) standards on exchanging information in their double taxation accord, the statement said.

When the accord is ratified in both countries, authorities will share information about all forms of tax, not just income and capital taxes, the ministry said.

In addition, the information exchange will no longer depend on the taxpayer being resident in one of the two countries, and banking secrecy "will not constitute an obstacle to exchanging information," Berlin said.

Germany hopes to seal a similar deal with Switzerland to resolve a dispute over tax evasion and bank secrecy which has hurt relations between the neighbours.

A Swiss-German tax deal is due to take effect in January 2013 but still needs to be ratified by both parliaments.

The double taxation agreement, signed by ministers this year, would see German citizens with assets parked in Switzerland's notoriously secretive banks paying a tax rate of 26.4 per cent on these holdings.

The neighbours have been embroiled in a spat since 2010 when German authorities raided branches of Credit Suisse bank in 13 German cities after buying data on suspected tax frauds.

Switzerland reacted angrily, saying the data were stolen in violation of its banking secrecy laws.

As much as 180 billion euros ($233 billion) in German assets are deposited in Switzerland, according to unconfirmed media reports.

According to a report in Der Spiegel news weekly Sunday, tax authorities in the state of Rhineland-Palatinate are preparing to purchase another disc.

Monday, 8 October 2012

Electioneering threatens German tax deal

Patrick Odier of the Swiss Bankers Association and State Secretary Michael Ambühl recently tried to convince German senators of the accord's virtues
Patrick Odier of the Swiss Bankers Association and State Secretary Michael Ambühl recently tried to convince German senators of the accord's virtues (Keystone)
by Peter Siegenthaler,

The German-Swiss tax deal aimed at legalising undeclared assets held by German citizens in Swiss banks may not face a referendum in Switzerland, but there are no guarantees the accord will be ratified by Germany’s Senate with elections looming.

Media in both countries noted that after backers of a referendum against the so-called Rubik accords with Germany, Britain and Austria failed to gather enough signatures to force a vote, it was a sign that most Swiss agreed with the deals.
The Neue Zürcher Zeitung’s Berlin correspondent wrote that this result was welcomed in German government circles, adding that there was  “coalition of common sense” in both countries that recognised the advantages of the accord.

Any danger for the deal does not lie within the cabinet in Berlin, nor in the lower chamber of parliament, where the majority is safely in the hands of the government coalition, but in the Senate, which is the chamber where Germany’s federal states are represented and is dominated by the centre-left and the Greens.    

This majority seems intent on refusing the accord, according to Bonn University political scientist Gerd Langguth.

“The Swiss ambassador to Germany has been extremely active and has been trying to talk to all parties involved, but the Senate majority is unlikely to change its position,” he told

Langguth points out that with elections looming, the centre-left Social Democrats are not just going to oppose the treaty, but will also take the opportunity to score points against Chancellor Angela Merkel’s government.

“If the opposition can get some mileage out of an issue, such as this tax accord, they will seize the opportunity,” the political scientist points out. “In Germany, there are plenty of people who are opposed to Swiss banking secrecy as they feel the state has been cheated.”

The treaty would legalise the undeclared Swiss bank accounts held by Germans citizens. Swiss banks would deduct a one-off levy for backdated assets and then impose a withholding tax on future income earned for those account holders who do not want to reveal their identities to the German authorities.

With the Social Democrats sensing that tax justice interests voters, they have made it into an election issue. A number of federal state premiers, as well as the official candidate for the Chancellery, Peer Steinbrück, have repeated in the past few days their opposition to the accord.

After being nominated, Steinbrück warned that the Swiss must do more to fight German tax evasion, adding that it was an issue of German – and not Swiss - sovereignty. He pointed out that tax evasion was not considered a minor offence by the Social Democrats.

No backing down

Langguth says that it is unlikely the Senate majority will back down, even if in theory it is possible to hammer out a deal that both chambers of the German parliament could accept with the government acting as a facilitator.

Normally this would involve some horse trading with the federal states to reach some kind of agreement, as has been the case in the past.

But for Langguth, this is not really an option. The Social Democrats have nailed their colours to the mast and left no room for negotiation, he says. Enough to doom the accord with the Swiss.

According to the German-language correspondent for Swiss public radio in Berlin, government sources have confirmed that a new deal is being negotiated by diplomats, but also that a revised accord would demand a significant new concession from Switzerland.

The original tax agreement was already upgraded in Spring. Swiss President Eveline Widmer-Schlumpf has repeated recently that there would be no further concessions and that the text of the treaty should not be modified.

Any discussions taking place now would be to find ways of preventing Germans who hold undeclared assets in Switzerland from moving them to another location. Any solution would however have to avoid involving any major changes to the Swiss position, a situation that leaves little room for discussion, according to the radio correspondent.   

The Swiss foreign ministry still hopes a majority of the German federal states will accept the accord as it is.

In a statement, it writes that most of the states dominated by the Social Democrats have yet to determine their position on the deal, adding that the German government is backing the agreement strongly and believes ratification is possible.

Peter Siegenthaler,
(Adapted from German by Scott Capper)

Missing bank data found in Greece

Greece has located a CD of Swiss banking data it bought two years ago
Greece has located a CD of Swiss banking data it bought two years ago (Keystone)

Authorities in Greece have found a missing data CD containing the names of Greek clients with Swiss bank accounts, paving the way for Athens to prosecute tax evaders.

The head of the Greek financial police, Stelios Stasinopoulos, reportedly handed the data over to the country’s chief prosecutor on Tuesday. It took the Greek government almost a week to locate the CD, with the support of intelligence agencies and two former finance ministers.

The CD, which the Greek government acquired in 2010 via then-French finance minister Christine Lagarde, was originally obtained by a worker at the Geneva branch of the bank HSBC along with other data pertaining to Greek clients. It contains the names of roughly 2,000 Greeks with money in Swiss banks.

Greek authorities long believed that they would no longer be able to use the data on the CD, even if it were to be found. Just two weeks ago, acting finance minister Giorgos Mavraganis told Greek parliament that using the data would amount to “industrial espionage”.

However, on Monday, Greek finance minister Yannis Stournaras told the Financial Times newspaper that his government would make catching tax evaders a top priority, with the help of the CD obtained in 2010. He then said that if the CD could not be found, the Greek government would ask its “European partners” for help in finding another copy.

Stournas also said that more than 30 Greek politicians and department heads were under investigation for tax fraud and corruption. Those names were recently made public in the press, and the president of Greek parliament, Evangelos Meimarakis, stepped down temporarily as a result.

Greece and Switzerland are currently working on a tax accord that resembles agreements the Swiss have already struck with Germany, Austria and Great Britain. The accords, known as Rubik agreements, generally place a flat tax on foreign money in Swiss bank accounts, making it possible for Switzerland to maintain its banking secrecy while the foreign government in question can collect taxes due to it.

The tax deals with Austria and Great Britain have been ratified by all parties involved, but the agreement between Switzerland and Germany must yet be ratified by Berlin. A Greek-Swiss tax agreement is still in the negotiating phase. and agencies

Cabinet moots further easing of banking secrecy

Domestic tax authorities could also get easier access to bank data of tax dodgers
Domestic tax authorities could also get easier access to bank data of tax dodgers (Keystone)
by Urs Geiser, and agencies

The government has launched a lengthy process to grant cantonal authorities access to bank client data in a bid to crack down on suspected tax evasion. The move could lead to a further weakening of traditional banking secrecy rules.

More than three years after Switzerland loosened banking secrecy in line with international standards, the cabinet on Friday decided to reform the criminal law on tax issues.

Switzerland currently allows domestic authorities access to bank accounts only in cases of suspected fiscal fraud. However, tax evasion - when citizens fail to declare their income or wealth – is considered merely a civil offence and is punished by a fine.

The finance ministry has been mandated to present a detailed draft by next spring which will then be submitted to political parties, organisations and pressure groups. At a later stage parliament is discuss the proposals.

The reform of the penal law is aimed at eliminating loopholes and simplify and streamline the tax system, according to a cabinet statement.

Experts say the reform could also create a level playing field between foreign and domestic tax authorities trying to crack down on tax cheats.

The announcement met mixed initial reaction from the main political parties, the cantons and the banking industry.

The rightwing Swiss People’s Party vowed to fight against an easing of banking secrecy, the centre-right Radicals and Christian Democrats warned against lifting the distinction between tax fraud and tax evasion. The centre-left Social Democrats for their part welcomed the plan as step in the right direction.

The 26 cantons, which have wide-ranging autonomy, also came out in favour, while the Swiss Bankers Association warned of putting tax fraud and tax evasion on the same level.

OECD standards

Under growing international pressure on tax havens, the cabinet in March 2009 agreed to abolish the distinction between tax fraud and tax evasion in line with the Organisation for Economic Co-operation and Development (OECD), paving the way for the exchange of information with other countries in individual cases and based on legal requests.

Over the past few years, Switzerland has re-negotiated more than 40 double taxation accords with other countries.

Tax issues have been high on the agenda in talks with the United States but also with neighbouring Germany, France and Italy as well as with the biggest Swiss trading partner, the European Union.

The weakening of Swiss bank secrecy has been a big blow to the world's largest offshore centre with $2 trillion (SFr1.86 trillion) in assets.

The country’s largest bank, UBS, said it expects Swiss banks to see European clients withdraw "hundreds of billions of francs" as a result of steps to stop foreigners using secret accounts to evade taxes.

Urs Geiser, and agencies

Parliament allows controversial tax assistance

Finance Minister Widmer-Schlumpf defending the reform in parliament
Finance Minister Widmer-Schlumpf defending the reform in parliament (Keystone)
by Urs Geiser,

Parliament has approved grouped requests for administrative assistance on tax matters in line with international standards - further weakening Switzerland’s banking secrecy law. The move follows pressure to crack down on tax evasion.

The House of Representatives decided to follow the Senate in giving other countries information about suspected tax dodgers based on patterns of behavior by account holders or financial institutions.

Under the current law, assistance is only granted in individual cases and if suspects are identified by name.

During Wednesday’s debate, representatives of the rightwing Swiss People’s Party warned approval of the new standards was tantamount to giving up banking secrecy rules altogether.

“We are paving the way for random inquiries and thereby drive away the last foreign clients from our financial centre,” said Caspar Baader.

However, supporters of the reform, mainly members of centre-left parties, however argued Switzerland would be blacklisted if it refuses to implement rules decided by the Organisation for Economic Co-operation and Development (OECD) in July.

Green Party parliamentarian Louis Schelbert said there was no point trying to defend banking secrecy in the long run.

The centre-right approved the reform grudgingly. “There is nothing we can do to stop group requests,” said Thomas Maier of Liberal Green Party.


Despite calls to apply the amended law retroactively the house did not discuss such a proposal. It could have helped appease opponents of a planned deal with Germany aimed at recovering untaxed assets in Swiss banks, according to commentators.

Finance Minister Eveline Widmer-Schlumpf said the law would come into force next January and Switzerland would have to adapt some double taxation agreements (DTA) with other countries.

The cabinet initially tried to explicitly exclude group requests, but changed its mind following international pressure.

Peter Kunz, professor of economic law at Bern University, says the decision by parliament leaves some scope both for the government and for the courts.

“German account holders are likely to challenge implementation of the law by January 1,” he says.

Fishing expeditions

Kunz is also wary about the legal definition of group requests compared with random and speculative inquiries known as fishing expeditions.

“There is no clear distinction between the two from a legal point of view,” he told

The Swiss Bankers Association in July welcomed the differentiation.

“Group requests will be subject to specific criteria. In particular, the affected group must be clearly defined and an explanation specifying the concrete facts of the case is necessary in order for a group requests to be made,” a statement said.

The Neue Zürcher Zeitung newspaper welcomed the agreement but cautioned against violating basic legal tenets.

“It is correct to take a pragmatic stance to deal with fiscal legacies. But Switzerland must not ignore its constitutional principles and lose its dignity,” an editorial in Thursday’s edition said.

The newspaper said Switzerland had no choice but to grant Germany the same conditions it had agreed with the United States.

However, the NZZ questioned whether the parliamentary decision will pay off. Be it in Germany, where parliament is still to debate the tax deal with Switzerland, or at a domestic level, where opponents are challenging the accord to a nationwide vote.

Urs Geiser,
(With input from Andreas Keiser)

Birkenfeld reward may tempt other bankers

UBS whistleblower Bradley Birkenfeld was released from US prison last month.
UBS whistleblower Bradley Birkenfeld was released from US prison last month. (Keystone)
by Simon Bradley,

The record $104 million (SFr97.6 million) given by the United States to a whistleblower in a tax fraud case against the Swiss bank UBS is another defeat for Switzerland and may entice other bankers to follow suit, the Swiss papers agree.

Whistleblower Bradley Birkenfeld is credited with exposing widespread tax evasion at Swiss bank UBS. Birkenfeld served two-and-a-half years in prison for a fraud conspiracy conviction related to the case, which resulted in a $780 million fine against the bank and an unprecedented agreement requiring UBS to turn over thousands of names of suspected American tax dodgers to the Internal Revenue Service.

On Tuesday many Swiss papers led with stories about the size of Birkenfeld’s reward and its potential impact for Switzerland.

“Rich picking for a thief,” headlined the Basler Zeitung.

“Bradley Birkenfeld hits the jackpot in the United States,” said the French-speaking 24Heures newspaper.

The Blick tabloid newspaper said the case was not contradictory but showed “it’s possible to be both a perpetrator and a witness. More importantly, it proves how ruthlessly US officials are pursuing tax evaders and how determined they are to dry up tax havens.”

Zurich’s Tages-Anzeiger went further describing it as a “seductive offer for bankers”.

“This enormous reward show how the US are raising the stakes in their tax fight with Switzerland…in promising such high compensation the IRS are hoping that more incriminating material is handed over,” Zurich’s Tages-Anzeiger wrote.

The French-speaking daily Le Temps agreed that Birkenfeld’s huge reward could encourage other bank employees to follow his example.

“Those Swiss bank employees whose names were handed over to the US authorities by their banks now know how generous the US tax services can be to those who help them hunt tax cheats,” it wrote.

Whistleblowing habits “may be changing”

Eleven Swiss banks are currently under investigation by US authorities looking into allegations the banks helped Americans evade taxes.

Some 10,000 files have been relayed to the US Department of Justice containing written correspondence and notes of telephone calls made between bank staff and US clients. Some of this data has been used to identify specific bank staff.

Swiss bank employees, fearful of how the decision to hand over data could affect them, have begun legal proceedings against banks and the government.

Whistleblowing is not part of Swiss culture, Le Temps declared, but the bad feeling among the bank employees affected is such that habits “may be changing”.

The French-speaking daily said the reward was clearly another a defeat for the Swiss banking industry.

“It weakens the already uncomfortable position of the eleven banks that are trying to escape the clutches of the US justice and tax authorities…and limit the fine that they will inevitably have to pay,” it declared.

Tide turns for transparency

After several affairs involving CDs of stolen bank data bought by Germany, the nine-figure reward shows to what extent “tax transparency is not an option but a necessity for the entire finance industry”.

“Birkenfeld was a blessing for the Swiss financial industry,” the Blick commented. “He only sped up what was to come anyway – a transition from “dirty” to “clean” money. Bank secrecy has run its course for tax evaders, but it is worthy of protection for an open society that wishes to provide financial privacy for honest customers.”

Tages-Anzeiger concluded that the move to grant such huge compensation was “completely in line with the Obama administration’s strategy against international tax evasion and its use of Switzerland in its election campaign as an example of a dubious tax location”.

“If Obama is re-elected the Swiss government should brace itself for the US to become even less open to compromise,” it declared.

The Basler Zeitung was more critical: “Clearly Switzerland is being made to understand that the tried-and-tested practice of investigations, threats and blackmail will continue like before.”

The paper advised the government to break off ongoing tax discussions with the US and “at the worst allow things to develop into a confrontation. Maybe then the US justice or foreign ministries will bring the IRS to terms.”

The NZZ newspaper was equally critical of what it saw as “absurd methods” to track tax dodgers whereby a "crook out for revenge steals vast amounts of protected data for money" and is finally rewarded with $104 million as a hero.

The state thus turns into a “receiver of stolen goods and incites its citizens into illegal activities and betrayal” and in so doing “the rule of law and above all morals” are left on the sidelines, it concluded.

Simon Bradley,

UPDATE 1-Still hope for German-Swiss tax evader deal -Schaeuble

(Adds detail, background, quotes, SPD reaction)

(Reuters) - A deal between Germany and Switzerland to crack down on tax evaders is imperiled by an opposition party that says it does not go far enough, but German Finance Minister Wolfgang Schaeuble said on Tuesday he still hopes to get it approved.

Switzerland and Germany struck a deal in April to levy taxes on the assets that Germans have stashed in Swiss accounts to avoid the taxman but the opposition Social Democrats (SPD) party has said it will block the plan in the upper house of parliament, the Bundesrat, where the governing centre-right coalition has no majority.

The existence of the Swiss accounts has caused an uproar in Germany where the SPD-ruled state of North Rhine-Westphalia, Germany's most populous, has purchased CD discs containing bank data from whistleblowers to track down tax evaders who attempt to move their money before the deal comes into effect, planned for early next year.

Last weekend, senior SPD member Joachim Poss said his party would scupper the tax deal regardless of whether Switzerland makes concessions to allow back-dated inquiries, but Schaeuble said he thinks the deal with the Swiss is as good as it can get.

"I hope very much that we still manage to get it ratified," Schaeuble said as he opened a debate on Germany's 2013 budget in the Bundestag lower house.

"We have an agreement with Switzerland which means that in the future we will treat assets in Switzerland like those in Germany - you cannot reasonably want any more than that."

Until now, one of the SPD's criticisms has been that, as it stands, the pact would allow people to evade taxes by taking their money out of Switzerland before the deal takes effect.


The Swiss and German governments have already renegotiated the deal once, deciding in April to raise the retroactive levy on German funds held in Swiss bank accounts in an attempt to placate the SPD.

"Even in (the agreement's) renegotiated form, tax evaders are still protected and shrouded by anonymity," the SPD's Poss told the Bundestag during Tuesday's debate.

"They can still transfer money that has not been taxed to Switzerland and that, Mr Finance Minister, is a provocation of honest taxpayers," he said.

German media have accused Swiss banks of telling German clients to shift money to Singapore to avoid taxation.

Schaeuble said that without the deal, there would be nothing to prevent money from "sneaking out" of Switzerland.

Norbert Barthle, the budget expert for Chancellor Angela Merkel's Christian Democrats (CDU), urged the SPD to ensure that their state premiers did not block the deal.

"Then we would have more tax revenues - experts say around 10 billion (euros) ($12.85 billion), which we could rake in immediately and we would use that to reduce net borrowing," said Barthle.
Germans hold an estimated 150 billion euros in Swiss accounts.

Banking secrecy is key to Switzerland's $2 trillion offshore wealth management industry. It has refused an automatic exchange of information on account holders and is pursuing instead the strategy of a withholding tax to preserve secrecy. ($1 = 0.7821 euros) (Reporting by Michelle Martin, Sarah Marsh and Alexandra Hudson; Writing by Michelle Martin, editing by Gareth Jones and Michael Roddy)

Sunday, 2 September 2012

Switzerland pays the price for banking secrecy

Will the Swiss banking industry be able to survive the death of banking secrecy?
Will the Swiss banking industry be able to survive the death of banking secrecy? (Keystone)
Aug 30, 2012 - 11:00-by Armando Mombelli,

Attacks from European governments, investigations against Swiss banks in the United States and international arrest warrants against bankers - in the space of just a few years, banking secrecy has turned into a costly burden.

"Today I met several bankers in Zurich. They were all shaking their heads saying, ‘In 40 years of operations we’ve never had a crisis like this one – a war like the one being waged against the Swiss banking system. We’re in the artillery sights of every country and every day there are new attacks’,” recounted Paolo Bernasconi, a business law professor at St Gallen University and former Ticino public prosecutor.

"Many bank directors are unable to leave Switzerland because they risk being arrested.”

The storm sweeping through the Swiss banking sector can also have terrible consequences for those not directly involved. In August, the two teenage sons of a Geneva banker who flew to the US on holiday were detained by customs officials on arrival and grilled about their father’s activities.

Rapid change

This is not the first time that banking secrecy has been targeted by other countries, but until a few years ago they were isolated attacks rather than orchestrated campaigns launched by the world’s leading economic powers.

Swiss banks, as well as many tax havens, had always been able to place part of their activities in a grey zone, which is seen by most governments to be black. Eleven Swiss banks are under investigation by US authorities looking into allegations the banks helped Americans evade taxes.

“For 50 years, Swiss banks have lived by the following rule: we strictly uphold Swiss legislation while ignoring foreign legal norms. This has earned us a great deal of money – not just for the banks, but us as well,” Bernasconi said.

“Today we’re paying the price. But it’s not just those who were responsible in the past who are paying for it, but the new generation as well; they are losing their jobs and suffering from the impact of the crisis.”

Not so long ago, bank directors and politicians claimed that banking secrecy was “not negotiable”. But they underestimated the speed with which attitudes were changing in the international fight against tax evasion.

In 2009 when the G20 and the Organisation for Economic Co-operation and Development (OECD) officially took up the battle against banking secrecy, Switzerland was placed on a grey list of countries accused of not cooperating on tax matters.

In the crossfire

To avoid ending up on a blacklist, Switzerland was obliged to urgently adopt a range of OECD standards, including ending the historic distinction between tax fraud and tax evasion, which was unacceptable for other countries.

Under pressure from the US, the Swiss were also forced to hand over data on thousands of clients of Swiss banks to American authorities.

The Swiss government was caught in the middle. While the centre-left parties demanded absolute transparency immediately, for the rightwing Swiss People’s Party, supported by the nationalist Campaign for an Independent and Neutral Switzerland group (ASIN), it was clear that the cabinet had caved in under pressure.

“We have a weak government that capitulated in a humiliating way to the EU and the US, who keep trying to weaken our financial sector and banking secrecy,” said People’s Party parliamentarian and banking expert Hans Kaufmann.

Bernasconi said the rightwing parties’ viewpoint was “suicidal”.

"The People’s Party and ASIN have to realise that Switzerland is small fry compared to the US, the EU, and the OECD. Our country is completely tied to the global trading, banking and payment systems; it can’t afford to end up on a blacklist. Today, no one can avoid the OECD standards,” he warned.

Another way

To avoid the automatic exchange of tax information, which would effectively mean the end of banking secrecy, the government is currently pursuing a new path – negotiating bilateral tax treaties, known as Rubik accords, with interested countries.

Bilateral tax agreements have already been signed with Germany, Britain and Austria. Switzerland has agreed to levy a punitive retroactive tax on undeclared capital to regularise the past and apply a withholding tax to future interest income from those accounts.

But right-of-centre Swiss parties have launched a referendum against the three Rubik treaties already signed.

“These agreements are unacceptable. They do not contain any kind of reciprocity. They represent an administrative burden that is too high for the banks and the tax rates are almost confiscatory,” said Kaufmann.

“In two years, once they have pocketed the money, these countries will denounce the agreements and try to impose the automatic exchange of tax information.”

Bernasconi disagrees: "Rubik is not the answer to all our problems but it can solve some of them. The automatic exchange of tax information will definitely arrive one day as the OECD and the US are determined but at least we will have time to get ready and we will receive fewer blows from other countries.”

He said another thing should not be forgotten: “These tax agreements serve as a guaranteed amnesty for Swiss bankers who today can no longer risk leaving Switzerland.”

Secure island

In the face of such unprecedented attacks, will the Swiss banking industry be able to survive the death of banking secrecy or is there a risk it will lose huge amounts of managed funds?

“The greatest strength of the Swiss banking industry is not banking secrecy, but the country’s stability,” explained Jan-Egbert Sturm, head of KOF, the leading economic institute at Zurich’s Federal Institute of Technology.

“Switzerland is seen as an island of security, both politically, economically and from a monetary perspective. Just think about the strong Swiss franc.”

Sturm said this stability is particularly important during times of crisis such as the current problems in the eurozone: “And despite all these attacks against banking secrecy, massive amounts of funds continue to flow from abroad into Swiss bank accounts.”

Armando Mombelli,
(Translated by Simon Bradley and Jeannie Wurz)

Swiss Bank Employee Arrested for Stealing Customer Data

In another blow to the Swiss banking industry, a $2 trillion business based on secrecy, private bank Julius Bear confirmed Sunday that one of its Zurich-based employees has been arrested on allegations of stealing private customer information, according to the Associated Press.

That information, the reports said, was then passed on to German tax investigators. The story first reported by the Swiss weekly SonntagsZeitung.

The arrest of a Swiss private bank employee underscores the importance of having the right security policies and controls in place. It also strengthens the case for data breach insurance.
Banks typically buy the insurance in order to hedge against such breaches.

The insurance covers mishaps caused by low-level employee misconduct and protects against the loss of vendor-controlled data.

Julius Baer recently agreed to pay 860 million francs ($879 million) to buy Merrill Lynch's wealth management operations outside the United States.

Prosecutors seek names of Swiss bank employees

The war against Americans who use Swiss banks to evade taxes has been successful, even as it has pierced the aura of the once-vaunted Swiss banking system, which touted its secrecy.

A numbered account at a Swiss bank is hardly a guarantee of confidentiality these days. The U.S. is hardly the only country that has gone after Swiss banks in this regard. The head of one of Germany's main political parties has accused Swiss banks of "organized criminality" for helping rich Germans evade taxes and would like to see some criminal charge brought. Credit Suisse is currently under investigation by German authorities, but prosecutors want more than the clients from these banks. Increasingly, they are seeking the names of employees of Swiss banks--such as the Swiss unit of HSBC, Credit Swiss and others--as well as a wide range of identifying information (including copies of passports), with the idea that some of them might someday be charged with facilitating mass tax evasion.

So far, at least five banks have supplied e-mails and telephone records containing as many as 10,000 names to the Department of Justice, according to one Geneva- based lawyer interviewed by Reuters. Swiss banks are eager to settle the many probes in this area, and are apparently willing to provide the names, to the chagrin of employees. The banks say that most employees have nothing to fear, as they worked by the book.
But that's not enough to inspire confidence in many. One HSBC executive said he was afraid he would be arrested if he set foot in the U.S.

Read more: Prosecutors seek names of Swiss bank employees - FierceFinance

HSBC hands US more staff names in tax evasion probe

Wed Aug 15, 2012 10:25pm IST

* Bank says more data passed as part of December request
* Lawyer says one employee lawsuit filed, more could follow
* Big law firms unlikely to take on banks-lawyer
By Martin de Sa'Pinto

ZURICH, Aug 15 (Reuters) - Global bank HSBC has handed over details of current and former employees to the U.S. authorities, it confirmed on Wednesday, as part of a tax probe that almost sank rival bank UBS in 2009.

As a result the bank could now face legal action from individuals whose details have been revealed, lawyers representing them said.

In a letter to them seen by Reuters, the bank said it had passed on documents, in which their names appear, on the request of U.S. authorities looking to hunt down U.S. citizens with untaxed money held in Swiss accounts.

After passing on a first set of documents earlier this year, HSBC has sent the new batch to the U.S. Department of Justice and the Securities and Exchange Commission in an effort to reach a settlement over the investigation.

HSBC lawyer Lenz & Staehelin has told lawyers acting for these employees that the documents included the minutes of executive, board and audit committee meetings, client visit reports, emails and other correspondence.

"We have submitted further information to the U.S. authorities but it concerns the initial enquiry from December 2011. Client information has clearly not been submitted," HSBC Private Bank spokesman Medard Schoenmaeckers said by telephone.

Banks including HSBC, Credit Suisse and Julius Baer have already passed on about 10,000 employee names in an attempt to avoid the fate of private bank Wegelin, which broke up in January under threat of indictment, bank employees and lawyers said.

Credit Suisse said its cooperation with the U.S. authorities was also in the interests of the bank and its employees. Baer declined to comment.

Lawyer Douglas Hornung, who has filed a complaint against HSBC on behalf of its former chief legal counsel, said banks who handed employee names to U.S. authorities infringed the criminal code and Swiss privacy laws.

HSBC has avoided breaching strict Swiss banking secrecy laws by redacting from the documents any information that could lead to the identification of clients, said Lenz & Staehelin in a letter to lawyers acting for current and former employees of the bank.

In 2009 the Swiss authorities reached a deal for UBS to pay a fine of $780 million to avert criminal charges, and ultimately agreed to allow the bank to reveal details of around 4,450 clients.

Hornung said banks that hand over employee data to U.S. officials are hoping to reduce the potentially huge fines they might face if they are found to have helped U.S. clients avoid tax.

"HSBC could face a much higher fine than UBS, $1.3 to 1.4 billion would be logical. In cooperating HSBC can expect the fine to be lowered significantly," said Hornung.

The benefit of such a reduction for cooperating would far outweigh anything the banks would have to pay for breaching obligations to employees in Switzerland, where the maximum fine is 5 million Swiss francs ($5.15 mln) and there are no punitive damages, Hornung said.

A spokeswoman for the Swiss Attorney General confirmed that a legal complaint against HSBC had been received and said it was considering whether to open an investigation.


A former HSBC employee, who asked not to be named, told Reuters he had never dealt with U.S. clients and only realised U.S. officials had his name during a background check when he was shortlisted for a new banking job.

He was not offered the job.

"It can be difficult to inform former employees because as a company we don't keep records of their whereabouts. If they contact us, then we do inform them," Schoenmaeckers said.

But Hornung, a partner at Geneva-based Hornung Avocats, said allegations of professional damage might be hard to prove.

"I have spoken to five or six people in the same situation, which means there is some chance of demonstrating a direct link between being on the list and difficulties in finding further employment," said Hornung.

Bruno Seeman, a lawyer from small but locally renowned Zurich law firm Anwaltsbuero Landmann who is representing another former HSBC employee, said those wishing to sue the bank were unlikely to get any help from the largest law firms.

"The big five in Switzerland are all employed by the large banks, all the big commercial law firms with the capacity and know-how to act against big Swiss organisations cannot do so because it would be a conflict of interest," Seemann said.

"The effect is to prevent employees from approaching them because these law firms can't act against existing clients."