Wednesday, 29 February 2012

UPDATE 1-Swiss prosecutor says alleged data thief arrested

* Swiss arrest alleged Hyposwiss client data thief
* Individual held in custody as criminal investigation proceeds
* Hyposwiss latest in string of Swiss data theft cases

ZURICH, Feb 29 (Reuters) - Swiss police have arrested a man for trying to sell confidential client data from Hyposwiss Private Bank, Switzerland's prosecutor said on Wednesday.

The prosecutor said the unnamed individual, formerly employed by a firm that provided services to Hyposwiss, had approached a law firm with the data, and remains in custody after his Feb. 16 arrest.

Hyposwiss Private Bank's owner St. Galler Kantonalbank deferred questions to the prosecutor who would not give further details because the investigation continues.

Swiss banks have been hit by several cases of alleged data theft as foreign pressure ramps up on the alpine nation's bank secrecy laws.

One of the largest cases involved HSBC's Swiss private bank, which apologized after up to 24,000 accounts were handed over to French tax authorities stolen by Herve Falciani, a former HSBC computer specialist.

Last year, Credit Suisse paid a 150 million euro ($201 million) fine to end a German investigation alleging bank employees helped wealthy Germans dodge taxes.

Switzerland's banking secrecy rules, which are often used by foreigners to hide money in secret accounts, have come under pressure from other countries in recent years as their cash-strapped governments try to crack down on tax dodgers.

The first case in the recent series was in 2008, when stolen client data revealed that Klaus Zumwinkel, the former chief executive of German mail and logistics company Deutsche Post, had a Liechtenstein trust with LGT.

Swiss lawmakers set for tax plan vote

* Swiss lower house set for tax proposal vote on Wednesday
* Focus also on US-Swiss talks over hidden offshore accounts
* US, Swiss disagree over data handover guarantees-source
By Katharina Bart

BERN, Feb 29 (Reuters) - Swiss lawmakers are set to back a tax proposal with the United States on Wednesday in a move which could pave the way for Switzerland to settle a U.S. probe into Swiss banks and hidden offshore accounts.

Switzerland's lower house will vote on a proposal clarifying how Switzerland would hand over data on wealthy Americans suspected of dodging taxes at home.

The proposal, which passed the upper house in December, seeks to backstop an expected deal over U.S. probes into 11 banks including Credit Suisse and Julius Baer , likely to comprise a data handover and payment of a fine.

Legal loopholes threatened to upend UBS's deal with U.S. authorities in 2009 and Swiss officials are eager to avoid another lengthy court fight by clients seeking to protect their identity.

Specifically, the plan would allow Switzerland to hand over data on suspected tax evaders, even if U.S. tax authorities cannot identify alleged offenders by name or bank account. The move represents a weakening of Switzerland's long-cherished secrecy laws, which have underpinned the country's finance industry, on which the economy relies heavily.

There is little doubt the plan will pass after the Social Democrat (SP) party came out in favor and pledged to support the proposal if the government stays the course on planned clean-money measures.

Provided the plan does pass parliament and 100 days pass without a call for referendum, attention will shift to talks between the U.S. and Switzerland for a deal meant to sweep Swiss bank accounts clean of offenders and make good on past transgressions.

According to a source familiar with the matter, Swiss and U.S. talks are continuing, but sticking points remain in details such as how much client data from the 11 banks Switzerland will guarantee to hand over.

Though Switzerland has a rough idea how many potential tax evaders can be identified, the final number is a matter of speculation.

The Swiss banks have already sifted through client data for potential dodgers, through identifying characteristics such as clients who use a post-office address for their bank correspondence.
While U.S. negotiators are pushing for a guarantee on a large number of client data to be handed over, Swiss officials are reluctant to give in, according to the source.

The reasons involve the intricate nature of Swiss banking secrecy. Those deemed tax offenders still have a 30-day right to appeal and if they can prove their funds held in Switzerland are declared and taxed in the United States, Switzerland cannot hand over the data.

Another difficulty is that divisions between Swiss justice and finance arms have emerged over how to deal with U.S. negotiators, the source said.

The Swiss government wasn't immediately available to comment on the negotiations.
The talks came into sharper focus after U.S. prosecutors indicted Swiss private bank Wegelin in February, shortly after the bank broke itself up in the face of the U.S. campaign.

The government talks are largely separate from individual discussions conducted between U.S. officials and banks including Credit Suisse, which has put aside money towards paying a fine to the U.S. over offshore accounts, and Julius Baer.

U.S. officials are using information won after a landmark settlement with UBS in 2009. The talks also coincide with the latest of several amnesty programs offered by the Internal Revenue Service, which is attempting to shake out tax offenders by making it easier for them to come clean.

Tuesday, 28 February 2012

Raiffeisen bank breaks ranks over tax dispute

Vincenz warned that important trading partners such as India could exert more pressure on Switzerland in future
Vincenz warned that important trading partners such as India could exert more pressure on Switzerland in future (Ex-press)
by Matthew Allen,

The head of Switzerland’s third largest banking group has called for the country to bow to international demands for an automatic exchange of tax information.

Pierin Vincenz, chief executive of Raiffeisen Switzerland, is the first major Swiss banker to openly advocate unrestricted sharing of client data with other countries. Switzerland is resisting such a move, which would undermine banking secrecy laws.

Vincenz first mooted his proposal in the Swiss Sunday newspaper Sonntag and outlined his views further in Tuesday’s edition of the Tages-Anzeiger newspaper, saying there should be no “taboos” on the subject.

Switzerland has been placed under increasing pressure in recent years to end its global status as a haven for foreign tax dodgers.

The Swiss government was forced to hand over UBS client data to the United States last year after the bank was caught assisting tax evaders. Switzerland is now poised to transfer a further batch of coded information to the US after other banks came under suspicion.

Fragmented response

Vincenz  said it was time to bow to the inevitable conclusion that the European Union would force a similar deal in future.

“There will be a form of automatic information exchange with the US,” he told the Tages-Anzeiger. “If the US gets the details of thousands of clients, then Europe will want the same.”

Vincenz went on to criticise the fragmented Swiss response to a variety of threats and demands from the US and Europe.

The Swiss government has generally lowered hurdles for handing over client data to foreign tax authorities that are investigating suspected evasion cases.

Separate deals

But Switzerland has steadfastly stopped short of meeting demands to automatically transfer such information if no suspicion of crimes exist. The government is also implacably opposed to so-called “fishing expeditions” that call for information with little or no evidence of wrongdoing.

Last year, Switzerland concluded deals with Britain and Germany that would compel Swiss banks to collect taxes on the assets of clients from those countries unless they could prove they were tax compliant.

But the treaties could well collapse under the combined weight of German parliamentary disapproval and legal objections from the European Commission.

Earlier this week, the Swiss government came up with a different plan to police its own banks to make sure that they only took assets from tax compliant sources.

“Suddenly everyone is talking about a clean money strategy and everyone means something different,” Vincenz told the Tages-Anzeiger.

“We really have to show that Switzerland is serious about its clean money strategy. And that will only happen when such a strategy attracts international support.”

Wegelin assets

Vincenz warned that important trading partners, such as India and Brazil, could start to exert more pressure on Switzerland in future unless a global tax evasion solution was found.

The Raiffeisen boss called for the formation of a steering group of politicians, bankers and legal experts to find a solution to the problem – along the same lines as the “too big to fail” committee that reformed financial regulations in the aftermath of the financial crisis.

In January, Raiffeisen announced that it would buy up the wealth management business of bank Wegelin. Switzerland’s oldest private bank sold out to the cooperative after folding under the pressure of  the ongoing US tax probe.

Before selling to Raiffeisen, Wegelin stripped out the contentious US offshore business which was retained by the bank’s partners in their continuing legal battle in the US.

Matthew Allen,

Monday, 27 February 2012

Financial policy tops parliament agenda

A bird's-eye view of the House of Representatives - a political stage for the next few weeks
A bird's-eye view of the House of Representatives - a political stage for the next few weeks (Keystone)
by Urs Geiser,

A deal with the United States extending legal assistance in tax probes is likely to catch media attention during the regular three-week spring session of parliament.

Debates over the circumstances of the recent resignation of the Swiss National Bank president, as well as other financial policy issues, are also high on the agenda.

In December, the Senate approved a deal granting information on US clients of Swiss banks to the authorities in Washington investigating suspected tax dodgers. The House of Representatives is now due to debate it.

Passage of the bill in the House appears certain after the centre-left Social Democrats pledged to join the centre-right parties and give up their opposition.

The party-political policy U-turn came in the wake of last week’s decision by the government to seek to boost due diligence requirements for banks in a bid to clean up Switzerland’s tax haven image.

The accord foresees that Washington no longer has to provide the name and other details of a suspected tax dodger, but legal assistance is granted based on a certain pattern of bank client behaviour.

US pressure

The expected approval of the bill on Wednesday should help the Swiss government and the banking sector avoid further pressure from the US, which has threatened legal action against Switzerland’s financial sector. However, Finance Minister Eveline Widmer-Schlumpf has refused to link the bill directly to a swift solution of the stand-off between Washington and at least 11 Swiss banks.

The rightwing Swiss People’s Party is now the only main group which remains opposed to the deal, arguing it would further undermine cherished Swiss banking secrecy.

This was dealt a blow when the government in March 2009 agreed – in line with standards of the Organisation for Economic Development and Co-operation (OECD) - to lift the legal distinction between criminal tax fraud and accepted forms of tax evasion for foreign clients of Swiss banks.

In the same year, Switzerland handed over nearly 4,500 names to Washington as part of a deal to avoid potentially disastrous legal action against the UBS bank.

National Bank

Time has been set aside in both parliamentary chambers during the third week of the session for discussions over the reasons which led to the resignation in January of the former head of the Swiss National Bank, Philipp Hildebrand.

He had come under increasing pressure over his wife’s controversial private currency transactions after a former bank employee, in violation of banking secrecy rules, helped publish confidential client data.

Observers have described the fall of Hildebrand as part of a political manoeuvre by the People’s Party strongman, Christoph Blocher.

Parliament could decide to discuss the creation of a special parliamentary investigation committee. However, it has no say over possible court action or the appointment of a successor to Hildebrand as the National Bank enjoys wide-ranging autonomy.

An investigation by a cantonal prosecutor is underway into an alleged breach of banking secrecy rules, while the central bank has decided to examine its own corporate governance regulations more closely.


Among the main issues tabled is an overhaul of the system of lump-sum taxation for wealthy foreigners, a proposal to grant the Swiss hotel sector a preferential value added tax rate and approval of a planned reform of the International Monetary Fund, aimed at increasing financial contributions from its member states. Switzerland joined the IMF in 1992 and has held a seat on its executive board.

Away from financial matters, parliament was due to begin discussions about plans to tighten citizenship rules, but the debate was struck off the list at short notice.

The government is set to face harsh criticism by rightwing and centre-right parties over its asylum policy as the number of asylum applications continues to rise, reaching a ten-year high in January.

The proposals tabled include making development aid conditional on countries’ cooperation on asylum matters, speeding up the asylum procedure and the reintroduction of border controls with neighbouring Italy despite a European single-border agreement.

Labels, bombs, troops

The stakes are high for the agricultural sector, the food and the watchmaking industry as parliament begins discussions on boosting domestic protection under the designation of origin “Made in Switzerland” and the Swiss cross.

A key bone of contention is a plan to reduce the minimum requirement for a product to receive a “Swiss” label.

Final approval from parliament is expected for an international agreement banning the production, use, stockpiling and proliferation of cluster bombs. The convention was signed by the government in 2008 and has been debated in parliament twice before as conservative parliamentarians tried to block approval.

Both chambers are set to give their tacit approval to the deployment of special forces to protect the Swiss embassy in Libya.

It reopened last October following the fall of the regime of Moammar Gaddafi. But the use of a British private security firm, which sought to set up its commercial headquarters in Switzerland, has caused public concern.

Urs Geiser,

Sunday, 26 February 2012

Italian money heads back to Switzerland

Italian borders have increased checks on vehicles entering Switzerland
Italian borders have increased checks on vehicles entering Switzerland (
by Gerhard Lob in Lugano,

Italians are shifting money into Swiss banks, prompting fears that vast sums are crossing the border illegally and adding to the billions of euros already stashed away.

But financial experts say the funds are mostly assets that have been declared to the tax authorities in Italy and are not substantial.

According to Attilo Befera, head of the Italian Revenue Agency, huge amounts of capital are leaving the country amid uncertainty surrounding its financial wellbeing. In an interview with the “La Repubblica” newspaper, he said that the fight against tax evasion needed to be stepped up.

Last year, €11 billion (SFr13.25 billion) that was about to leave the country was seized by the financial police at Italy’s borders. Seizures of cash increased by around 50 per cent in 2011, while the figure for gold grew by at least 30 per cent.

There have been reports that old smugglers’ routes between Italy and Switzerland have been re-activated while rumours have been circulating that Swiss banks have been forced to rent safes in hotels to meet the unexpected demand from Italian clients.

Claims that Italians are smuggling massive amounts of assets out of the country are not new.

In December for example, La Repubblica reported that some smugglers were resorting to primitive methods such as hiding money in suitcases or under their clothes, as in the 1970s and 1980s.

Amount questioned

In canton Ticino, where most Italian funds have been deposited in the past, bankers play down this kind of report.

“There has been an influx of money, but not as much as people believe,” said economist and journalist Alfonso Tuor, who believes most of it is made up of small deposits.

Credit Suisse in Ticino declined to answer any questions about the alleged arrival of fresh Italian assets.

Alfredo Gysi, president of the board of the BSI bank based in Lugano, conceded in a newspaper interview in January that Italian funds were coming over the border, but there was nothing true about the numbers being mentioned. 

BSI created a number of new accounts, and existing clients had only brought medium-sized amounts over the border to deposit.

Business lawyer and financial expert Paolo Bernasconi shares that impression, pointing out that Italians have been transferring officially declared assets from Italy to Switzerland for the past few months.

The risk that an Italian bank might go belly-up as the result of the country’s debt level and the financial crisis has led many people to spread their assets a little wider. Switzerland’s better outlook has convinced Italians to transfer their funds to Swiss banks.

“The influx of legal money shows that the Swiss government’s so-called ‘white money’ strategy is starting to pay dividends and that’s a positive signal,” Bernasconi told Certainly, for the lawyer, more important than any smuggling going on.

More checks

For the banks operating in Ticino, there is no apparent interest in taking on undeclared assets from Italy. The Italian authorities have criticised Swiss financial institutions in the past, and Ticino banks in particular.

Italy has also tightened border controls to stop undeclared assets fleeing the country. One method has been to systematically photograph cars crossing into Switzerland.

There is €150 to €160 billion worth of undeclared Italian assets in Swiss banks, according to various estimates. The Italian authorities have tried to repatriate these funds with three fiscal amnesties in the past decade.

Those who came forward faced lower penalties and immunity from prosecution. The last amnesty in 2009 and 2010 even allowed taxpayers to keep their Swiss accounts so long as they officially declared their assets.

The Swiss Bankers Association has refused to comment on the latest developments in southern Switzerland. “We don’t have any numbers to go by,” said spokeswoman Rebeca Garcia.

The story of renting hotel safes has at least brought a smile to bankers’ faces. In Lugano, it is considered by many observers as simply part of a strategy to intimidate Italian clients.

Gerhard Lob in Lugano,
(Adapted from German by Scott Capper)

Thursday, 23 February 2012

Clean money plan greeted with scepticism

Eveline Widmer-Schlumpf wants a credible and competitive Swiss financial sector Eveline Widmer-Schlumpf wants a credible and competitive Swiss financial sector (Keystone)
by Urs Geiser,

Government plans to extend due diligence requirements of banks and improve assistance on international tax matters have been greeted with scepticism by the Swiss press.

The government announced on Wednesday that it had mandated the finance ministry to prepare concrete measures by September in a bid to strengthen Switzerland’s financial centre, which is facing sustained pressure by several countries, including the United States.

Finance Minister Eveline Widmer-Schlumpf said the cabinet had agreed on three tenets, including upgrading due diligence rules to prevent banks accepting untaxed assets. Besides these additional duties for banks, their clients would also be required to sign a declaration that they had fulfilled all tax obligations in their home countries.

But newspapers based in the key financial centre of Zurich denounced the plan as vague and ineffectual.

“As regards giving the Swiss financial centre breathing space, these efforts should not be overvalued for several reasons,” the Neue Zürcher Zeitung wrote. “This will bring only a little relief in the tax conflict with the United States … that will play out on another level. As for fixing past irregularities, self-declaration will not solve anything either.”

The Tages-Anzeiger also derided the plan: “As for concrete details, the clean money strategy of the government could not be more vague”.

Meanwhile the Basler Zeitung said the international community would be sceptical of any plan in which the financial sector was responsible for enforcing honesty.

“The idea of self-declaration is far from being sufficient to calm the suspicions of foreign tax authorities. Even less so because Eveline Widmer-Schlumpf wants to leave it up to the banks to ensure the implementation and monitoring of such a scheme.”

French-language dailies Le Temps and La Tribune de Genève were less severe, with both commenting that the government was hardening its line on the issue.

“Symbolically, it’s a strong gesture,” said La Tribune de Genève. “It is not insignificant to require a client to sign a certificate of honesty. One, it will force potential fraudsters to think twice. Two, the document can be used as proof later on if the client has lied and is tracked down by tax authorities in their own country.”

Credible and competitive

Widmer-Schlumpf told reporters the government wanted a strategy which would ensure a “credible, tax compliant and competitive Swiss financial centre.” She said the cabinet continued to refuse the adoption of an automatic exchange of information, notably demanded by the European Union.

“We are convinced that this strategy allows us to live up to a legitimate demand of bank clients for privacy and to the equally legitimate demands of foreign countries to tax their citizens,” she told a news conference.

She said the aim was to settle past tax problems with individual countries through amended deals and a withholding tax to ensure that investment income and capital gains of Swiss bank clients living abroad are taxed in line with international regulations.

At least 11 Swiss banks are under investigation by Washington in the wake of a 2009 accord to transfer data concerning around 4,500 American bank clients suspected of violating US tax laws.

Approval of tax deals is also pending with neighbouring Germany and Britain.

Mixed reaction

Wednesday’s government policy statement met mixed reaction from political parties.

The Social Democrats said they welcomed the cabinet policy of “cleaning up the financial centre”, force banks to adopt a clean money strategy and reject untaxed money. The group said its most of its parliamentarians would now support the US tax deal.

The centre-right Radical Party, traditionally close to business interests, praised the government for taking more time to present concrete measures and refusing to cave in to pressure from the left.

The rightwing Swiss People’s Party, which has staunchly defended banking secrecy, criticised the government’s plans, accusing it of overloading the banks with further administrative duties even though they are not part of the tax system.

The centre-right Christian Democrats had already announced last week they would support the government’s strategy. The party’s spokeswoman said on Wednesday it was a step in the right direction, but further details were needed.

The Swiss Bankers Association said it was satisfied the government was sticking with a strategy it had already outlined and that it was still refusing the automatic exchange of client data.

But it called for any new regulations to be applied to all financial intermediaries and not just the banks.

However, the non-governmental organisation Berne Declaration, which works for equitable relations between the industrialised world and developing countries, slammed the strategy as mere window dressing for a domestic audience.

Urs Geiser,
(With input from Samuel Jaberg)

Swiss govt says banks won’t take untaxed foreign deposits

New Delhi: In a move that has implications for India’s fight against black money, the Swiss Government has asked its banks to prevent acceptance of “untaxed assets” in their accounts without violating client confidentiality.

“Banks’ existing due diligence requirements are to be extended in order to prevent the acceptance of untaxed assets of foreign clients, including Indians, more effectively,” the Swiss Federal Council,the country’s top policy-making authority has said.
The Swiss authority said they will not have automatic information exchanges with countries. AFP

“The focus is on enhanced due diligence requirements for banks when accepting assets as well as a requirement for foreign clients to make a declaration on the fulfilment of their tax obligations,” it said.
However, it opposed the idea of ‘automatic information exchange’ with any other country, asserting the ‘bank client confidentiality’ should be respected as far as possible.

Swiss banks are known to have the strongest secrecy clauses globally, which have helped them attract the rich and mighty clients from across the world, but has also given them a ‘tax haven’ tag.

In a multi-pronged strategy aimed at removing this tag, the the council has also proposed that all those past cases should be immediately settled, where assets of foreign clients of Swiss banks have not been correctly taxed.

The steps come on the back of growing international pressure on Swiss authorities to act against any possible hoarding of illicit and untaxed money in Switzerland-based banks by people from different countries, including India.

Earlier this month, the CBI Chief had said at a function that Indians are the largest depositors in Swiss banks. Within days, the Swiss Embassy said in a statement that such estimates and statistics lacked evidence and were uncorroborated.

While there have been various estimates of Indian black money stashed abroad, the statement by the CBI Director was significant as it was for the first time someone in authority in the country had come out with an estimate.

The Swiss Federal Council has asked its Department of Finance to prepare concrete measures by September, 2012.

The proposed steps include a greater international cooperation and taxation of investment income and capital gains for Swiss bank clients in the future.

“The Federal Council’s aim is to create favourable framework conditions for the Swiss financial centre that boost its competitiveness and at the same time are accepted worldwide. Abuses of bank client confidentiality should be prevented in so far as possible,” it said in a statement.

It has also proposed international withholding tax agreements for taxing the clients as per the regulations of their home country, while safeguarding their privacy.

“Despite the fact that some issues have not yet been fully resolved, there is international interest in this approach and it will be pursued by Federal Council beyond the agreements already negotiated with Germany and the UK,” it said.

The Swiss authority has also proposed an improved administrative and mutual assistance in accordance with the international standards.

While proposing steps to comply with the various double taxation agreements, the Council also said that serious tax crimes should be taken into account in the fight against money laundering in the future.

It has also sought extension of due diligence requirements of financial service providers as a complementary component.

The Swiss banks’ lobby group, the Swiss Bankers Association (SBA) has welcomed many of the proposed moves.

“For over two years now, banks in Switzerland have been pursuing a strategy of tax compliance, the key elements of which consist of a solution for the past (regularisation), a solution for the future (final anonymous withholding tax for the future), the protection of privacy for taxed assets and growth through market access,” SBA said in a statement.

The SBA also welcomed the Federal Council’s assertion against an automatic exchange of information.
“The codes of conduct will stipulate a risk-based approach whereby it makes sense for banks to obtain a
declaration from clients about their tax situation (self declaration) if they have indications that the clients have not complied with their tax obligations,” it noted.

However, the SBA opposed any “systematic duty of self-declaration as it has no credibility abroad, is unlikely to become an international standard, does not provide a solution for assets already deposed in Switzerland and casts suspicion over all clients.”

It also said that there was a need for all financial intermediaries, and not only banks, to implement the new provisions.

Swiss govt asks its banks to check 'untaxed' money flow

New Delhi: In a move that has implications for India's fight against black money, the Swiss Government has asked its banks to prevent acceptance of "untaxed assets" in their accounts without violating client confidentiality.

"Banks' existing due diligence requirements are to be extended in order to prevent the acceptance of untaxed assets of foreign clients, including Indians, more effectively.

"The focus is on enhanced due diligence requirements for banks when accepting assets as well as a requirement for foreign clients to make a declaration on the fulfilment of their tax obligations," the Swiss Federal Council, the country's top policy-making authority has said.

However, it opposed the idea of 'automatic information exchange' with any other country, asserting the 'bank client confidentiality' should be respected as far as possible.

Swiss banks are known to have the strongest secrecy clauses globally, which have helped them attract the rich and mighty clients from across the world, but has also given them a 'tax haven' tag.

In a multi-pronged strategy aimed at removing this tag, the council has also proposed that all those past cases should be immediately settled, where assets of foreign clients of Swiss banks have not been correctly taxed.

The steps come on the back of growing international pressure on Swiss authorities to act against any possible hoarding of illicit and untaxed money in Switzerland-based banks by people from different countries, including India.

Earlier this month, the CBI Chief had said at a function that Indians are the largest depositors in Swiss banks. Within days, the Swiss Embassy said in a statement that such estimates and statistics lacked evidence and were uncorroborated.

The CBI Director A P Singh had also said that "it is estimated that around 500 billion dollars of illegal money belonging to Indians is deposited in tax havens abroad".

While there have been various estimates of Indian black money stashed abroad, the statement by the CBI Director was significant as it was for the first time someone in authority in the country had come out with an estimate.

The Swiss Federal Council has asked its Department of Finance to prepare concrete measures by September, 2012.

The proposed steps include a greater international cooperation and taxation of investment income and capital gains for Swiss bank clients in the future.

"The Federal Council's aim is to create favourable framework conditions for the Swiss financial centre that boost its competitiveness and at the same time are accepted worldwide. Abuses of bank client confidentiality should be prevented insofar as possible," it said in a statement.

It has also proposed international withholding tax agreements for taxing the clients as per the regulations of their home country, while safeguarding their privacy.

"Despite the fact that some issues have not yet been fully resolved, there is international interest in this approach and it will be pursued by Federal Council beyond the agreements already negotiated with Germany and the UK," it said.

The Swiss authority has also proposed an improved administrative and mutual assistance in accordance with the international standards.

While proposing steps to comply with the various double taxation agreements, the Council also said that serious tax crimes should be taken into account in the fight against money laundering in the future.

It has also sought extension of due diligence requirements of financial service providers as a complementary component.

UPDATE 1-Unsettled Sarasin sees more client outflows in 2012

Thu Feb 23, 2012 4:26am EST
* Sarasin had outflows of 2.4 bln Sfr in H2
* Compares with net new money of 3.9 bln Sfr in H1
* Assets under management drop 6.7 pct in 2011
* Shares rise 0.7 pct (Adds details, background)

ZURICH, Feb 23 (Reuters) - Swiss private bank Sarasin , rattled by uncertainty over its ownership and a data leak on the account of the former central bank head, expects clients to continue to withdraw assets this year after big outflows in second half of 2011.

Sarasin said clients withdrew a net 2.4 billion Swiss francs ($2.63 billion)in the second half of 2011 as assets under management slipped 6.7 percent on the year to 96.4 billion francs at the end of 2011, mainly due to sluggish market performance.

After months of speculation about its Sarasin holding, Dutch cooperative Rabobank sold its majority stake to Brazilian-Swiss private bank Safra in November.

"New clients showed a great reluctance to commit funds in the second half of 2011 because of media speculation about the change in Bank Sarasin's shareholder structure," Sarasin said in a statement on Thursday.

However clients were rattled again in January when the bank revealed an employee had breached strict bank secrecy laws by passing the bank account details of Swiss National Bank Chairman Philipp Hildebrand to his political opponents.

That leak -- which revealed details of a lucrative dollar trade by Hildebrand's wife just weeks before the central bank moved to cap the franc -- ultimately cost Hildebrand his job.

"We are convinced that our focus on sustainability and tax-compliant assets will pay off in the long run and that with the backing of Safra as a well-capitalised majority shareholder we can look forward to exciting prospects," Chief Executive Joachim Straehle said.

At 0925 GMT, Sarasin shares were trading 0.71 percent firmer.

However the bank said it expected more outflows in 2012 due to its shift to focus on managing only taxed assets.

Switzerland announced plans on Wednesday to force its secretive banks to do more to make sure foreign clients' money is taxed in an attempt to shake off its image as a haven for untaxed funds after pressure from U.S. and German tax probes.

Sarasin said it hoped to recruit 75 new client advisers this year and reiterated a target for assets under management of 150 billion francs by 2015. ($1 = 0.9116 Swiss francs) (Reporting by Katie Reid and Emma Thomasson.; Editing by Jane Merriman and Hans-Juergen Peters)

Wednesday, 22 February 2012

Swiss gov’t raises the ante for banks, other countries (update)

BERN, SWITZERLAND – The Swiss government announced the first phase of a strategy “for a credible, tax-compliant and competitive Swiss financial centre” Wednesday 22 February. The statement for the first time puts the emphasis on future offshore clients stating they are tax-compliant at home before an account will be opened.

The Federal Council says it has asked the Federal Finance Department to draw up the details of the strategy and it expects to announce a series of concrete steps by September 2012. Today’s statement provides an outline of what is to come.

The first step must be to settle past tax problems, says Bern, “in particular cases of clients living abroad whose assets have not been correctly taxed.” Existing clients’ assets will have to be “regularized” from a “tax viewpoint, thereby lowering the legal risks for banks”.

This will be followed by a three-prong programme that focuses on international cooperation and future taxation of investment income and capital gains for offshore accounts:

  • International withholding tax agreements, beyond those negotiated with Germany and the UK: Bern calls this “an effective means of taxing taxpayers in accordance with the regulations of their country of domicile while safeguarding their privacy”. It notes that some issues “have not yet been fully resolved, [but] there is international interest in this approach”.
  • Improved administrative and mutual assistance based on international standards as laid out in double taxation agreements (DTAs). Serious tax crimes and money laundering investigations will be more closely linked, but the key part of this will be the new Tax Administrative Assistance Act, out for public consultation until April. It replaces an ordinance that has been in place since October 2010, implemented quickly so that Switzerland could comply with an OECD deadline to observe its standards. The new law, Bern announced earlier, “assumes the basic features of the provisions of the ordinance. It contains the principle that administrative assistance will be provided exclusively upon request in individual cases. Switzerland will not provide any administrative assistance in the case of requests based on stolen data. Unlike the ordinance, which covers only administrative assistance in accordance with double taxation agreements, the Act also governs administrative assistance based on other agreements which make provision for the exchange of information relating to tax matters, for example the agreement on the taxation of savings income with the EU. The appeal procedure is to be streamlined and the deadlines shortened.”
  • Tougher due diligence requirements for banks to more effectively prevent them from accepting untaxed assets; foreign clients will be required “to make a declaration on the fulfillment of their tax obligations”.
Switzerland manages the largest amount of private offshore funds in the world, 27 percent. The Swiss argue their share is more the result of financial management skills than banking secrecy and the new government strategy is banking on this. The Swiss have nevertheless found it hard to shake off the old cliche that the country is a tax haven (according to OECD definitions it is not, although Tax Justice Network views it differently), in a world where wealth management is rapidly changing.

Boston Consulting publishes an annual report on worldwide private assets under management and in May 2012 it noted that in the previous year these assets had grown by 8  percent to a record $121.8 trillion. It issued a press release noting that:
“‘Offshore private banking remains a tumultuous part of the business,’ said Anna Zakrzewski, a BCG principal and a coauthor of the report. ‘The relative importance of offshore centers is changing rapidly. Some are benefiting from continued asset growth, while others are suffering large asset outflows, with wealth being repatriated to onshore banks, transferred to other offshore centers, redirected into nonfinancial investments, or simply spent at a faster rate.’
“For most clients, however, the core value proposition of offshore banking remains, Zakrzewski said. ‘Offshore wealth managers offer a sense of stability and security that these clients cannot find in their home countries. Other clients value the expertise or access to certain investments provided by offshore private banks. To continue to grow, offshore wealth managers will need to adapt to the changes imposed by the push for greater transparency while accentuating their strengths in areas that remain extremely relevant to clients around the world.’”
Switzerland’s announcement comes at a time when media have been speculating whether the country and the US are reaching an agreement over a fine a group of 11 Swiss banks would pay, linked to US accusations they helped American citizens and residents hide money offshore in an effort to evade taxes. Today’s announcement covered by Reuters, Wall St Journal
Posted by Ellen Wallace on 22 February 2012 at 20:32 | permalink

Banking secrecy remains secure at home

Take note: not everyone agrees with the Swiss distinction between tax fraud and tax evasion
Take note: not everyone agrees with the Swiss distinction between tax fraud and tax evasion (Ex-press)
by Peter Siegenthaler,

Switzerland’s tax dispute with foreign countries would disappear overnight were it to lift banking secrecy completely rather than gradually.

However, the only Swiss political party to consider this option is the centre-left Social Democratic Party – and even then half-heartedly.

“Is it never going to end?” is the reaction of many Swiss to the continual attacks on their banking secrecy from abroad.

Not only Germany, Switzerland’s most important trade partner, but also the United States and many other countries no longer tolerate the fact that Swiss banks facilitate the tax-evading activities of their citizens.

Unlike banking secrecy in other countries, Swiss authorities have only given administrative assistance to other governments in cases of tax fraud, not evasion.

Where’s the difference? According to Swiss law, someone engaged in tax fraud is actively trying to hide money from the tax authorities, for example by falsifying documents. Tax evasion on the other hand involves “forgetting” to declare one’s assets.

Tax evasion is illegal in Switzerland and can result in steep fines, but banking secrecy means banks don’t have to hand over client data to the tax authorities in suspected cases of tax evasion.

Banking secrecy was even enshrined in Swiss law in 1934 – break it and you could end up in prison.


The distinction between tax fraud and evasion appears to be getting harder to defend.

In the case of Swiss bank UBS, Switzerland delivered client data to the US without demanding documentation of suspected tax fraud, thus undermining banking secrecy.

And to prevent itself appearing on lists of tax havens, Switzerland has negotiated treaties with more than 30 countries in which it accepts the standards of the Organisation for Economic Co-operation and Development (OECD).

According to these standards, administrative assistance must be provided in suspected cases of not only tax fraud but also tax evasion.

Ideological justification

But within Switzerland, Swiss-style banking secrecy is clung to tightly.

The difference is justified ideologically, according to Niklaus Blattner, a former director of the bankers association and a former governing board member of the Swiss National Bank.

Blattner cites the argument that the Swiss are honest tax-paying citizens and therefore it’s not necessary to force banks to give out client data for tax evasion.

“This justification reflects the love for the country rather than reality. It’s folklore,” he told

“But in Switzerland the idea that tax evasion is an offence which would justify breaking banking secrecy has never gained majority support.”

Indeed, the rightwing Swiss People’s Party even wanted to anchor banking secrecy in the federal constitution. But the centre-right Christian Democrats and Radicals also want to carry on guarding the banking fort.

People’s initiative?

The centre-left Social Democrats haven’t dared challenge banking secrecy since the heavy defeat in 1984 of their people’s initiative against the misuse of banking secrecy.

“We’ll decide in the coming years whether to launch a people’s initiative,” party president Christian Levrat told

The Social Democrats still maintain that banking secrecy protects only those taxpayers who have failed to declare everything and that the tax authorities know the financial situation of wage earners the best.

But it appears that the party itself doubts whether this message has been received by its voters.

“I’m not sure whether a people’s initiative is the best way to reach our goal,” Levrat admitted.

The goal – to differentiate tax fraud and evasion not only for foreign tax payers but also for those within Switzerland – is what the Social Democrats want to achieve at a parliamentary level and in cooperation with the cantons.

“The cantonal tax offices are making more and more noise because they no longer understand why, when it comes to tax evasion, foreign authorities get access to Swiss documents that are withheld from [the cantonal tax offices].”

“Workable solution”

Were Switzerland to abandon its banking secrecy, Niklaus Blattner is convinced that the dispute with foreign governments would ease overnight.

“But to push this through the Swiss parliament would be a superfluous detour with massive conflicts for direct democracy,” he said.

Blattner believes it is possible, however, for the Swiss to meet foreign interests and also hang on to banking secrecy – for example, via double taxation agreements (DTAs) which comply with OECD standards.

The fact that foreign governments are already demanding improvements before the DTAs enter into force can never be avoided entirely, he added.

“We have problems with individual countries, and if we could negotiate a withholding tax with these, we’d have a workable solution for a few years which would also be attractive for many other countries,” he said.

The agreement between Switzerland and Germany, signed by the finance ministry, still has to be approved by the German Bundesrat, which represents the country’s 16 states.

Peter Siegenthaler,
(Translated from German by Thomas Stephens)

Tuesday, 21 February 2012

Austria Launches Talks On Swiss Tax Deal

by Ulrika Lomas,, Brussels

21 February 2012

Austria’s Finance Minister Maria Fekter has recently announced that talks on a planned bilateral tax agreement with Switzerland are due to begin in April.
In the meantime, a corresponding official letter has been sent to Bern, Fekter explained, noting that a meeting with her Swiss counterpart Eveline Widmer-Schlumpf is expected to take place in April.
Alluding to the European Commission’s current opposition to such a bilateral tax deal aimed at resolving the issue of undeclared assets held in Switzerland by Austrian nationals, Fekter underlined her confidence that the Austrian government would be able to iron out any concerns that the Commission may have.
The European Commission confirmed plans at the end of last year to challenge similar landmark bilateral tax deals concluded between Switzerland and the UK and Switzerland and Germany pertaining to the taxation of savings held by British and German investors in Swiss bank accounts.
Undermining Switzerland’s hopes of negotiating further bilateral tax agreements with individual European Union member states, as a means to resolve the ongoing, longstanding disputes regarding undeclared assets held in Switzerland by EU nationals, the Commission recently asserted that the treaties are not compatible in their current form with European law.
The Commission argues that the tax deals undermine the objective of the Savings Tax Directive, a mechanism which allows member states to tax certain investments held by residents in other member states and certain third countries, including Switzerland. Opposed to the anonymity provision, the Commission is continuing to strive for an automatic exchange of tax information.
EU Tax Commissioner Algirdas Semeta recently insisted that any bilateral agreement that violates the EU Savings Tax Directive or EU agreements with third states is simply “not acceptable”. Banking secrecy must not be allowed to protect tax evaders, he stressed.
Signed on September 21, the Swiss-German bilateral tax deal provides for the future taxation of income earned by German taxpayers through accounts held in Switzerland from January 1, 2013 by means of a withholding tax, with the proceeds derived from the levy subsequently being transferred to the German authorities. The Swiss-UK deal has very similar terms.
The agreement also provides for the lump sum taxation of 'old money' held by German residents in undeclared Swiss accounts.
Both bilateral treaties maintain traditional Swiss banking secrecy, by regularizing accounts without, however, disclosing individual identities.
Austria’s Finance Minister also revealed plans to implement a reform of the country’s current system of taxation, “certainly in this legislative period”, and before autumn 2013. The central aspect of the reform would be a planned simplification of the existing tax system, a reduction in the entry rate of income tax, the introduction of a tax deduction for alimony payments, and additional tax relief measures for families, the minister explained.
Fekter alluded specifically to the German model, which provides for tax-free maintenance payments for children of EUR7,000 (USD9,285) a year.

Uganda: Enact Asset Confiscation Law to Fight Graft

Posterity demands that public servants who amass wealth which is disproportionate to their known source of income, should have their wealth confiscated and declared government property.
Chapter V of the United Nations Convention against Corruption (2003) provides for "International Asset Recovery" against corruption.
It refers to when governments repatriate wealth of corruption hidden abroad. "Asset recovery" refers to recovering the proceeds of corruption, vis-à-vis terms such as "asset confiscation" or "asset forfeiture" which refer to recovering illegal wealth or instrumentalities of crime in general.
"International asset recovery" includes numerous processes such as the tracing, freezing, confiscation, and repatriation of proceeds stored in foreign jurisdictions. It, often, emphasises the 'multi-jurisdictional' or 'cross-border' aspects of a corruption investigation, thus making it one of the most complex fields of law. Arguably, although potential rewards in developing countries make it an attractive undertaking there are structural bottlenecks patent in, especially, formative nations like Uganda.
Concededly, finance techniques, transportation, and communications technologies have made it easier to conceal loots in offshore banks. Conflicting laws, high costs of investigations, lack of international cooperation, and bank secrecy policies in some recipient countries have enabled corrupt officials to conceal much of their ill-gotten gains.
There are some countries which have tried to fight corruption with some apparent challenges. Uganda has been characterised by pacifying commissions of inquiry, parliamentary action committees, political influence and pseudo-police investigations, which mask and condor the status-quo.
Vladmiro Lenin Montesinos Torres
He was the right hand man of President Alberto Fujimori of Peru, whose presidency lasted till November 2000. Montesinos was officially head of Peru's secret service and de facto presidential adviser and national security adviser. The Swiss Supreme Court ordered that Peru receives legal assistance and bank documents from Switzerland to assist in Montesinos corruption case. A bank account containing $6.5 million was frozen. On May 14, 2006 Montesinos was sentenced to 10 years in jail and a fine of approximately euros11.8 million for illegal enrichment in addition to a sentence of 15 years for corruption.
Jean-Claude "Baby Doc" Duvalier
He plundered Haiti for 15 years having taken over after his father's death in 1971. He lived lavishly while his mother ran the government. In addition to his father's loot, his wealth came from a pre-existing governmental tobacco monopoly which he expanded to include other parastatals as personal property.
In 1985 the citizens revolted against his gluttonous excesses and he fled to France in 1986 with his family. In 1986 Haiti requested for legal assistance from the Swiss government as the proceedings against him and his family had already commenced in Haitian Courts. In February 2010, the Swiss Federal Court decided to maintain the seizure of the assets. The assets are still confiscated in the Swiss Banks due to conflict of laws.
Pavlo Ivanovych Lazarenko is a former Ukrainian politician and former Prime Minister who, in August 2006, was convicted and sentenced to prison in the United States for money laundering, wire fraud and extortion. According to the official count by United Nations, approximately $200 million was looted by Lazarenko during 1996-1997 from the government of Ukraine.
Dieprieye Alamieyeseigha
Was accused of owning multi-million dollar mansions in Nigeria and abroad and pleaded guilty to embezzlement and money laundering. A Lagos high court sentenced this former Nigerian governor to two years in prison for money laundering as Nigeria battles to shed its reputation for corruption. Five other former governors are currently facing sundry charges of corruption, theft and money laundering in courts in Abuja and Lagos.
Hendra Rahardja was a corrupt Indonesian banker who served under President Suharto's regime. He fled Indonesia in September 1997 following the liquidation of Bank Harapan Sentosa (BHS) and Bank Guna International (BGI) where he served as President. In 2002, an Indonesian court sentenced him to life in prison in absentia for misusing $216.7 million, and required him to pay indemnities worth $280 million. So far, Indonesia has been able to recover $3 million from Australia. In spite of negotiations to repatriate $800 million from Hong-Kong back to Indonesia, the bulk of $9.3 billion remain un-recovered.
Ao Man Long was Secretary for transport and public works of the Macau Special Administrative Region of the People's Republic of China, from December 20, 1999 to December 6, 2006. On December 8, 2006, Long was arrested basing on Corruption. He had allegedly offered government works projects to his favoured individuals, and had amassed assets. In 2008, Long was found guilty of bribe-taking, amongst others, and was sentenced to 27 years in prison. His four family members were also jailed for 10 to 18 years.
Sani Abacha
Abacha was listed as the world's fourth most corrupt leader by Transparency International in 2004. Abdulsalam Abubakar transitional government's report, of 1998 described how Abacha solicited fake funding requests, which he approved. The funds were usually sent in cash or travellers' cheques by the Central Bank of Nigeria then to Abacha's house. His son, Mohammed Abacha, then laundered the money to offshore accounts.
A total of £5 billion was traced to Abacha, his family and cronies. This includes monies derived from systematic plunder from the Central Bank of Nigeria, and bribes from foreign companies. The Swiss Federal Court rejected the Abachas appeal against the repatriation of approximately $468 million frozen in Switzerland.
The Nigerian government agreed with the Abacha family to return $2.1 billion, and the Abachas would keep the rest, but it was rejected by Mohammed Abacha. Nonetheless, approximately $1.2 billion has been repatriated to Nigeria (from Switzerland, Luxembourg, Jersey, Liechtenstein, Belgium and the UK) due to pressure from court proceedings.
Ferdinand Emmanuel Edralin Marcos, Sr.
He was a former Philippine president (1917-1989). Some believe his entire life was based on fraud, deceit, and plunder, and his two decades as president became epitomised by excessive autocratic rule. In 1983, after being accused of being involved in the assassination of Benigno Aquino, Jr. the public was enraged, hence the People Power Revolution of February 1986 that led to his exile.
He and his wife Imelda Marcos had moved billions of dollars of embezzled public funds to the US, Switzerland, and other countries. Marcos' frozen bank accounts in Switzerland were said to have $475 million. The government merely auctioned off three jewelry collections $13 million.
Shiv Shankar Verma , an Indian Civil Servant, his three-storey house was confiscated and turned into a government primary school for slum children while he was on trial for corruption, after Bihar's State Vigilance Unit raided Verma's house in July 2007 and found large amounts of gold and foreign currency. The state lodged corruption cases against nearly 20 other government officials, including a former state police chief.
Verma had accumulated more than $335,000 in illegal wealth. The Bihar Special Courts Act 2009 empowers government to confiscate the property of any official charged with corruption - even while the trial is ongoing, which he may reclaim if found innocent. This is what Uganda needs.
The above case studies may manifest themselves upon regime in Uganda. In law school my trial advocacy professor, Mark Oring, often cautioned us: "concede if it is so obvious that a blind person can see it, otherwise court will perceive you as unreasonable and/wasting court's time".
I am pleading with my beloved President Gen. Yoweri Museveni to let them go before they tarnish your name. People won't stop corruption unless they have something to lose. Let us enact a law that confiscates ill-gotten gain. Impunity has reached its highest! Lastly, I propose a sort of Bishop Tutu's 'Truth and reconciliation Commission', amnesty for the corrupt fraternity, if they confess, but enact a confiscation law rather than relying on foreign laws. Let's stop the anti-corruption façade and walk the talk.
The author is a practicing lawyer and a non-violence advocate

Monday, 20 February 2012

The Corona Impeachment Trial: Battling the institutions of secrecy

Banks are notorious for secrecy. There is, after all, a need to protect the rights and safety of their depositors and clients. Without banking secrecy laws, individuals and corporations could be at risk for theft and other monetary dangers. In this country, that would translate to family and friends constantly asking for loans that may never get paid, or worse, kidnappers targeting family members for ransom. Also, no one in his right mind would want the public to know just how much money he has.
The recent developments in the impeachment trial against Supreme Court Chief Justice Corona have once again tested the credibility of the banking secrecy laws as it goes head on against a number of subpoenas relating to the trial.
Peso accounts subpoenaed

The peso deposit accounts of Renato Corona have been revealed to be about P31 million for his various PS Bank and BPI accounts. This was known after the peso accounts were subpoenaed by the Senate in relation to the impeachment proceedings. Impeachment is one of the five exemptions when it comes to the banking privacy laws.
The first copies of the alleged accounts were supposed to be given by an unidentified small lady to one of the lead prosecutors of the case. However, the CCTV of the Senate did not record any such lady interacting or handing anything out to the lawyer. While it was presented in Court, the PS Bank manager called them fake. The Prosecution claimed it had no idea that the bank documents were fake, but the damaging information was already revealed to the public.
The Defense team claimed that the money in the accounts was from the sale of the corporation of Corona’s wife and not ill-gotten wealth from the government. The Defense has also reiterated that they will explain everything in due time and present the necessary documents to the public later on to prove their side.
President Aquino himself has been very vocal about the authenticity of the bank documents. He even questioned why Filipinos were reluctant to believe the veracity of such documents when they were highly incriminating. He has issued the challenge that if Corona had nothing to hide, then Corona should be the one to volunteer and reveal his statements and other bank documents.
Dollar accounts revealed

The dollar accounts, however, are now not anymore being subpoenaed since the law does not cover foreign deposit accounts.
At the time the law was crafted, it was meant to entice foreigners to place their foreign deposit accounts in the country. Our lawmakers wanted to make the Philippines competitive to Switzerland when it comes to the strength, credibility and secrecy of the banking system.
However, in true John Grisham fashion, the amounts of Corona’s foreign deposits were also revealed to the public, even without the benefit of a subpoena. Copies of alleged dollar deposits of Corona were slipped into the gates of the home of Quezon City’s 3rd District Representative Jorge Banal.
According to the Manager of PS Bank Katipunan, Banal personally went to the bank to ask her help in determining the authenticity and accuracy of the photocopied statements. However, she had to turn down his request.
Rock and a hard place

The Bank Manager in question, Annabelle Tiongson, is in a tricky situation indeed. She needs to protect the privacy of their depositors. Also, the bank could get sued for breach of privacy, much like when former President Erap Estrada sued Citibank and won when the bank released his banking information.
Tiongson needs to be very careful about her answers. She also needs to protect her branch, because Banal himself said that someone is helping them. If this is true, then there is obviously someone violating banking privacy laws in PS Bank. How else could these statements, whether authentic or not, leak out to the public and land in the hands of the Prosecution?
When faced under the strict questioning of the Prosecutors and the Senator Judges, Ms. Tiongson was clearly uncomfortable. She probably never thought in her entire career that being a bank manager would land her in the halls of Senate to testify against the Supreme Court Chief Justice!
Need to balance secrecy and transparency

The SALNs of the Supreme Court Justices have been kept under lock and key for many years. In the case of the ongoing impeachment proceedings, it took Senator Franklin Drilon to get the SALNs of the Chief Justice to be presented to the Court by the Supreme court clerk, after failed attempts of the Prosecution to get the documents.
There are privacy laws in place to ensure the security and privacy of individuals. However, there is also a need to balance the need for transparency, especially when there is a need to fight corruption.
Here lies the conundrum. How do you prove that someone has ill-gotten wealth without first seeing the bank statements of the accused? You can only file an impeachment complaint and there will be an impeachment trial if there is substantial basis for the accusation. At the same time, the Prosecution cannot use the subpoenas to gather evidence against Corona, since they are supposed to already have such evidence at the time they filed the impeachment complaint.
Help from the public
This is where the mysterious help from the people comes in. Thanks to private sympathizers to the cause of the Prosecution, these very private bank documents are now surfacing, with blatant disregard for privacy banking laws. The Prosecution claims that this type of help just shows how the public supports the impeachment proceedings.
Does the end justify the means?
However, we should all remember that this is still against the law. Even if we think he’s the bad guy and he’s guilty, no one has the right to open these accounts and make them public, unless the depositor himself asks for it, or if there is an impeachment.
If we go back to the Marcos plunder case, the government lawyers didn’t get any anonymous help from Swiss bankers when it came to Marcos’ accounts. This just further established the strength and credibility of the Swiss banking system, protecting the privacy of alleged crooks, convicts, millionaires and other depositors equally.
This is also the type of “accidental leaking” to the media that has plagued this case from day one. Institutions of secrecy are made for a purpose, and it’s up to the Prosecution to get around them but through legal means.
Even if these revelations about Corona’s accounts have helped the Prosecution, we shouldn’t lose sight of the big picture. These actions are sending the wrong message to the financial community. We may slowly be destabilizing the banking industry by violating privacy laws. At worst, a bank run may ensue if depositors feel their money and privacy aren’t safe.
As such, we should all tread carefully.

Sunday, 19 February 2012

SC throws monkey wrench at prosecution's case

Posted at 02/17/2012 5:02 PM | Updated as of 02/19/2012 6:21 AM

MANILA, Philippines - The Supreme Court has thrown a monkey wrench at the House prosecution panel's efforts to gather evidence in the impeachment trial of Chief Justice Renato Corona.
Prosecutors said the High Court's resolution restricting the testimonies of the justices and court employees as well as access to some court documents pose challenges to prove Corona's guilt in Article 7 of the impeachment complaint.
Spokesman Miro Quimbo said the SC resolution is not a welcome development since they were hoping the Court would abide by Corona's commitment to be cooperative and not restrict access and transparency.
Quimbo said they will seek other remedies to get the documents they need, like appealing to the Senate impeachment court to insist on its subpoena. The prosecution also wants the Court to clarify the coverage on the restriction on documents.
Spokesman Sonny Angara, meanwhile, said the court's documents are public documents.
In a 28-page per curiam en banc Resolution dated February 14, the SC denied the examination and reproduction of confidential court records of cases cited in the Corona impeachment case as subpoenaed by the Senate.
The High Court also maintained that its justices, officials and employees are bound by the rules on confidentiality and barred from disclosing information pertaining to the raffle of cases, actions taken on each case in the agenda of court sessions, and deliberations of justices in court sessions on cases and matters pending before it.
The voting was unanimous with 12 justices present.
Another roadblock
Quimbo said the Court's documents would show how Corona used his position to expedite and provide preferential treatment to alleged patron, former President Gloria Macapagal Arroyo, when the court issued a restraining order against the watch list order against her.
"It will not weaken the case. The case is stronger but makes proving it more difficult. Dagdag balakid para patunayan pero di mahina ang kaso, kasi as it is, malakas na malakas," he said.
Angara likened this development to the Senate impeachment court's decision to reject the requests to subpoena the Corona family. He said the decision only made the presentation of Article 2 longer.
"Kung pinayagan maging saksi si Chief Justice at pamilya sa Article 2 di tayo tumagal ng 5 linggo pero napatunayan ang argumento sa ibang paraan. Gumamit kami ng official documents," he said.
He declined to reveal how else they intend to prove their case for Article 2.
The prosecutors' spokesman said they will stick to their timeline to end the presentation of evidence in court by the 1st week of March, with the unpresented articles to be presented instead through documentary submissions.
The panel wants to give the defense enough time to make their case and the impeachment court time to decide the case before the Holy Week break.
Angara said the prosecution will decide soon on which article they will stop with the open presentation of evidence, noting that some members of the team feel they can convict Corona on Article 2 alone especially after PSBank revealed 3 other accounts under Corona's name with the bank.
Quimbo thinks the defense panel's initial explanations and rebuttals of the allegations and evidence presented do not really address the issues.
BGEI used as 'scapegoat'
He noted the defense panel is using Basa Guidote Enterprises Incorporated (BGEI), a corporation owned by Mrs. Corona's relatives, as an excuse to explain the cash in Corona's bank accounts.
Quimbo said the defense had already cited money from BGEI to explain the purchase of Corona's properties. He said the same money from BGEI is being used to explain Corona's alleged P36 million in bank deposits last December 12, 2011.
Corona closed 3 accounts last December 12, the same day he was impeached by the House of Representatives.
Quimbo said the defense is already hard-pressed to explain these, noting the dollar accounts of Corona have not even been opened yet.
Angara, for his part, asked why cash from BGEI would be deposited in Corona's account when it's not even a joint account with wife Cristina, whose family owns BGEI.
'Lay off Banal'
Quimbo, meantime, told the defense to lay off Quezon City 3rd District Rep. Jorge "Bolet" Banal after it was revealed that he approached PSBank Katipunan manager Anabelle Tiongson to verify a photocopy of Corona's signature card.
Banal admitted meeting Tiongson but said he only found the photocopy of the document left at his gate last January 30.
Corona's defense team is reportedly considering filing a case against Banal, prosecutor Rey Umali and Chief Prosecutor Niel Tupas Jr. for possible violation of the bank secrecy law for attaching the document to their request for Senate subpoena.
Corona's lawyers are also mulling the filing of an ethics complaint against the congressmen before the House ethics committee.
Quimbo said that despite questions on the bank documents the prosecution attached to secure subpoena's for Corona's other bank records, testimonies by bank executives lately have proven these are authentic because the information in the documents are correct. With a report from Jing Castañeda, ABS-CBN News

Thursday, 16 February 2012

US secrecy law to pile pressure on IFSC

The US has holed Swiss bank secrecy below the waterline and its new law – restricting the ability of the worldwide banking system to hide funds from its tax authorities – is heading for an international quid pro quo
IN JUNE 2007 a senior executive at a Swiss bank boarded a plane in Geneva on route to the United States carrying documents that provided evidence for one of the biggest frauds in history.
Bradley Birkenfeld had a meeting scheduled with the authorities in Washington DC so he could fill them in on how his employer, UBS, was involved on a massive scale in facilitating tax evasion by wealthy US-based clients.
In time it emerged that up to $20 billion in undeclared funds were involved, and up to $200 million a year in fees for the bank.
Since then the bank has put its hands up, paid a fine of $780 million, and, following a vote to allow it to do so in the Swiss parliament, has handed over thousands of clients’ names to the US authorities.
The case knocked a huge hole in the Alpine jurisdiction’s reputation for banking secrecy, and has unleashed an attack on global banking secrecy that is gathering pace.
Just last week one of Switzerland’s oldest banks, Wegelin Co, was declared a “fugitive” by a court in New York after it failed to turn up for a hearing there.
The US authorities have alleged that the bank sought to profit from the pressures UBS came under in the years after Birkenfeld’s flight from Geneva, by telling US customers it would be better able to hide their money.
The bank said the US authorities would be less able to put it under pressure as it had no offices outside of Switzerland. In return for this aspect of its service, it sought higher banking fees.
In January the bank sold its non-US operations to rival bank Raiffeisen in a bid to protect its assets as the US assault on it continued to make progress.
The successful campaign by the US authorities on Swiss banking secrecy, and the US government’s need for as much revenue as possible, have fed into the enactment of a new law that is aimed at restricting the capacity of the international banking system to hide funds from the US Internal Revenue Service.
The new law seems set to make new and expensive demands on the international financial system, where Ireland is a huge player.
Fatca, or the Foreign Account Tax Compliance Act, was passed in 2010 and is due to begin coming into effect next year. The law is one of the most significant and far-reaching pieces of national tax law ever enacted.
It requires non-US financial institutions and other entities to identify and disclose accounts and other interests belonging to US customers to the US authorities.
Institutions and entities that don’t comply with the new law will face the prospect of having 30 per cent of the income or proceeds they gain from investments in US shares or other assets, deducted at source.
GIVEN THE COMPLEXITY and enmeshed nature of so much of the international financial industry, the measures have the potential to cascade through it, creating a huge array of reporting responsibilities not to mention the prospect of payments being withheld throughout the system.
Last week draft regulations for how the new system will work, running to more than four hundred pages, were published. It was also announced by the US Treasury Department that Europe’s five largest economies have entered into discussions with the US in relation to the implementation of Fatca.
The Treasury said the five countries – the UK, France, Spain, Germany and Italy – shared the US government’s goal of combating international tax evasion, but that the legislation had raised a number of issues, including the fact that complying with the US law might be illegal for the non-US financial institutions.
The group of countries are now to look at adopting an inter-governmental approach to Fatca in a bid to circumvent this problem and also to reduce the costs to industry that the law creates.
They are discussing a system whereby financial institutions would report to their domestic authorities rather than to the US tax administration, and the domestic authority would then automatically share the information with the US. Not only that, but the system would operate reciprocally between the countries involved.
“The United States is willing to reciprocate in collecting and exchanging on an automatic basis information on accounts held in US financial institutions by residents of France, Germany, Spain and the United Kingdom,” the joint statement said.
“The approach under discussion, therefore, would enhance compliance and facilitate enforcement to the benefit of all parties.”
Importantly, under the scheme being explored by the countries involved, withholding taxes would not be levied against financial institutions from the countries involved in the arrangement.
When the joint statement was issued last week it was noted by many commentators that Ireland and Luxembourg – both major global financial centres – were not party to it. When US presidential hopeful Mitt Romney published his tax returns recently, it showed a substantial part of his wealth was in funds based in Dublin.
A spokeswoman for the Department of Finance said it had no comment to make on Fatca or on any discussions the Irish authorities might be having with the US.
Ireland’s financial services sector plays host to funds with a value of more than $2.4 trillion, with the administration and management of these funds employing up to 11,000 people.
“This is a huge issue for Ireland, particularly because of the size of the funds industry,” said Peter Vale, a tax partner with Grant Thornton in Dublin. “I would imagine some agreement will be reached in time.”
Anne Stopford, head of investment funds tax with Grant Thornton in London, said it will be interesting in time to see if the law influences where funds will be established.
She said the law has the potential to drive a move away from tax havens, because the withholding tax will continue to apply to financial institutions that are not complying with the law or are not resident in countries that are complying. “There are pretty stringent downsides to not complying,” she said.
The industry is concerned at the costs and difficulties the new law is creating for it. All the major financial advice firms are developing expertise in the area so they can sell their services to those who need to deal with the new responsibilities being created.
“At a recent seminar in Dublin it was felt that the amount of tax realised could be significantly less than the cost to all the companies that will have to put in the necessary processes and procedures,” said Niamh Meenan, head of financial services for Grant Thornton in Ireland.
A new survey of the Irish fund administration sector by Deloitte has found that Fatca is generally viewed as a business threat, with the threat of the withholding tax being seen as the single greatest challenge.
Meanwhile the pressure on Switzerland continues. John Christensen of the Tax Justice Network has said the putative Fatca deal between Europe’s five largest economies and the US could embolden the European Union to seek a similar deal with Switzerland.
Anne Stopford believes that other countries will now look at copying the US law.
In a recent paper published in the United States, Offshore Accounts: Insider’s Summary of FATCA and its Potential Future , Prof Richard Harvey, whose work with his former employer, the IRS, included negotiations with UBS and the development of the Fatca law, suggested that the international financial services sector should devise a global model for dealing with Fatca rules, rather than having to develop multiple, expensive responses as other countries’ Fatca-type laws follow the US lead and introduce their own demands.
Multilateral implementation of Fatca would reduce the options available for people wanting to hide money offshore, he said.

Sarkozy denies tax haven slur

French President Nicolas Sarkozy has said "under no circumstances" does he want to fall out with Switzerland, adding for good measure that he “adores Roger Federer”.

He also denied he had treated his neighbour as a tax haven at the G20 summit in Cannes last year.

Sarkozy was speaking on Wednesday in the French commune of Annecy, 35 kilometres south of Geneva, where he declared his candidacy for a second presidential term.

“I never treated Switzerland as a tax haven. I said that at the heart of Europe – even if Switzerland is not in the European Union – every country had to implement rules which are the rules of regulated globalisation,” he told Swiss radio.

“I have a lot of affection for our Swiss friends. I have many contacts with Swiss leaders. Switzerland is an ally, a sister country – but there are rules.”

He explained it had been decided within the G20 that, regarding international cooperation, banking secrecy laws had to change.

“Banking secrecy is to preserve people’s private lives, not to authorise certain things that shouldn’t be authorised,” he said.

At November’s summit in Cannes, to which Switzerland wasn’t invited, Sarkozy denounced the Swiss government’s shortcomings towards tax, despite the fact that Switzerland had been off tax haven black lists since September 2009. and agencies