Switzerland Opens Criminal Investigation into Forex Scandal

Foreign exchange is a trillion dollar market. (Photo: Reuters)

Published 13 November 2014

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The Swiss prosecution says an undisclosed number of individuals are being investigated for violating banking laws, but no banks are being probed for criminal misconduct.

Several individuals are now under investigation by Swiss authorities in relation to manipulation of foreign currency exchange rates, prosecutors announced Thursday.

Authorities stated an undisclosed number of people are being investigated under suspicion of violating Switzerland's banking secrecy laws, and breach of trust, according to the Wall Street Journal. No details about the individuals have been released, though the prosecution says it's not looking into any banks.

The prosecution also said it's conducting the investigation alongside Switzerland's financial regulator, FINMA and has been in contact competition commission WEKO.

The latter is also conducting a separate probe into allegations a number of banks have colluded to influence forex markets.

The announcement comes on the heels of a group of some of the world's biggest banks being slapped with billions of dollars in penalties, in relation to an investigation into an international forex scandal.

After a 1.5 year investigation by regulators in the United States, United Kingdom and Switzerland, traders were alleged to have secretly collaborated online to maximize profits from forex exchanges since as early as 2009.

These traders allegedly met in chat rooms to swap private client details. In total, financial giants accused of failing to stop the traders including Citigroup, JPMorgan Chase, the Royal Bank of Scotland and UBS will all pay out US$3.4 billion. Since 2012, big banks have paid out over US$10 billion due to the scandal.

Two more major banks caught up in the scandal still have not settled. Barclays says it has not reached an agreement with regulators, while an investigation into Deutsche Bank is ongoing.

Banker walks free from $20bn tax evasion charges

Raoul Weil

Rory McDonough | 12/11/2014 

(CNS Business): Former head of UBS Raoul Weil has been acquitted by a US federal jury on all charges of conspiring with as many as 17,000 US taxpayers to abuse Swiss bank secrecy to hide $20 billion in secret offshore accounts. Jurors in a Fort Lauderdale, Florida, federal court reached their verdict after deliberating less than two hours. Prosecutors at the trial, which started on 14 October, had attempted unsuccessfully to convince jurors that the 54-year-old Swiss citizen was aware of and helped US clients with the concealment of $20bn of undeclared assets between 2002 and 2007, despite the testimony of former head of the wealth management division for the Americas at UB, Martin Liechti.

Weil, 54, who faced five years in prison, was indicted in 2008 on the charge and was arrested last year in Bologna, Italy, waiving extradition.

Weil, the former number three at UBS, jumped for joy and kissed his wife at the Florida court after jurors returned the not guilty verdict in 90 minutes, with the prosecution failing to show sufficient evidence that he had aided US citizens in hiding billions from authorities.

During the three week trial, Matthew Menchel, the defense attorney from Kobre & Kim, argued that Weil had no knowledge of the scheme to evade US taxes, noting that several US Government witnesses were testifying after receiving generous plea deals from the prosecution.

“There is no document to prove” any wrongdoing, Menchel, said during closing arguments. “There is no evidence in this case, none, zero, that Mr Weil knew about, much less participated or joined in, any criminal conspiracy in which low to mid-level bankers were violating the bank’s policies and laws and actively assisting customers in committing tax evasion.” He told reporters after the verdict: “This is a case that should never have been brought.”

Several of Weil’s former colleagues had already revealed the lengths to which UBS bankers went to avoid being caught, including using a computerized card game to mask secret, hidden laptop hard drives or handing over to a client thousands of dollar bills in interest, wrapped in a newspaper.

Liechti ended his first day of testimony by telling the jury about the 2002 closings of client booking centers in the Cayman Islands and the Bahamas because both had signed US agreements to exchange bank client information.

He also said the IRS had begun cracking down on credit card companies Visa Inc and MasterCard Inc to reveal the identities of card holders with offshore accounts. “It made the business unsustainable,” Liechti said. “A customer who has not disclosed income could be revealed.”

Liechti said Weil, who oversaw the Caribbean operations, was aware of the problem and signed off on his plan to move client assets out of the islands to Switzerland.

In a gamble that paid off, the defence chose to call no witnesses. Its lawyers cast doubt on the reliability of the government’s co-operating witnesses, accusing them of lying to save their own skins. They claimed that Weil was not aware of the rogue actions of his employees, despite accusations of his full awareness of financial exchanges that were against US law since 2002.

“The verdict shows you the difficulty of going after senior management who can at times blame the bank’s customers and lower-level employees for the bank’s mistakes,” Nathan Hochman, a former assistant attorney general who oversaw the Justice Department’s tax division, said of Weill’s acquittal.

Hochman said the prosecution’s use of cooperators implicated in the US probe may also have hurt its chances. “It’s difficult to prove a historical case beyond a reasonable doubt when the government heavily relies on witnesses who have received very favorable treatment,” he said.

Since 2009, more than 70 US clients and three dozen offshore bankers, lawyers and advisers have been charged with tax crimes. More than 100 Swiss banks and 43,000 US taxpayers applied to the US to avoid prosecution over offshore accounts. Credit Suise Group AG’s main bank subsidiary pleaded guilty and paid a $2.6 billion penalty.

As the former head of Global Wealth Management at UBS AG, Mr Weil is the highest ranking banker charged in a US crackdown on offshore tax evasion in which over 100 bankers, lawyers and advisors have been charged since 2008. According to the Wall Street Journal, “the verdict is being interpreted as a setback for the Justice Department’s crackdown on the aiding of offshore tax evasion in Switzerland. But it remains to be seen whether it will embolden the dozens of other Swiss bankers, lawyers and advisors who have also been indicted in the US in recent years to fight the charges against them.”

The acquittal comes as a second blow in less than a week for the Department of Justice’s pursuit of alleged enablers of tax dodging. Former senior vice-president of Mizrahi Tefahot, an Israeli bank, was cleared on 13 October by a court in Los Angeles of charges of helping Americans to cheat the Internal Revenue Service by preparing false tax returns. That case, too, rested on testimony from co-operating witnesses.

The defeat will unlikely dampen the US Justice Department’s crusade against the tax-shy. A Department of Justice spokeswoman said that the collapse of the case against Weil “will not impact the department’s ongoing commitment to holding offshore tax evaders and those who aid them accountable.”

Trial dredges up Swiss banks' shady past (Business Report)

Reuters.Former UBS banker Raoul Weil, who is on bail, arrives for his trial at federal court in Fort Lauderdale, Florida, October 20, 2014. Raoul Weil, 54, who headed wealth management at Zurich-based UBS until his indictment, is charged in a Fort Lauderdale federal court with helping thousands of US taxpayers hide up to $20 billion in assets in offshore accounts. Weil, facing up to five years in prison if convicted, is by far the highest-ranking Swiss banker to be charged in the United States. His trial culminates a more than 7-year battle with Switzerland on the abuse of its bank secrecy laws to help Americans avoid paying billions of dollars in taxes.

November 2 2014 at 01:48pm 
By Reuters

Fort Lauderdale, Florida/Zurich - From bundles of cash inside scraps of newspaper to setting up shell companies, the trial in Florida of a former UBS executive is a reminder of the extreme methods some Swiss bankers used to hide clients' cash.

Raoul Weil, 54, is the highest ranking Swiss banker to be arrested in the United States and prosecutors are seeking to paint him as a facilitator of efforts that helped conceal up to $20 billion (R221 billion) in taxpayers' assets in secret offshore accounts.

Weil's main defence has been that these efforts were done by people below him and that the US cross border business was a tiny fraction of his overall responsibilities.

If convicted, Weil faces up to five years in prison for conspiracy to commit tax fraud.

Weil and his attorneys declined comment on the trial.

At the trial, which pits Weil against several former UBS colleagues who have chosen to cooperate with US authorities in exchange for favourable sentencing, Swiss bankers have testified about using an arsenal of James Bond-like tactics to avoid detection while in the United States, and to help US clients keep their accounts hidden from tax authorities.

Bankers were given laptops with two hard drives, Hansruedi Schumacher, who formerly ran UBS' cross-border business, told the trial, which began on October 14 and is expected to run for about four weeks.

One hard drive was filled with anything from family photos and personal emails while another contained a password-protected database with the US citizens' code-named bank records.

Another witness said the drive with the bank details could be wiped simply by typing in a short password.

“It was known all those account holders were not paying their taxes, and for the Swiss bank it was a very profitable business,” Schumacher said during testimony at the trial.

Eskander Ensafi, who banked with UBS, told the court about a clandestine meeting in 2005 at a Los Angeles hotel with bank adviser Claude Ullman.

The adviser handed him roughly $50,000 in US bills wrapped in newspaper, Ensafi testified, tax-free interest from a Swiss bank account in the name of Ensafi's father, who had just suffered a debilitating stroke.

Ullman was sued by a number of US individuals - who were jailed for not paying US taxes by hiding their money in Swiss bank accounts - for alleged racketeering, along with UBS and a number of high ranking bankers, including Weil, in a 2009 lawsuit in the Eastern District of California.

The case was dismissed with prejudice in September 2014.

An attorney for Ullman did not respond to a request for an update on the case.

German businessman Juergen Homann, 72, who pleaded guilty to a US charge of failing to report a foreign account to the Internal Revenue Service (IRS) in 2009, told the court one UBS client adviser, Hans Thomann, helped him set up a Hong Kong-based shell company.

The company, the Prodon Foundation, was then used to funnel income Homann made from his raw minerals business venture in China.

Attempts to reach Thomann for comment were unsuccessful.

In 2012, he was charged in the Southern District of New York with conspiracy to defraud the United States and conducting an unlicensed money transmitting business.

SHADOW OF SECRECY

Switzerland's biggest banks have paid a heavy price to settle their US tax evasion cases.

UBS admitted to helping US taxpayers hide money and paid a $780 million fine in 2009, while Credit Suisse pleaded guilty in May to a US criminal charge and will pay more than $2.5 billion in penalties.

Since US authorities began to chip away at the wall of Swiss banking secrecy in 2008, details have trickled out of the extraordinary lengths bankers would go to in order to smuggle assets in and out of the United States.

A US Senate report published earlier this year described how a customer at Swiss bank Credit Suisse was given statements tucked into the pages of an issue of Sports Illustrated magazine at a hotel meeting.

Former UBS financial adviser Bradley Birkenfeld admitted in 2008 to smuggling diamonds in a tube of toothpaste for a client.

Birkenfeld was a whistleblower in the tax fraud case against UBS and won a record-setting $104 million reward from the US Internal Revenue Service.

On top of the fines forked out by Switzerland's two biggest banks, about a dozen smaller Swiss players are still under US criminal investigation and face serious penalties, while many more have joined a government-brokered programme allowing them to make amends if they aided tax evasion by wealthy Americans.

The United States is not the only jurisdiction that has cracked down on tax evasion by its wealthiest citizens.

UBS is under investigation in France over whether it helped wealthy individuals there dodge taxes.

Investigating magistrates have proposed that UBS pay a fine of 4.88 billion euros ($6.2 billion), according to a judicial source.

The bank also booked a near-$300 million charge in the second quarter of this year, mainly to settle claims it helped wealthy Germans evade taxes.

The bankers who helped move clients' money around undetected are themselves faced with a legal bind that goes beyond financial penalties.

Since 2009, the US Justice Department has charged more than 30 bankers and advisers in the offshore investigation, including several Swiss bankers set to testify at Weil's trial, while others have been arrested by European authorities.

In some cases, the accused can cooperate with foreign authorities in exchange for lighter penalties.

However, such a move could put them at risk of violating Swiss banking secrecy laws, an offence punishable by up to three years in prison and a fine of up to 250,000 Swiss francs ($262,000).

Failure to cooperate, though, can expose the bankers to the danger of being detained by foreign authorities whenever they leave Switzerland. - Reuters

JPMorgan: 76 million customers hacked

NEW YORK (CNNMoney)

JPMorgan said Thursday that cybercriminals gathered information on more than 80 million account holders as part of a massive bank hack this summer.

The revelation follows news back in August that hackers had infiltrated seven of the country's largest banks, using sophisticated malware to burrow into their computer systems and manipulate records.

At JPMorgan (JPM), the hackers got contact information for 76 million households and 7 million small businesses, including names, addresses, phone numbers and email addresses, as well as "internal JPMorgan Chase information relating to such users."

Related: What you need to know about the big bank hack

But the bank said that the hackers didn't get any account information -- account numbers, user IDs, dates of birth or Social Security numbers -- and that it hasn't seen "any unusual customer fraud related to this incident."

"The Firm continues to vigilantly monitor the situation and is continuing to investigate the matter," JPMorgan said in a securities filing, adding that it is cooperating with law enforcement.

Although it appears that the hackers haven't been able to access bank accounts, they could still cash in by selling email addresses and other personal information to spammers.

The source of this summer's attack still isn't clear. Some analysts have pointed to hackers Russia, though the evidence is only circumstantial.

Related: FBI investigating hack on JPMorgan

Hackers from Russia and eastern Europe are often top FBI suspects in cyberattacks. The timing of the hack raised suspicions given the mounting tensions between Russia and the West over Ukraine and economic sanctions.

In a letter to shareholders earlier this year, JPMorgan said it planned to deploy over 1,000 people and budget $250 million annually to focus on cyber security. 

BBC News/ Banks shut branches over Hong Kong protests

Standard Chartered and several other banks have suspended some of their operations in central Hong Kong following mass pro-democracy protests.

Bank branches that offer over-the-counter services have been closed, as well as ATMs and cash deposit machines in affected areas.

Some firms have also advised their staff to work from home or go to secondary offices.

Thousands of demonstrators clashed with police, who fired tear gas, on Sunday.

In a statement, British bank Standard Chartered said it had activated contingency plans to ensure continuous services to customers.

Bank of China said it had suspended operations at some branches because of the "unusual situation" in parts of Hong Kong.

Singapore's biggest bank, DBS, also temporarily shuttered its branch in the Admiralty neighbourhood.

Many Hong Kong pro-democracy protestors slept in the streets despite clashes with riot police

Hong Kong's de-facto central bank said 29 bank branches, offices or ATMs of 17 banks in the territory will be temporarily closed because of the protests.

The Hong Kong Monetary Authority (HKMA) said "affected banks have activated their business continuity plans this morning to maintain the normal operations of the core functions of the banking system".

"The HKMA will also inject liquidity into the banking system as and when necessary under the established mechanism," it added in a statement.

Fitch Ratings head of Asia-Pacific Sovereigns Andrew Colquhoun said the protests are unlikely to impact Hong Kong's creditworthiness "in the short term".

"It would be negative if the protests are on a wide enough scale and last long enough to have a material effect on the economy or financial stability, but we don't currently see this as very likely," he said.

Political unrest

Over the weekend, thousands of protestors blocked large parts of the city to pressure the Chinese government into granting full democratic powers to the former British colony.

The demonstrators were spread across three of Hong Kong's most important commercial neighbourhoods and in front of government buildings.

Police fired several rounds of tear gas at the crowds, but the protestors continued to rally, with many staying on and sleeping in the streets.

Many of the protestors are university students who have boycotted classes since last week to hold pro-democracy rallies.

The political unrest in Hong Kong is the worst the city has seen since China took back control of the territory from the British in 1997.

BBC News- UK

_The boss of one of the world's biggest banks last week described the UK to me as the world's "biggest, most developed tax haven".

Which rather jars with the splash in this morning's Telegraph, whose headline is "high taxes 'stifle UK entrepreneurs'".

So what is going on?

Well my banker was talking about the declining and low rate of UK corporation tax, which will be a uniform rate of 20% for big and small companies from next year, and reforms by this government which mean UK-based multinationals pay no UK tax on dividends they receive from their overseas operations.

If this system was designed by the Treasury to attract more huge global companies to take up residency here, it seems to be working: this morning America's Pfizer said that if it succeeds in buying the UK's AstraZeneca, the new pharmaceutical monster's holding company would be incorporated in the UK.

Also if Omnicom of the US and Publicis of France ever make it down the aisle to create the world's biggest advertising company, it would be tax-resident in the UK (though apparently HMRC is a bit embarrassed at being seen to be aiding and abetting what some would described as tax avoidance, and is dragging its feet on approving the tax status of the merged beast).

So the days when multinationals feel the irresistible pull of Dublin's ultra low tax rates seem to be over - and in spite of the regular spankings administered by Margaret Hodge and the Public Accounts Committee to the digital multinationals, Google, Amazon et al, for contributing little in the way of corporation tax to the UK Exchequer in spite of apparently being rather successful here.

Which for George Osborne, David Cameron and Treasury mandarins would be regarded as good news - because when multinationals are resident here, certain numbers of highly paid jobs are also located here, and they also tend to buy high-value services from the City.

This is how one Treasury official put it to me the other day: "London is now the unchallenged capital of the world; it is wonderful."

Which is all very well, if London's status as the home of choice for the richest and most successful generates work and prosperity for the UK as a whole - and some would say that is moot - but not everyone is thrilled by the associated creation within London of ghettos of properties affordable only by the super-rich.

Entrepreneurs

But back to the apparent contradiction between London as putative tax haven and the UK as alleged high-tax strangler of entrepreneurs.

The high taxes in question, according to a report by the Centre for Policy Studies quoted by the Telegraph, are the 45 pence top rate of income tax and the 28 pence rate of capital gains tax.

These are supposedly a reason why the UK spawns fewer home grown billionaire entrepreneurs per million citizens than Hong Kong, Israel and the US (in that order).

Did I hear you say "so bleedin' what? What have billionaires ever done for us?"

Well there are billionaires who make their dosh creating huge numbers of jobs and revolutionising industries and even economies: Google, Microsoft, Facebook and Amazon spring to mind, as do vast numbers of entrepreneurs in Korea, China, India, Africa and South America, but not so many in Europe.

And then there are others who are brilliant at borrowing cheaply to buy undervalued assets - the private equity and hedge fund titans, inter alia - whose wealth creation typically benefits rather few people.

Role of the state

But even if there are billionaire entrepreneurs whose activities are a net benefit to us all, there is a lively debate about whether societies are becoming less happy, as inequalities become more pronounced.

Also there is by no means a consensus about the institutional and economic structures that best promote industrial innovation and sustainable wealth creation.

There are some, such as Mariana Mazzucato, who argue that the role of the state in the biggest industrial breakthroughs of our time is desperately undervalued these days.

There are others, such as the consulting firm McKinsey, who say that vast multinationals are the best at commercial research.

As for billionaires, the UK does of course have a legion of them. But they tend to be Russian, or Saudi, or Chinese - with most of their industrial activities outside the UK, but a large chunk of their often tax-avoiding nest eggs here.

Your comments (572)

Article written by Robert PestonRobert PestonEconomics editor

UBS banks on growth in business with the ultra-rich

The logo of UBS bank is seen at its Belgian office in Brussels

June 20, 2014. Credit: Reuters/Francois Lenoir

(Reuters) - UBS (UBSN.VX) expects its business with its wealthiest clients to grow by 7 to 8 percent in terms of assets, as the area plays an increasingly important role for the Swiss private bank.

Private banks are increasingly seeking the ultra-rich - typically those with liquid assets of 50 million Swiss francs ($55.9 million) or more - in a shift from an earlier strategy of chasing the "mass-affluent", or moderately rich.

"Growth in net new money of 7 to 8 percent is possible over the cycle, if you look at the past five or six years," Joe Stadler, the Zurich-based bank's global head of ultra-high net worth business, told Reuters in an interview. He did not specify a time frame.

UBS has only published separate results for its ultra-rich division for the past two years. In that period, it has posted quarterly growth of net new money of between 4.5 percent and nearly 12 percent. It recorded growth of just over 7 percent in the latest quarter.

Switzerland's largest lender, and the world's largest private bank by assets, has cut back on risky debt trading, which has been made more expensive by tougher regulations, in favor of its low-risk private banking arm, a move it says will drive returns for shareholders.

UBS' business with the ultra-rich now accounts for almost half of the broader private bank's assets of 899 billion francs. That proportion is up from about a third five years ago.

While business with the wealthiest actually commands a lower margin on assets than other segments, these clients make up for it in sheer volume. Because their assets tend to be diversified between business and private interests, the super-rich also tend to feed into private banks' other arms - investment banking and asset management.

HIGH MAINTENANCE

The ultra-rich are known as a high-maintenance group of clients, typically commanding more sophisticated banking services as well as the best perks from their private banks like private dinners with professional tennis player Roger Federer, a Credit Suisse (CSGN.VX) brand ambassador.
For UBS, which does not break down the ultra-rich segment by region in its results, Asia represents a major growth market, as the region sees a surge in millionaires and billionaires.

"We've been strong in Asia for many years and want to build our presence further. We're also growing in emerging markets, in Europe, and in Switzerland," Stadler said.

Europe is a sore spot for Swiss private banks, which are suffering withdrawals of funds as Germany, France and other European countries crack down on untaxed funds hidden in Switzerland's offshore accounts.

However, the ultra-wealthy are more likely to be tax-compliant, according to Swiss private bankers.
"The debate around tax transparency is hardly relevant for ultra-high net worth clients," Stadler said.
"Today's standards help to prevent banking secrecy being abused for tax evasion, and this development has been favorable for our business."

Switzerland, along with Singapore, has joined the growing ranks of countries agreeing to share tax information, effectively abandoning centuries-old banking secrecy under an onslaught of international pressure.

Swiss banks UBS and Credit Suisse are increasingly seeing competition for the ultra-rich segment, for example from Deutsche Bank (DBKGn.DE) which said last week it was growing quickly with new client money pouring in, following two years of restructuring.

($1 = 0.8921 Swiss Francs)

(Reporting By Albert Schmieder; Writing by Katharina Bart; Editing by Pravin Char)

Swiss banks to tell all under FATCA

Jun 30, 2014 - 11:00

The IRS expects all US tax dodgers to come clean

(Keystone)

The American FATCA legislation comes into effect on July 1. The world’s banks will be required to supply Washington with regular updates on customers liable to pay US tax. This means the end of Switzerland’s much-vaunted tradition of banking secrecy.

Swiss banks and asset managers are gearing up to implement the FATCA (Foreign Account Tax Compliance Act) rules, by which the US government is to get all information on capital held anywhere in the world by people liable to pay American taxes.

How FATCA works
Washington’s new legislation, the Foreign Account Tax Compliance Act (FATCA), aims to fight tax evasion by wealthy Americans (the “fatcats” lambasted by President Barack Obama) by ensuring that tax is paid on all capital held abroad – in banks, insurance companies and other entities.
 According to the legislation, foreign financial institutions have to register with the American tax authorities (IRS) and send in periodic reports on the assets that they hold for American taxpayers. The information should start to flow by April 30, 2015.

In an initial phase, only deposits over a certain limit, such as $50,000 for personal accounts, will be reported. Later all capital will have to be declared.
So far about 80 countries are negotiating or have concluded agreements with Washington to implement the FATCA system.
The American legislation is the model for the standards developed by the OECD to introduce automatic exchange of information on a global level.

Steep costs

Unlike most other European countries, Switzerland opted for a “model 2” agreement, whereby it is not the Swiss tax man but the banks themselves that are to supply the data to Washington.

To do this, the industry players first need to identify all those customers subject to American tax: this means American citizens, of course, but also Green Card holders, and other individuals or companies legally domiciled in the US.

This was a huge operation for the Swiss financial industry to mount. “Implementing FATCA is not so crucial for other countries whose financial institutions have few American customers or who have already been supplying data. Swiss banks, however, manage the biggest slice of transnational wealth in world terms”, says Mario Tuor, communications manager with the Swiss government’s State Secretariat for International Financial Matters (SIF).

“It’s a very complex process,” notes Thomas Sutter, spokesman for the Swiss Bankers Association (SBA), which is looking at costs of CHF200-300 million for the nation’s banks. “We can’t just push a button to find all the customers liable for American tax. We have to identify them, track them down, explain to them what is involved and ask them if they are willing to have their data transmitted”.

Powerful sanctions

Customers may indeed refuse to let their data be handed over – but this will not be enough for them to escape the long arm of the Internal Revenue Service (IRS), the American tax collector. In such cases, banks will still need to tell Washington the number and total amount of undeclared assets.

Double trouble

US expats feel the burden of FATCA

By Simon Bradley

US anti-tax evasion legislation known as FATCA – the Foreign Account Tax Compliance Act – has caused upheaval among the American expat community ...

Bern has to respond with information on all cases within eight months – so gone are the days in which information was released in dribs and drabs over a period of years. “Administrative assistance will be provided, if there is any evidence of an infraction. If the customer is not willing to oblige, he is admitting that he is not at rights with the American tax system,” points out Patrick Dorner, director of the Swiss Association of Asset Managers (SAAM).

“With FATCA, there is practically no more banking secrecy for customers liable for American tax,” admits Sutter. The Swiss government and parliament have had to accept this fact.
FATCA comes with a toolbox of powerful sanctions against banks or customers unwilling to comply, starting with a 30% withholding on all payments of dividends, interest or other revenue from American sources. Financial institutions also are at risk of being locked out of the world interbank market.

Required to register

All wealth management firms, trust companies, insurers and even major industries which have significant financial activities have to get with the American programme. All these companies are required to register with the IRS to avoid being labelled as “uncooperative”.

To apply the FATCA legislation, the American Treasury Department has proposed to other countries two kinds of agreement, which provide mechanisms to relieve some of the administrative burdens.
On the IRS website there are already 4,000 Swiss companies listed. “For months we have been mounting a big information campaign to tell all the asset managers that they have to register, even if they have no American customers or investments," says Dorner. "If an asset manager declines to register, banks won’t work with them. The banks can’t take the risk of working with managers not in conformity with FATCA," he explains.

Two kinds of FATCA

FINMA, the Swiss government’s financial markets watchdog, has issued a warning to all financial institutions calling on them to fulfil their obligations under the American regulations and in particular “not to engage in any action to get around FATCA”.

The new Swiss federal legislation on the FATCA accord, which takes effect on June 30, provides for fines up to CHF250,000 where there is intentional violation of the regulations, including that of having to register with the IRS.

Logical change

It’s a spectacular paradigm shift for this country. Until a few years ago, sanctions fell on those who violated banking secrecy and cooperated with foreign governments. Now they fall on whoever does not go along with shipping data to Washington.

Already the Swiss government wants to go further. By this autumn it intends to start negotiations with the US with a view to switching from a “model 2” FATCA accord to a “model 1”, which would essentially mean automatic exchange of information between the tax authorities.
This change is considered “logical” by the associations of bankers and assets managers. “When talk of FATCA started, automatic exchange of information was still a taboo topic in Switzerland. But we will soon have the OECD international standards, which Switzerland will have to conform to. So the best thing is to adopt this model now for our dealings with the US,” says Dorner.

The IRS expects all US tax dodgers to come clean

(Keystone)

How FATCA works
Washington’s new legislation, the Foreign Account Tax Compliance Act (FATCA), aims to fight tax evasion by wealthy Americans (the “fatcats” lambasted by President Barack Obama) by ensuring that tax is paid on all capital held abroad – in banks, insurance companies and other entities.
According to the legislation, foreign financial institutions have to register with the American tax authorities (IRS) and send in periodic reports on the assets that they hold for American taxpayers. The information should start to flow by April 30, 2015.
In an initial phase, only deposits over a certain limit, such as $50,000 for personal accounts, will be reported. Later all capital will have to be declared.
So far about 80 countries are negotiating or have concluded agreements with Washington to implement the FATCA system.
The American legislation is the model for the standards developed by the OECD to introduce automatic exchange of information on a global level.

US citizens abroad given lifeline
The Internal Revenue Service has given US citizens living abroad further breathing space to get their tax affairs in order.
On June 18 the IRS lifted restrictions to its offshore voluntary compliance programme by allowing citizens to apply if they have less than $1,500 of unpaid tax to declare.
Penalties will also be waived for those who can show that they did not wilfully hide assets.
This might apply to thousands of dual citizens living outside of the US who did not know that they should have been filing US tax returns.

How the Americans are defending their own bank secrecy

The financial industry in the USA is fighting hard for the preservation of bank secrecy. Switzerland’s private banking industry should take lessons from the Americans.

Not only Switzerland is under the massive attack of the U.S. Treasury and the U.S. tax authority (IRS, Internal Revenue Service) but also the financial industries in Florida and Texas are under pressure.
Since about a year foreigners with a bank account in the United States come under closer scrutiny. If their accounts earnings are more than USD 10 a year, this income must be reported directly to the tax authorities. The U. S. Treasury is convinced that foreigners have deposited up to USD 400 billion in American banks without having a regular USA residence permit, or at least have partially illegally invested in the USA territory.

Bankers Association of Florida and Texas are fighting the information exchange

The Internal Revenue Service (IRS) will collect this tax data in order to improve the exchange of information in tax matters with other countries. A similar so-called reciprocal agreement is also the FATCA agreement.
Florida Bankers Association (FBA) and the Texas Bankers Association ( TBA) are efficiently defending the bank secrecy. They are fighting against the elimination of banking secrecy and want to cancel decisions of the authorities having cancelled the bank secrecy rules.

America has always been a haven for the wealthy prosecuted in their home countries

To this end, they fight in court. A first action was indeed shot down by a federal judge. But the two industry associations do not want to be discouraged. They wrestle with the right speakers doing the right lobby efforts against elimination of the banking secrecy.

They want to increase the pressure on the government.
In Central and South America, the disrespect of human rights is a daily phenomenon.

Many residents in Latin America are living in constant fear that their data protection rights and elementary human rights are disregarded. Florida and Texas Bankers Associations have engaged professional lobbyists taking care on their interests and fighting for the preservation of banking secrecy. Switzerland should do the same and engage professional lobbyists to fight in favor of banking secrecy.