Thursday, February 2, 2012

Wegelin Indicted in SDNY with Money Laundering Forfeiture (2/2/12)

Wegelin & Co. has been indicted.  The DOJ Tax press release is here; the indictment is here; and the related forfeiture complaint is here.  (The indictment and forfeiture complaint are provided with the permission of Tax Analysts.) The indictment is a superseding indictment adding Wegelin as a defendant to the prior indictment of three individual bankers affiliated with Wegelin.  See my prior blog, New Swiss Enabler Indictments - Bankers Related to UBS and, Allegedly, Wegelin (1/3/12), here.  The allegations of the prior original indictment are essentially repeated.  Many of those allegations related to Wegelin, identified in the original indictment as Swiss Bank A.  A number of paragraphs with various additional allegations, some interesting and others not so.  The indictment charges a single conspiracy count which alleges a conspiracy to (i) defraud (Klein) and (ii) commit offenses of evasion (7201) and tax perjury (7206(1)). In terms of the indictment, nothing is particularly surprising, although I am sure there will be a lot of comment about it.  For present purposes, I will just quote interesting parts of the press release.  Although alleging long term promotion of U.S. tax evasion through Wegelin, the press release notes particularly Wegelin's attempt to leverage its insularity from the U.S. by hustling UBS U.S. depositors:
In the wake of the IRS investigation, members of Wegelin's senior management affirmatively decided to capture the illegal business that UBS exited. To capitalize on the business opportunity this presented and to increase the assets under management, along with the fees earned from managing those assets, Berlinka, Frei, Keller and others, acting on behalf of Wegelin, told various U.S. taxpayer-clients that their undeclared accounts would not be disclosed to U.S. authorities because the bank had a long tradition of secrecy. They also persuaded U.S. taxpayer-clients to transfer assets from UBS to Wegelin by emphasizing, among other things, that unlike UBS, Wegelin did not have offices outside of Switzerland and was therefore less vulnerable to U.S. law enforcement pressure. Members of the Swiss bank's senior management approved efforts to capture the clients who were leaving UBS and also participated in some meetings with U.S. taxpayer-clients who were fleeing UBS. In February 2009, UBS entered into a deferred prosecution agreement with the Justice Department on charges of conspiring to defraud the United States by impeding the IRS. As part of the deferred prosecution agreement, UBS paid $780 million in fines, penalties, interest and restitution.
The indictment contains a lot of detail behind that summary.  It is fun reading for those who have the time and interest.

I think some  readers at least might be interested in a recitation of the co-conspirators.  So, here goes; some are pseudonyms as is typical in large conspiracy indictments).

1.  Of course, the individual named defendants previously indicted are named: Berlinker, Frei, and Keller.
2. Client Advisor, a Wegelin person who was team leader for the individual defendants.
3. Managing Parter A, head of the Zurich branch of Wegelin.
4. Executive A, a member of the Wegelin executive committee.
5. Beda Singenberger, an independent asset managers holding Wegelin accounts.  Singenberger has previously surfaced in the Swiss bank debacle.  For prior blogs mentioning Singenberger, see here.
6. Gian Gisler, UBS client advisor.  For previous blogs mentioning Gisler, see here.

Contemporaneously, the Government filed a complaint to forfeit Wegelin assets being held by UBS's U.S. affiliate acting as a correspondent bank.  I find forfeiture the most interesting part of the U.S. juggernaut against Wegelin and, by inference, the remaining recalcitrant Swiss banks (as well as the Swiss Government which serves those banks), because the clear message is that Swiss banks with little apparent U.S. footprint can be reached.  So, I turn to forfeiture..

The opening paragraph of the forfeiture complaint is:
1.  This an action by the United States of America seeking forfeiture of all funds, approximately $16.2 million, on deposit at UBS AG, Account No. 101-WA-358967-000, held in the name of Wegelin & Co. (the "Defendant Funds"). The Defendant Funds are subject to forfeiture pursuant to 18 U.S.C. § 981(a)(1)(A), as property involved in transactions in violation of 18 U.S.C. § 1956.
This is money laundering forfeiture.

Although it is a long Verified Complaint containing overlapping allegations with the Indictment, here are key allegations regarding the money laundering:
The Nature and Risks of Correspondent Banking and Wegelin's Correspondent Account at UBS
18. As reported in a 2001 investigative report published by the Minority Staff of the Senate Permanent Subcommittee on Investigations entitled Correspondent Banking: A Gateway For Money Laundering:
   Correspondent banking is the provision of banking services by one bank to another bank. It is a lucrative and important segment of the banking industry. It enables banks to conduct business and provide services for their customers in jurisdictions where the banks have no physical presence. For example, a bank that is licensed in a foreign country and has no office in the United States may want to provide certain services in the United States for its customers in order [to] attract or retain the business of important clients with U.S. business activities. Instead of bearing the costs of licensing, staffing and operating its own offices in the United States, the bank might open a correspondent account with an existing U.S. bank. By establishing such a relationship, the foreign bank, called a respondent, and through it, its customers, can receive many or all of the services offered by the U.S. bank, called the correspondent. 
   Today, banks establish multiple correspondent relationships throughout the world so they may engage in international financial transactions for themselves and their clients in places where they do not have a physical presence. Many of the largest international banks located in the major financial centers of the world serve as correspondents for thousands of other banks. Due to U.S. prominence in international trade and the high demand for U.S. dollars due to their overall stability, most foreign banks that wish to provide international services to their customers have accounts in the United States capable of transacting business in U.S. dollars. Those that lack a physical presence in the U.S. will do so through correspondent accounts, creating a large market for those services. 
Correspondent Banking: A Gateway For Money Laundering (Feb. 2001).
19. Because foreign financial institutions may not be subject to oversight by U.S. regulatory authorities, providing these foreign financial institutions access to the U.S. financial system through the correspondent banking system increases the risk of money laundering. In order to combat these risks, among other means, Federal Financial Institutions Examination Council ("FFIEC") publishes The Bank Secrecy Act/Anti-Money Laundering Handbook (the "Handbook"), a publication that helps identify money-laundering risks and establishes guidelines for U.S. financial institutions to mitigate those risks. In terms of correspondent accounts, the Handbook explains their inherent money-laundering risk and how criminal elements such as drug traffickers have used them to launder funds. The Handbook further explains: 
Because of the large amount of funds, multiple transactions, and the U.S. bank's potential lack of familiarity with the foreign correspondent financial institution's customer, criminals and terrorists can more easily conceal the source and use of illicit funds. Consequently, each U.S. bank, including all overseas branches, offices, and subsidiaries, should closely monitor transactions related to foreign correspondent accounts. 
Handbook, Correspondent Accounts (Foreign) -- Overview.
20. The Handbook also explains the danger of "nested" foreign correspondent accounts. "Nested accounts occur when a foreign financial institution gains access to the U.S. financial system by operating through a U.S. correspondent account belonging to another foreign financial institution." These nested accounts pose a further money-laundering risk because they provide additional foreign financial institutions access to the U.S. financial system and make it more difficult to identify the source and nature of the funds being sent to or from a correspondent account at a U.S. financial system.
21. Because of the heightened risk of money laundering through correspondent accounts, the U.S.A. Patriot Act and related regulations impose certain obligations on U.S. financial institutions housing correspondent accounts for foreign financial institutions to guard against money laundering. As explained in the Handbook:
Due diligence policies, procedures, and controls must include each of the following:
Determining whether each such foreign correspondent account is subject to [Enhanced Due Diligence]. 
Assessing the money laundering risks presented by each such foreign correspondent account.
Applying risk-based procedures and controls to each such foreign correspondent account reasonably designed to detect and report known or suspected money laundering activity, including a periodic review of the correspondent account activity sufficient to determine consistency with information obtained about the type, purpose, and anticipated activity of the account.
Handbook, Foreign Correspondent Account Recordkeeping and Due Diligence -- Overview. 
22. Since at least the late 1990s, Wegelin has had a correspondent bank account with UBS in Stamford, Connecticut. Through this correspondent relationship, Wegelin could wire funds from Switzerland to the Stamford Correspondent Account in the United States and, in turn, wire funds from the Stamford Correspondent Account to other accounts in the United States or to accounts overseas. Wegelin also had the ability to issue checks drawn on the Stamford Correspondent Account. These checks functioned like any check drawn on an account at a U.S. financial institution and could be deposited, or cashed for U.S. dollars, at other financial institutions.
23. Wegelin also offered nested correspondent services to other Swiss banks, including Swiss Bank C and Swiss Bank D, two Swiss banks that also held undeclared accounts for U.S. taxpayers. These additional Swiss banks were able to have Wegelin issue checks drawn on the Stamford Correspondent Account on their behalf. Swiss Bank C used this nested relationship, despite the fact that Swiss Bank C maintained its own correspondent account with UBS in the United States, which allowed it to conduct wire transactions in the United States, but did not include check-writing abilities.
Overview of Wegelin and Its Co-Conspirators' Mail and Wire Fraud Scheme to Defraud the United States
24. From at least in or about 2005 up through and including in or about 2011, more than 100 U.S. taxpayer-clients of Wegelin and other Swiss banks, conspired with, at various times, Wegelin and many of Weglin's employees, including Berlinka, Frei, Keller, Managing Partner A, Executive A, Client Advisor A, other Client Advisors at Wegelin, Swiss Bank C and Swiss Bank D, and others known and unknown, to defraud the United States of certain taxes due and owed by concealing from the IRS undeclared accounts owned by U.S. taxpayers at Wegelin and other Swiss Banks including Swiss Bank C and Swiss Bank D. As of in or about 2010, the total value of such undeclared accounts at Wegelin alone was at least $1.2 billion. In particular, Client Advisors at Wegelin, including Berlinka, Frei, and Keller, and others opened dozens of new undeclared Wegelin accounts for U.S. taxpayers in or about 2008 and 2009 after UBS and another large international bank based in Switzerland ("Swiss Bank B") closed their businesses servicing undeclared accounts for U.S. taxpayers ("the U.S. cross-border banking businesses") in the wake of widespread news reports in Switzerland and the United States that the U.S. Department of Justice was investigating UBS for helping U.S. taxpayers evade taxes and hide assets in Swiss bank accounts. These Client Advisors did so after the Managing Partners, including Managing Partner A, affirmatively decided to take advantage of the flight of U.S. taxpayer-clients from UBS by opening new undeclared accounts for these U.S. taxpayers at Wegelin. As a result of this influx of former UBS U.S. taxpayer-clients into Wegelin, Wegelin's undeclared U.S. taxpayer assets under management, and the fees earned by managing those assets, increased substantially. As part of their sales pitch to U.S. taxpayer-clients who were fleeing UBS, at various times, client advisors at Wegelin told U.S. taxpayer-clients that their undeclared accounts at Wegelin would not be disclosed to the United States authorities because Wegelin had a long tradition of bank secrecy and, unlike UBS, did not have offices outside Switzerland, thereby making Wegelin less vulnerable to United States law enforcement pressure. Managing Partner A and another executive of Wegelin participated in some of these meetings. At various times, Berlinka, Frei, and Keller collectively managed undeclared U.S. taxpayer assets worth hundreds of millions of dollars. As part of the scheme to defraud, Wegelin, Swiss Bank C, and Swiss Bank D provided U.S. taxpayer-clients with undeclared accounts access to funds in these undeclared accounts in a manner that obscured the source of these funds, that is, the U.S. taxpayer-clients' undeclared accounts in Switzerland. Also as part of this scheme, these U.S. taxpayer-clients, used the U.S. mails, private and commercial interstate carriers, and interstate wire communications to submit tax returns that were materially false and fraudulent in that these returns failed to disclose these undeclared accounts or the income generated from these accounts.
For a related blog, see HSBC Reportedly Being Investigated for Money Laundering (1/26/12), here. and the comments to that blog noting that DOJ Tax will not normally permit garden variety tax crimes to be ramped up to money laundering charges with the far greater incarceration and fines.  The Swiss banks' conduct is not garden variety tax crimes, but truly large scale and industrial strength tax crimes. The allegations specifically against Wegelin are strong, if true, and I suspect replicated in many other Swuss banks' conduct.  Still, the indictment does not charge money laundering.  But the Government is using money laundering as a tool to put the heavy hammer on Wegelin via financial costs, penalties, etc.

I think all of this will make a substantial point to the Swiss in the current standoff regarding access to information.  See my prior blog: Swiss Government and Swiss Banks Continue to Play Games (2/1/12), here.

Links regarding the Wegelin indictment:

Lynnley Browning, U.S. Justice Department indicts Swiss bank Wegelin (Reuters 2/3/12), here.
Kara Scannell and Haig Simonian, Wegelin charged with aiding tax evasion (Financial Times 2/3/12),  here.

Prosecutors call Wegelin a fugitive when its representative fails to appear in court.  See David Glovin, Wegelin Doesn’t Appear at Hearing, Called ‘Fugitive’ by U.S. (Bloomberg 2/10/12), here.

For all blogs on Wegelin, see here.


  1. Jack,

    Here is an interesting analysis by the International Tax Blog indicating that the number of US citizens who have shed their US citizenship rose 16% in 2011 from 2010.

    Although the actual number is not high (1781 people expatriated), it does, perhaps, suggest that dual citizens are pursuing other methods of cleaning up their offshore tax problems.

  2. I think this is very significant. It shows that even smaller banks with no US presence are vulnerable to US law enforcement. It also shows that the US has the upper hand in the chess game with the Swiss, that unless the Swiss deliver what the US wants, the US can cripple the Swiss banking system and severely effect the Swiss economy. The latest move brings the US closer to checkmate.

  3. Reading the commentary I think this problem is intractable as it stands because it is framed as the rich vs the poor.

    The IRS (and US Congress) caters to the poor (the general public, the voters, and their elected officials). And to do so they have to take from the rich.

    And offshore centers cater to the rich. (Specifically to protect their assets from the poor and from governments acting on behalf of the poor).

    "it is our duty to guarantee our clients ... the greatest possible security ... unanimous on that."

    Whereas other governments agreed to anonymous Swiss withholding, the US has not. This is because it is fixated on the idea of "fairness". I am not sure why.

    Perhaps the government lawyers are in a state of denial, avoiding the reality that taking from the rich and giving to the poor is really not fair.

    Call it noblesse oblige, a social or moral obligation, anything but fair.

    Taking money from people (whether rich or poor) is theft. Yet this is a "fairness" crusade?

    Luckily I am not a psychologist, because I can foresee some life-altering personal contradictions arising.

  4. One of my comments over at Isaac Brock Society was at least in Canada if the US ever came after us we could take back(steal) the 70% of Imperial Oil(The largest company in Canada)owned by ExxonMobil(We do really need to get that oil pipeline built to the Pacific though). I wonder given Wegelin's pronouncement of pulling out of the US years ago why the left even 17 million behind. Plus I would argue why did Wegelin need a US correspondent account. Most of the big US banks have correpsondent accounts in Switzerland and can cash Swiss Franc checks drawn on any bank in Switzerland through their correspondent relationships in Switzerland typically either UBS or CS in Zurich. The Fed actually runs a check delivery service to Canada for banks who receive Canadian checks by collecting them in Atlanta and then shipping them air freight for "presentment" to the Canadian Payment Association in Toronto.

  5. This is a very serious step, and the equivalent of sending the other Swiss banks involved that the Wegelin indictment is what their own will look like if they do not comply with US demands, and I don't believe that sending encrypted material will be viewed as compliance, and least not in the US.

    But another aspect of the Wegelin situation piqued my interest, and perhaps readers can give their thoughts:

    How was it so easy for the Wegelin bankers to track down the illegal UBS account holders and arrange for the transfer of deposits from UBS to Wegelin? The DOJ certainly seems to have great difficulty.

    1. From reading the indictment, the vast majority walked in the front door. $1.2 billion (according to the IRS estimates) just walked in the front door, without appointments.

      Apparently UBS asked all (perhaps unreported) American depositors to close their accounts (some accounts were over 30 years old).

      They all traveled to Zurich and asked UBS what to do, and it was UBS who referred them to Wegelin. Perhaps there was a referral fee, perhaps they wanted to keep the deposits in Switzerland. I read that there was a bank in neighboring Liechtenstein as well, for those who did not want to stay in Switzerland.

      This particular fact likely rose the IRS' ire: That UBS did not report those accounts that moved to Wegelin. So according to the IRS/DOJ logic, if UBS admitted to the guilt of harboring those accounts, Wegelin is guilty as well, because it is harboring the vary same accounts.

      Wegelin charged huge fees to open such accounts (likely in the thousands, in not tens of thousands). The IRS/DOJ claims that the bank's internal marketing correspondence shows that they knew that the Americans were under threat of criminal prosecution, and exploited that fear to charge them the large fees.

      But now there is an ethical problem if they do disclose, because they charged them those large fees to not disclose.

      As additional protection, they set up coded/numbered account numbers and/or corporations/foundations, for all accounts, whether requested or not. This is likely to further mask ownership. Even if the data were "stolen", (hacked), or more likely, requested by the Swiss govt, it would not have the names of the beneficial owners.

      Perhaps the Swiss govt got the idea from them to send encrypted data...

      They did not send paper mail to the US, nor phone calls. The only way business was to be done was in person, in Switzerland.

      There were emails, but they were masked as well, not from the bank's email address.

      All this strategy info the IRS received from the OVD program disclosures. (Likely in exchange for non-prosecution).

      The banks' defense is to separate the "assets" (depositors' accounts). UBS discarded the undisclosed Americans to Wegelin, and others. Now Wegelin transferred/sold non-American depositors to other banks.

      This way their liability is limited to the American accounts.

      It is a fascinating shell-game. They seemed to have received some hurried schooling from Caribbean banks.

      Unlike UBS, who is a major commercial/retail bank, with much to lose, Wegelin has nothing to lose. This is their only business.

      As most accounts are well over $1 mil, some as high as $30 mil, I doubt their owners need the money in the US. They likely have even more in US banks. This absence of inter-account transactions with the US likely make it difficult for the IRS to trace.

    2. So most of the money is still sitting there I am assuming in various Swiss government/corporate bonds etc all denominated in CH Francs. Wegelin & Co is still a member in good standing apparently of Swiss Interbank Clearing which means they can still clear and issue Franc checks and electronic payments and buy Franc banknotes from the Swiss National Bank. This could go on a very long time. One difference with Carribean shell banks is most of the Carribean islands where highly dependent on US dollars not really being issuers of currency that could be used anywhere but locally. So the next step if the US wants to push is to attack Swiss Interbank Clearing and the Swiss National Bank. The other thing is Swiss Interbank clearing maintains a nostro account for all member banks including Wegelin apparently that wish to conduct business in Euros at UBS in Frankfurt Germany. So Wegelin can continue to buy Euro currency additionally.

      I seem to remember a decent sized bank in Latvia that was banned from the US financial system for many years but continued to stay in business conducting activity only in Euros and Latvian local currency.

    3. Thank you M.

      Here is what I was hinting at though: if Swiss bank secrecy rules were broken for the referred accounts to Wegelin, as I suspect they were (as it is likely the account holders were revealed to Wegelin and to others so UBS could pick up referral fees), how can Wegelin (and others in a similar position) claim the benefit of Swiss banking laws to deny IRS/DOJ requests for account information?

      All in, I think Swiss banks holding any derivative UBS accounts, and other illegal US accounts, are kinda screwed.

      Their risk/reward analysis was fundamentally flawed. Let's not forget at the bottom of all this are tax whistleblowers (the unfortunate Mr. Birkenfeld comes to mind), who are not going away given the scope of the potental rewards available for good information. This is only going to get a lot worse for tax havens, as Treasury seeks to raise revenue, without raising existing tax rates.

  6. Again I am not an expert on the Swiss banking sector but at least some these 11 remaining of so called Cantonal Banks or essentially public owned by the Cantonall governments. First you have the issue of state immunity which has been pared back but not completely. Second these banks do do a lot of retail Swiss franc business so they have something to fall bank on. "Indicting" a foreign government so to speak gets fairly messy quickly. This was done once before when a "crown" corporation of British Colombia was indicted in the US and quickly became a political sorespot on both sides of the border. I'll have to look up the details. Switzerland is actually trying to push the Franc down artifically so this doesn't seem like in the currency markets anyone considers this a huge risk to the Swiss economy.

  7. Jack,

    This is the Foreign Soverign Immunity case regarding the BC Hydro and Power authority below I was talking about. So it would seem to be an interesting question to what extent do Cantonal Banks operate in the "public interest" and what jurisdiction defines that.

  8. To Tim and Patrick:

    I have no doubt that the Swiss bankers will exchange information about depositors if needed.

    (Please keep in mind that all Swiss banks (and most all offshore banks) will ask you directly, where you got the money you are depositing. Most want proof of earnings, ie check stubs, capital gains statements, and/or tax returns, as well as references from your CPA, other banks, business associates, etc.

    The reason for this is to confirm that you earned the money legitimately, and are not involved in an illegal or underground economy.

    This is confirmed in the indictment, that all Wegelin depositors were first asked where they got the money (even if it had been with UBS for years). What is notable is that the US indictment does not mention the depositors' answers...)

    The point is the intent of sharing the information. I think the bankers are in a self-protection and preservation mode now.

    I believe that Credit Suisse asked UBS for a list of depositors who joined OVD. The Swiss govt also has multiple lists of declared depositors, from the member banks. (Their website also allows you self-declare).

    As a result I suspect that Credit Suisse only declared to the IRS those who had already self-declared or had already been reported and had to join OVDP to avoid prosecution. This way they complied with disclosure requests without disclosing anything new.

    I think they are learning from their retained American lawyers how to outwit the IRS.

    I say this because until now there was no reason for the Swiss to lie or play games with the IRS. In Switzerland tax evasion is perfectly legal, and bank accounts were always secret. So they could always hold an upright attitude.

    I think this is what is really troubling the IRS/DOJ/Washington DC. Precisely these Swiss arguments that tax evasion is legal and one's wealth is a protected secret, and that the government has no more power than anyone else, and their upright attitude towards this.

    These arguments come from one of the world's richest countries. (Switzerland's GDP/capita is twice that of US).

    What is the possibility that Switzerland became wealthy and successful because of these policies (and attitudes)?

    This kind of thinking is completely contrary to Washington DC's bureaucracy mentality.

    And the ostracism inherent in branding someone a criminal serves them well in this regard.

    As far as the battle between the IRS and tax havens, I do not see either side giving up yet. As long as the IRS receives their paychecks and as long as the wealthy have money anyway.

    1. I have forgotten all the details over the years but I do happen to believe the "civil" penalties in Switzerland for tax evasion would problem be considered cruel and unusual punishment in the US. My understanding is on resident accounts the Swiss Federal Tax Administration takes a big chunk of out in witholding which tend to greatly minimize the opportunities for Swiss taxpayers to evaid. The other thing I heard over at Bruce Krasting's blog is the non "US" part of Wegelin that was sold/spun off just before the indictment went for almost 700 million dollars. Now perhaps that was a big decrease compared to what the business was once worth but the Wegelin partners are free and clear of any personal liability related to the impact of the non US business plus 700 million richer. Bruce Krasting actually thinks there might be some discussion about going after other entities such the new owners of the non US Wegelin business or the central bank.

    2. Americans unfortionately do have a proclivity for lying and cheating compared to other nationalities such as the Swiss or us Canadians. Reading through at least some of these indictments the people being in indicted do not necessarily appear to be the "nicest" people to know or work with. My sense though is a lot of people opened these accounts not for tax purposes but to hide assets from spouses and business partners.

      I have always been a big fan of the Canadian GST for many years as by most accounts it has completely whiped out much of the Underground economy. One of the things I have wanted to know in many of the cases what exactly was the source of the funds was it really from a US based illegitimate business as would seem to be common implication.

    3. Hi Tim,

      I partially agree. Yes, those Americans mentioned in the indictments I find disgusting. They make us all look bad, and I can see why most Swiss banks have chosen not to open any accounts for any Americans, period.

      But you have to understand the DOJ system which encourages people caught to "rat" on others, especially their associates, partners, etc. The penalty for not "ratting out" is more jail time. The incentive for "ratting" is less or no jail time.

      As a result people caught are trapped. Very few have the stamina (or morals) to keep quiet.

      This is something the Swiss bankers did not expect, that their own clients would turn on them, under interrogation by the IRS/DOJ investigators.

      First the clients plead with the Swiss to allow them to transfer accounts, etc. then they disclose to the IRS (mostly out of fear), then they "testify" against the same bankers who they were begging for help one year prior.

      (There ought to be a law against that. First you beg a lifeguard to pull you out of the water, then you sue the same lifeguard for pulling you out of the same water?

      And yes, there is class action suit filed against UBS by American depositors for opening their deposits.

      The real question is what kind of character is the DOJ shaping or encouraging? And are those characters ("the rats") more or less likely to uphold civic and social duties like the paying of taxes. But that is for another post.

      Ultimately, the Swiss have to do what most offshore banks do: keep a distance between the bank and the other country. This is why it is called "off-shore", (away from the shore).

      The Swiss tried to be amenable bankers, and good citizens. Remarkably, they filed IRS forms 1099-INT for those who wanted them filed. They offered everyone a W-9. They really tried to integrate with the IRS. They were granted "Qualified Intermediary" status by the IRS, the power to withhold, document, disclose, etc.

      But because they only comply selectively, the IRS wants to punish them badly.

      Contrast this to other offshore countries' banks (Dubai, Lebanon), who I doubt know who the IRS is. They don't get bothered.

    4. In response to the comments about banks asking which bank the money is coming from, I see this as a non-issue since the incoming wire would identify the originating bank.

    5. M:

      The difference here in Canada is we encourage the scum of the earth to come and immigrate here under the various "investor" immigrant programs like the multi millionaire Middle Eastern guy who was just convicted of killing three of his daughters and his first wife(he was polygamist) in honor killing. What is so interesting is despite his millions he was basically too cheap to even attempt to cover up the crime. Basically he bought a cheap used 5000 CAD car three days before the killing to drive his daughters into a lake so he wouldn't have to give up his Lexus SUV and then he hagled back in the motel him and his family were staying at to give up the additional room he booked he intended for his daughters at a cost of 70 CAD. Basically I guess he thought back in the middle east when you are rich like him you just get away with stuff like this. I personally have never supported the death penalty but this case he caused me to question that view. Even in jail this guy is still going to have control of his investments and property.

  9. To Asher Feb 3,

    Interesting comment - “the US can cripple the Swiss banking system and severely affect the Swiss economy” – The US has already crippled the world economy in 2007 due to the systemic corruption of the United States by the financial services industry and the consequences of that systemic corruption (at least according to the documentary film “Inside Job” which won many international and domestic awards).
    I wonder, if the US thinks this “crisis” is so important that the only way to solve it is by crippling again a Western European economy which might cause a rippling effect in all of Europe, and the whole world .The Brits and the Germans have more money stashed in Swiss banks but they are not trying to be bully and cripple the Swiss economy in order to solve the same issue.
    If the DOJ is so righteous, why it is not going after their own banking/financial systems bankers, mortgage loans, rating agencies and etc? So far, no one was criminally indicted on a much more serious damage to the US and world economy – or maybe they are waiting for the EU or the rest of the world to start an investigation because their resources are tied up pursuing Swiss Banks?
    I do not want to sound cynical or philosophical, but when it comes to trillion of dollars, no one is saint on either side of the Atlantic, although many are Hippocratic and you can try hide it under pile and piles of legalistic or even moral arguments.
    I only hope that by the end of the day common sense will prevail and governments will put this thing behind them. They should look ahead for the real threats to the free world such as the Iranian nuclear program, otherwise we will have a new World Order and this issue will not matter anymore.
    By the way – the Swiss government represents the US affairs in Tehran whatever it worth. I wonder if they perform in good faith on our behalf if we were trying to cripple their economy.

    1. I would not worry about the Swiss economy. The Swiss banks hold 20% of US' debt. The threat of selling 1% of that debt is worse than the threat of US indictments.

      How can you indict your mortgage bank, to whom you pay interest every month, and who has refinance every year? What if they call the loan and refuse to refinance?

      I would worry about the US economy, and the US government. Take a drive through the slums of Washington DC and see how and by whom the US is governed before making any conclusions.

  10. Found it interesting that Client Q, mentioned on page 91, points 74 and 75 transfered $7 million from UBS and yet it seems that UBS did NOT disclose this account among the 4,450 accounts disclosed.

  11. The head of the Swiss-American Chamber of Commerce warned today about a risk of a significant collateral damage if the US continues with its threats and plans to indict more banks. He mentioned that “Switzerland is the protector of U.S. interests in Iran and Cuba, as well as one of the largest net jobs creator in the USA,"
    See Reuters -

    1. When one hears such nonsense, one believes then end is near for Switzerland! What nonsense.

  12. Various thoughts on reading the Wegelin documents:

    Holding mail is standard practice, often cheaper for the client than mailing individual statements. Some US banks offer to let clients pick up statements at the branch, often to avoid employees opening mail. Or companies in the US will have financial mail sent to a PO box for the same reasons.

    "Sham corporations" in Panama, Belize etc. are no more "sham" than those in delaware, Nevada, etc.

    "Numbered accounts" just mean the client's name is not printed on statements and available to every nosy bank clerk. The bank still has the same customer info as with an ordinary account. In the US too, ATM receipts usually do not show the client's name, just the account number, sometimes only a partial account number.

    Now for some of the bad stuff:

    Some of the customers mentioned had both a declared and nondeclared account at the same bank, a clear sign of wilfulness. Hard to claim to not know or have overlooked FBAR requirements if you only report some accounts.

    Some customers engaged in what sure looks like structuring, seen in the consecutive checks written on Wegelin's correspondent account. Yet check numbers go up to 3,000 or 4,000. The IRS could have quickly found many of the biggest, baddest actors just by reviewing canceled checks written by Wegelin and other banks. I would guess this whould have taken as much time as auditing 1 or 2 little fish, and brought maybe a thousand times more revenue to the IRS.

  13. According to published reports as part of its agreement with the US, UBS disclosed to the US the names of the banks to which funds were transfered when UBS customers closed their accounts:


  15. As a practical matter, this boils down to a forfeiture case. It was made very clear in the UBS case that Switzerland does not extradite its own citizens to any country for tax-related charges. So these individuals need only stay in their own country where they grew up and presently live. They will never go anywhere near a jail or a courtroom and the DOJ knows this. The DOJ is trying to rattle some cages and grab some headlines (and trying to compel a universal resolution of the entire Swiss banking issue with the cooperation of the Swiss government).

    Did you notice that the indictments came on the heels of the Davos economic conference? During the conference, Treasury Secretary Geithner discussed the Swiss banking/tax issues with Swiss representatives. That was "the carrot" approach. The indictments were "the stick".

  16. It also shows that the US has the upper hand in the chess game with the Swiss, that unless the Swiss deliver what the US wants, the US can cripple the Swiss banking system and severely effect the Swiss economy.


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