Wednesday, August 8, 2012

The Plot Thickens for Swiss Bankers Involved In U.S. Evasion (8/8/12; supplement 8/9/12)

A commenter alerted me to some developments regarding at-risk Swiss bankers and their travel plans.  I link to some of the articles below with some cuts and pastes:

US may target Swiss bankers travelling in Europe ( 8/6/12), here.
Swiss bankers whose names were delivered to the United States in April as part of the crackdown on US tax evaders face the risk of arrest while travelling in some European countries, not just on US soil. 
Extradition treaties between the US and countries including France, Germany, Italy, Austria and Britain make it possible for the US to take legal steps via Interpol against bankers suspected of helping US citizens evade taxes, Denise Chervet, central secretary of the Swiss Bank Employees Association told the Swiss News Agency. 
 “If the US issues an arrest warrant via Interpol, the employee targeted could be arrested in any country with which Washington has an extradition treaty, and where the alleged offences are also punishable,” Chervet said. 
 Around 10,000 employees of 11 banks under investigation by US authorities could be affected by potential travel restrictions. 
 Chervet said that employees visiting the US who had had direct contact with American clients “run the risk of being arrested for violating American tax laws for having assisted with tax evasion”. Other bank employees who may not have had direct contact with clients could be called as witnesses, she said. 
 Bankers’ families could also be implicated: a report in La Tribune de Genève newspaper this week said two teenagers who arrived in the US to visit their grandparents were interrogated by officials for six hours about the whereabouts and working habits of their father, a Geneva banker.
Swiss banker's children quizzed by US officials over tax (The Local 8/6/12), here.
US attempts to clean up on tax evasion took a new twist when a Geneva banker's two teenage children were detained when they arrived on US soil, it was reported Monday. 
The teenagers, due to visit their grandparents, were questioned for several hours by US officials who asked them the whereabouts of their father and whether he sometimes worked in the country, according to La Tribune de Genève newspaper. 
During their six-hour interrogation the youngsters were not allowed to contact their grandparents who were waiting for them at an undisclosed airport, the report added. 
 * * * * 
In all, some 10,000 names of people linked to Swiss banks with American clients were given to the US tax office with Bern's blessing, according to SwissRespect, the organisation founded by Geneva lawyer Douglas Hornung who represents bank employees caught up in the affair.
"I advise my clients not to leave Switzerland," said Hornung, who advises around 40 bank staff in the country. 

Petros has posted the following blog on the Isaac Brock Society:  Children of Swiss asset manager detained for six hours for questioning by US officials (Updated with partial translation) (Isaac Brock Society 8/6/12), here.  The blog has a partial translation of the French from the article:
The banks recommend that their current and former employees whose names were transmitted to the other side of the Atlantic avoid going to the US. But such a precaution seems to be quite insufficient, considering the number of extradition treaties that exist. “I encourage my clients not to leave Switzerland” said Douglas Hornung, Attorney at Law in Geneva, who represents approximately 40 employees of banks involved in this matter.The disagreements go much further than a limited choice of vacation destinations, or family visits that must be postponed. Few banks in Switzerland or elsewhere, perhaps none at all, are interested in employing a “listed” bank employee from one of the 5 banks who gave data to the Department of Justice in order to avoid criminal prosecution. Careers risk being derailed because of this. « Banks are not afraid to expose their employees to potentially devastating consequences » wrote another newspaper “Le Temps” last month. 
Doubts about legality 
This matter has caused accusations of treason in the Swiss financial world. Opinions of [legal] experts have only reinforced this. The Swiss Federal Commissioner on Data Privacy, Hanspeter Thür, has continually repeated his doubts about the legality of delivering employee data to the American administration. “The employer does not have the right to reveal the names of its employees. If it is compelled to do so, it must inform the employees, and cover any damages and legal fees, warns Thomas Geiser, Professor of Law at the University of Saint-Gallen. 
Huge Inconsistency 
The five banks implicated in the matter can certainly defend themselves. The Federal Council formally authorized the transfer to the DOJ of identity data concerning the 10’000 employees. This is inconsistent: in 1997, in exactly the same sort of circumstances, two banks asked for a similar authorization to respond to DOJ requests. The Federal Council refused it at that time considering that Swiss banking laws prevented such.
Can it be said that, by instilling fear in these Swiss bankers, the U.S. is sentencing them to Switzerland?  Switzerland would be considered a country-club prison, but these guys are not used to being locked into Switzerland.  One would then need to pay attention to the statute of limitations for that would be when the "sentence" to Switzerland ends.  The statute, 18 USC Section 3290, here, is straight-forward - "No statute of limitations shall extend to any person fleeing from justice.".  Normally, being a fugitive would connote leaving one's normal place of residence or operation so as to evade discovery or arrest.  Would staying in the country of one's normal place of residence or operation (or avoiding coming to U.S. or a country with an applicable extradition treaty) be the functional or statutory equivalent of being a fugitive?  I would suspect so, but have not researched the issue.  If so, the Swiss bankers might have an effective life sentence.  And, in any event, of course Section 6531, here, excludes from the statute of limitations for tax crimes defined in the internal revenue laws the period of time that the person is "outside the United States."  Swiss Bankers are normally indicted under the defraud / Klein conspiracy statute, 18 USC Section 371, here, but enablers functionally equivalent have been indicted for tax crimes such as tax evasion, Section 7201, here, and tax obstruction, Section 7212, here  And, as I have previously noted, the specter of the sealed indictment discovered only when entering the U.S. or a country with an extradition treaty may hamper one's appetite for travel.  See Sealed Indictments - A Primer (7/11/12; revised 7/12/12), here.


  1. Wow, great article, I really appreciate your thought process and having it explained properly, thank you

  2. Maybe the Swiss could target New York CEOs traveling to Delaware to set up their shell corporations. :) Frankly, the biggest tax haven in the world, is onshore in the US. The U.S. actions drip with hypocrisy! Listen to the last 10 minutes of this Podcast by Planet Money

    Episode 390: We Set Up An Offshore Company In A Tax HavenIn the last 10 minutes they discuss an Australian study of offshore tax havens. The country with the worst transparency, requiring no background checks or identity, were in the US, not Switzerland, the Cayman Islands or Belize. Go figure!

  3. My sense is the statute of limitations issue is not open and shut. Wouldn't the defendant have to be given some type of notification of a court summons. Could this be accomplished by mail? My understanding is this has already come up in the Wegelin case.

  4. The IRS has to serve the John Doe summons on the summonsed party (such as UBS). The IRS does not know the names of the parties with the relationship to the summonsed party and hence cannot give them any notice. Ideally, the summonsed party is supposed to notify the unknown parties which it surely knows so that they have the ability to contest or participate in a contest of the summons.

    Jack Townsend

  5. Of the 10,000 employees it is likely that only a tiny fraction had any dealings with US clients, and of those clients a sizeable proportion are either Swiss residents conducting their day to day banking. Banks have personnel doing all kinds of functions, and these employees are now caught in the net too.

  6. Reuters: Apologetic Swiss banks sweat it out as U.S., Europe mull redress

    It appears that the Swiss Bankers thought acquiescing to FATCA would have built goodwill for a Swiss bank deal. How silly of them. They could have consulted with any OVDI or OVDP participation who would have told them that dealing the IRS is a fool's errand.

    "Contrary to what may appear as inactivity, the U.S. is in fact keeping the pressure on Swiss banks, which are like mice before a snake," said Martin Janssen, professor of finance at the University of Zurich. "The U.S. is really maximising its position here."

    Maximizing is all the IRS knows, and punishment is a 'requirement' with their mindset. "Vengence is mine", saith the Lord, and Treasury sees themselves and the Lord of the Financial Universe when it comes to what it wants!

    Doesn't matter that the real fraud and real revenue loss is in the homeland as reported by the Inspector General of the TIGFA.

    Inspector General calls IRS problems “shocking and disappointing”

    Fraud is so bad, that a member of the House Ways and Means Committee is calling on Shulman to reign.

    In an August 8 letter to Shulman, Johnson said the report from the Treasury Inspector General for Tax Administration showed that the IRS is a "willing accomplice to tax fraud."

    What Johnson doesn't understand is Commissioner Shulman, the IRS and Treasury have been so focused with FATCA chasing relatively meager revenue as compared to what they are leaving on the table in the homeland, they haven't had time or energy to bother focusing on all the ITN and child credit fraud in America.

    Nothing is going to stop Treasury in its offshore follies, no matter the protests, no matter what damage is done. There are some FATCA fanatics, like Dick Harvey, the architect of FATCA, who think of this as some kind of moral struggle and is basically unapologetic even when they see the harm before them. Their only concession is that IGAs might be required to get what FATCA wants.

    But maybe there is some hope that politics might intervene in this silly season...

    From Reuters... "This depends on whether the U.S. is willing to reach a settlement before or after their elections, which is unclear at the moment," she said.

    At least some in Congress are waking up to the FATCA fallout when it blows back on their constituents banks!

    From the Miami Herald:: Miami’s international banking clients move money to protect financial privacy
    House votes to postpone IRS rule on foreign deposits in US banks
    This would stop the reciprocity that FATCA depends on to get those recalcitrant governments to go along with an IGA. Germany has said it will not agree to an IGA without real reciprocity.

    So, the Biggest Financial extra territorial battle of our generation continues unabated, but our establishment media seem oblivious to it.

    In the meantime, the Swiss Bankers, as Jack says, are becoming prisoners in their own country, and the world's Financial Institutions are being held hostage to FATCA. It is now becoming a Risk factor in all new offerings, like this from Australia's WestPac Bank. It stated in its Risk notes on a new bond offering...
    " Holders may be subject to FATCA withholding and information reporting in relation to the Westpac Subordinated Notes"
    Moby summed it up best, when he said:
    " this investment involves no US source income. The risk outlined means that an Australian citizen living in Australia (with dual US citizenship), who earned their money in Australia, and then invested their money in bonds with an Australian bank and that money goes nowhere near the US, could be subject to FATCA withholding."

    The FATCA Fallout is just beginning...


  7. Der Spiegil: The 'Singapore Connection'German Tax Investigators Set Their Sights on Switzerland's UBS

    The German state of North Rhine-Westphalia has made headlines by buying data on Swiss bank accounts in a crackdown on German tax evaders. But now they have found evidence that Swiss bank UBS may have helped Germans shift their assets to Singapore before a tax treaty between Germany and Switzerland goes into effect next year.

  8. A new list of Switzerland bank employees was sent to U.S. Treasury by Bank HSBC.
    Geeze, Talk about dis-respecting your own employees and creating your own Switzerland prisoner list!!

    and as you would expect...

    A criminal complaint was filed against Swiss Federal Council in the case of names of HSBC bank employees sent to U.S.

    If it were I, so effected, I would be suing too, wouldn't you? Your Company turns your name over to a foreign government for possible prosecution and you are supposed to say, "thanks mate for the job you provided me!

    Maybe there is some hope in the comments from the Reuters story...

    "WASHINGTON RESHUFFLEAdding to the agony, several key U.S. officials plan to step down, which could mean negotiations having to be reset.Internal Revenue Service commissioner Doug Shulman and Treasury Secretary Timothy Geithner, who discussed the case with Widmer-Schlumpf in April, are both scheduled to depart after the election. Secretary of State Hillary Clinton, credited by Swiss officials with helping negotiations over a settlement for UBS in 2009, is also leaving her job.Another key U.S. contact, Attorney General Eric Holder, the top law enforcement officer, is under pressure after a Republican-led Congress found him in contempt of Congress for withholding documents in a gun-running sting operation.But all of that could be trumped by the "fiscal cliff" - a combination of tax hikes and automatic spending cuts that will take effect at the end of the year if lawmakers in the Democratic-controlled Senate and Republican-controlled House are unable to reach a compromise.By that point, if the Swiss haven't got a deal, they will face an even longer wait."

  9. Thanks, Just Me. I and, I am sure, the readers appreciate your continued efforts to stay informed and share information.

    Jack Townsend

  10. The Miami Herald link provided by Just Me is highly instructive as it reports just how much unreported foreign money is held in US banks.
    I have no facts to base this on, but would not be surprised that just as UBS bankers were traveling to NY, US bankers very well might be traveling to Buenos Aires, Rio de Janeiro, Mexico City etc. engaging in the very same conduct.

  11. Rogue members in private banking at RBS + ABN Amro act like criminal crews.

    Laws + rules do not apply to them.

    They operate by the 3 D's: DENY, DELAY, DESTROY.

    We are insiders exposing the next big banking scandal involving private banking fraud, asset hiding, black money,money laundering + tax evasion.

    This HIGH LEVEL private banking is much more than numbered bank accounts + offshore credit cards.

    High level private banking can be hazardous to your health if you get in their way.

    WE are in their way!

    See + keep up to date with our library of Press Releases + postings of evidence until we break out this story in the headlines:

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