Friday, May 31, 2013

More Developments on Offshore Banks in Switzerland and Beyond (5/31/13)

There is a continuing virtual flood of information on Switzerland's recent moves and some ripple effects of the U.S. and the U.S. inspired other-country initiatives to get past offshore bank secrecy to chase major sources of tax revenue.

It is reported that the new Swiss proposal and earlier less dramatic moves to share information with the U.S. have many Swiss bankers and related enablers worried.  See James Shotter, Swiss tax proposal jolts bank workers (Financial Times 5/31/13) here.  Some of the personnel involved in the egregious conduct have already been indicted by the U.S.  More are being considered for indictment, along with some of the more egregious banks who took in U.S. customers -- including significantly UBS customers -- after UBS was forced to close its tax evasion enabling business.

Not surprisingly, the money will move from -- or avoid in the first place -- Swiss Banks.  This means the money must find another "haven."  Now where will that be?  Contemporaneously, a lot of wealth build-up is going on in SE Asia.  Swiss banks might have been attractive in the past, but are less so now.    See Martin Vaughan, Singapore, Hong Kong to Claim Larger Share of Offshore Wealth Pie (WSJ SEAsia 5/31/13), here.  Some excerpts:
Private banks in Singapore and Hong Kong will capture an ever-larger share of global wealth held offshore as the ranks of the super-rich in Asia grow faster than elsewhere in the world, according to a report from the Boston Consulting group. 
Offshore wealth rose by 6.1% globally to $8.5 trillion last year, the new BCG study said, and will continue to grow apace as high net worth people seek to protect their wealth by stashing it where there is political stability, a low tax burden and banking expertise. 
* * * *
Offshore wealth is defined as assets held in a country where the owner has no legal residence or tax domicile. 
Switzerland won’t be challenged anytime soon as the top destination for offshore wealth. It will still be the home for a quarter of the world’s offshore assets by 2017, BCG said, down from 26% currently. But its dominance has been eroded in recent years as the Swiss government has acceded to demands from U.S. and U.K. tax authorities to share information on possible tax evaders. 
Banking centers such as Singapore and Hong Kong should be on notice that the pursuit of illicit money flows by global tax authorities isn’t likely to let up, BCG said.
“Offshore centers must position themselves not only as possessing skills and expertise that cannot easily be found onshore but also as embracing full transparency and integrity,” according to the report.
In the latter regard, it seems to be clear from the U.S. initiatives that it is taking a particularly harsh stance toward offshore accounts being moved from banks in the IRS's gun sights to other banks that, in the banks or customers imaginations, may be less visible or vulnerable.

Germany is reportedly about to reach agreement with the U.S. on U.S. access to German bank information.   Charles McPhedran, Germany to share data on American accounts with U.S. (Democrat and 5/30/13), here.
Germany will sign a landmark agreement with the U.S. government Friday, allowing the bank account details of U.S. citizens living in that nation to be transferred to the IRS to help in the hunt for tax cheats. 
The deal is part of a move by the U.S. government in the past three years to tighten up on reporting requirements of financial assets abroad belonging to Americans living overseas, as well as U.S. nationals residing domestically with foreign accounts. 
"This is an important step on the path to a united war against tax evasion," said the German government after reaching a consensus Wednesday to sign the agreement.
Of course, one of the historic money laundering operations (using the term broadly to include tax evasion and other skulduggery promoted by secrecy), has been the Vatican bank.  The Vatican's religious garb does not exempt it from the developing global -- at least major country -- consensus that this behavior must stop.  See  Philip Pullella, New Vatican bank head vows zero tolerance with suspect accounts ( 5/13/13), here.  Excerpts:
The Vatican bank is checking the account of every client including Holy See employees, its new chief said, in a campaign to root out any money-laundering at an institution prone to scandals for decades. 
Ernst von Freyberg's predecessor was dismissed for poor management, and the Vatican's financial watchdog said last week it was investigating six possible attempts to use the Holy See to launder money in 2012.


  1. Anybody who thinks this agreement between Germany and the US is a done deal needs to watch this hearing now available on YouTube.

    This hearing occured on Tuesday in Brussels. The real fireworks start a little before 39 minutes in. It is worthwhile though for practioners to probably watch the whole thing. This hearing did not go well for the IRS. I know people who were present in the room. It was going well for the IRS until about 39 minutes in. Even worse for the IRS were the discussion after the meeting ended in the hallway on OVDI and expat issues that did not come up during the hearing.

  2. The little ones are hung, and the BIG ones run! (need google translate for this)

    So Asher, what do you think the chances are that any of these FATCA IGA countries like Singapore or Germany will actually get any real reciprocity as promised in the IGA pseudo treaties they are all signing?

    Every new one that is signed, is assuring that FATCA Fallout is blowing back on US shores and USFIs. Is Harry Reid going to give up his States beneficial Ownership Corporate shielding practices along with Delaware as Treasury official Jack Stack just promised in this recent EU FATCA public Hearing?

    The reciprocity (DATCA) provisions are right there in the Obama 2014 budget, page 202 as Stack said.

    They want Congress to give the IRS more regulatory authority to impose all the onerous provisions of FATCA onto USFIs too.

    Do you think Congress is in the mood to do that given the current 501(c)(4) scandal?

    As I see it, that is DOA, unless some Dem is going to step to the plate and either offer it as a separate bill, or try to hide it like FATCA was originally hidden in the 2010 Hire act. It will be buried in another piece of legislation having nothing to do with taxes.

    There is a fight brewing in America from this Administrations offshore jihad focus of the last 4 years, and the repercussions are yet to be felt back in the homeland where the real tax haven of the world is. :) S887, to repeal portions of FATCA could get legs when even more Wake up and realize this focus and compliance cost is coming home to roost.

  3. Switzerland: Sidestepping banking secrecyAs Swiss banks get ready to reveal client information to US authorities, is this crime-fighting or a breach of privacy?

    Media grills ‘political hot potato’


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