Tuesday, December 24, 2013

Articles on U.S. Program for Swiss Banks (12/24/13)

I report on two of the many articles populating the internet.

David Voreacos and Giles Broom, Swiss Banks Employ Army of Advisers for U.S. Amnesty Plan (Bloomberg 12/22/13), here.  Key excerpts:
Switzerland’s 300 banks have enlisted an army of auditors, lawyers and in-house workers as they race to meet a Dec. 31 deadline on whether to seek U.S. amnesty for helping American clients evade taxes. 
 * * * * 
“The hard work is getting to the right data and cutting through complex systems to get all the facts on the table,” said David Fidan, a partner in Deloitte LLP’s forensic services practice in Switzerland. “That’s very expensive and involves lawyers, forensic accountants and bank employees. It can take 20, 30 or 40 people over four or five months for bigger banks.” 
* * * * 
“It’s necessary for the banks to do a deep analysis of their clients and the history of those relationships,” said SBA spokeswoman Sindy Schmiegel. “That’s really expensive, and that’s why the program is at the limit of tolerability for the banks. It’s really a painful program.” 
* * * * 
To gain non-prosecution deals, banks must pay 20 percent of the value of accounts not disclosed to the IRS on Aug. 1, 2008, 30 percent for such accounts opened between then and February 2009 and 50 percent for accounts opened afterward. 
“The view seems to be that the penalty rates for this program came out way too high,” said Milgrim, who is advising a Swiss bank. “A lot of banks are having difficulty deciding whether to go into a program which doesn’t take into account the level of culpability and instead treats all banks the same.” 
* * * *
“Most of the banks are going to category 2,” said Fidan. “The DOJ has already stated numerous times that if you’re unsure, you should file for a category 2. Clearly, if you file as a category 2 and cooperate with the U.S., from a governance perspective, your risk is much lower.” 
The advisers scouring electronic records seek to find which accounts among thousands were held by U.S. clients who didn’t declare assets. They search for U.S. citizens or residents. They sift for those born in the U.S. or have U.S. addresses, phone numbers, or instructions to transfer funds there. The bank may also try to reach customers to clarify their status. 
“Most of these accounts are closed,” Fidan said. “You need to reach out to a customer with whom you don’t have a relationship anymore. Everything can be handled. It’s just a matter of resources and time. The problem is resources are scarce and you don’t have that much time.” 
‘Minimal Risk’ 
After evaluating their accounts, banks must weigh whether to enter the program or risk detection by the U.S. if they don’t, said attorney Lawrence Hill of Shearman & Sterling LLP. His firm advises some Swiss banks and is seeking to work as an independent examiner for others. 
“If they’ve done adequate due diligence and evaluation, they may decide they have no risk or minimal risk,” Hill said. “If they feel they have some risk, they may decide to go into the program. It’s a complicated equation.”
One unknown variable for banks is the 38,000 clients who told the IRS all about their offshore accounts.
“The DOJ is basically saying to the banks that if you don’t come into this program and you have customers that went into the voluntary disclosure program, you could be in our sights,” Hill said. “That’s part of what the banks have to evaluate when they decide whether to participate.”
Banks have offered various explanations on their decision.
Caroline Copley., Swiss regulator recommends banks take provisions for U.S. tax deal (Reuters 12/24/13), here.
Swiss banks should set aside funds to cover the legal costs and fines associated with a crackdown on Swiss lenders suspected of helping wealthy Americans evade taxes, the country's financial regulator has recommended. 
The regulator FINMA said it was "generally recommended" that banks book provisions for the 2013 financial year, a FINMA spokesman said, referring to a letter sent to the Swiss Banking Association and the Institute of Certified Accountants and Tax Consultants on Monday. 
* * * * 
Swiss banks have until the end of the year to sign up to the program which requires the banks to hand over some previously hidden information and face penalties equivalent to up to 50 percent of the assets they managed on behalf of wealthy Americans. 
Many banks have come forward to say they will take part in the program, including Geneva-based Banque Privee Edmond de Rothschild and EFG International. 
The success of the scheme, open to a host of second-tier banks in Switzerland, is key for a future settlement for 14 larger Swiss banks being investigated. Among those under investigation are Credit Suisse, Julius Baer, Pictet, local government-backed Zuercher Kantonalbank (ZKB) and Basler Kantonalbank.


  1. Baloise Bank SoBa went against the Category 2 recommendation of the US government, Swiss government, FINMA and auditors by entering Category 3. It's argument is that it is compliant with America's treasured national origin discrimination since it has been throwing out the Americans since 2009:


  2. West of the Atlantic, some Americans are drooling about how they can best attack the Swiss with their racist hatred, regardless of how many innocent Americans are wrongly harmed in the process.

    East of the Atlantic, the picture looks entirely different, as translated here:

    "The uncertainty is currently huge, with any word spoken risking being incorrectly expressed or interpreted and thereby having a negative impact upon the bank, although most regional banks are convinced of their innocence of never having assisted any Americans to evade taxes, never doing any US business and never having violated Swiss law. Nevertheless, they have to go through an expensive process that the US department of justice dictates (see box). And eventually they are being threatened with a fine in an unknown amount."

    Since some racists in America are clearly obsessed with their need to misuse and abuse, why doesn't America pay the costs that it burdens banks with to prove their innocence?

  3. Translated from the press:

    "US program participations have to declare a sum of assets of individuals whom they figure are Americans. A fine will be calculated based on this sum, that the banks will have to pay. Banks can reduce this amount by proving that their clients complied with US law. Yet, what counts as proof is everything other than clear".

    What this means is that the US program is driven by greed, corruption, racism and extortion, where the US is misusing and abusing its power to wrongly grab money from other nations regardless of how greatly such harms the innocent.

  4. Swiss bank is really good. I have personal experience. I am agreed with this statement that 50 percent of their assets are of the behalf of americans wealthy....

  5. Hello, I have a simple question. 1) How many names have been handed to the US government? 2) How many IRS civil examinations, 3) How many criminal (I guess around 50). Just to look at the ratio: it looks like the government is making much more money from the OVDI/OVDP without having to probe much. Thanks.

  6. The whole purpose of the "program" is to squeeze as much money out of a foreign government as possible, regardless of the actions of individuals, regardless of justice, regardless of the law and regardless of US tax policy. This is America's new strategy of taxing the already taxed who are not subject to US taxation.

  7. The whole purpose of Swiss banks over the decades has been to assist brutal dictators, corrupt bureaucrats and politicos, and crooked businessmen in third world countries loot countries and squeeze as much wealth as possible from these countries. Swiss banks have actively aided and abetted criminal activities in dozens of jurisdictions.

    Personally, I am no fan of the United States, but please spare me crocodile tears about 'innocent' Swiss banks. I look forward to the day when other countries also take actions against the looting of their countries by their rulers, with the complicity of the Swiss. Maybe it takes a bully (the US) to deal with crooks (Swiss banks) and their apologists.

  8. Capital goes where it is welcome, and stays where it is well-treated.....and with regards to the US : PEOPLE IN GLASS HOUSES SHOULDN'T THROW STONES - "Those who are vulnerable should not attack others" .
    There is no doubt that quite a few local swiss bankers displayed a
    pretty high dose of criminal energy over the last 40 years and deserve to be punished - so do their US counterparts which were partners in crime and enablers . With regards to crooks I can remember a few names : WorldCom,Enron,Waste Management,Tyco, HealthSouth,Freddie Mac, AIG, Lance Armstrong, Adelphia Communications, Global Crossing, Martha Stewart and of course B. Madoff .

    Again I repeat my comment from last month the big 2...... $UBS and $CS have achieved an all time high in AUM for 2013. Money talks and the swiss banking industry is coping just fine

  9. Jack, President Obama’s war on offshore tax havens targets every country on the planet
    with the exception of the United States; the world’s largest tax haven.
    Obama is the consummate politician and has perfected the ability to speak from all sides of his mouth at the same time.

    In speeches regarding his war on non-U.S. financial centers the U.S. President has invoked the words and terms; “Tax haven”, “tax evasion”, “money laundering”, “offshore banks”, “terrorist” and “drug cartels”, so many times they have been emblazon on his teleprompter.

    Money in Offshore Tax Havens is Okay if You are Obama’s Friend
    “When he was first elected, the president said tax avoidance through international tax havens forced ordinary Americans to ‘pick up the slack,’ ” said Senator Charles E. Grassley, Republican of Iowa and a Finance Committee member. “He railed against fat cats who avoid taxes offshore.”

    Jack please explain this : Michael Froman is President Obama’s nomination to be the United States Trade Representative. Mr. Froman is a longtime Obama White House economic aide
    and has half a million dollars in a fund based in the Cayman Islands; according to financial documents provided to the Senate Finance Committee ?

  10. Simple answers: 1) about 250 UBS who did not have a chance OVDI, 3,000 UBS in 2009 who had a chance to join OVDI, 300 Credit Suisse a couple of years later, maybe 100-200 from a Swiss-Israeli bank (forget which.)
    2) Civil exams would result if a) an audit reveals foreign dealings but no FBAR (very few of these) b) those with names turned in who did not join OVDI/OVDP, c) those opting out. 3) Jack has a spreadsheet listing criminal.

  11. USTax, this is an IRS program. I doubt that Obama had much, if anything, to do with it. Of course, if you believe that Obama was the directing hand behind the 501(c)(4) debacle, you will think -- more likely imagine (because it is not a coherent thought) -- that Obama was behind the OVDI/P initiatives since 2009. But that is fantasy. This is an IRS initiative in pursuit of its duty to collect taxes owed by all U.S. persons without favoring any group (such as offshore bank account tax evaders).

    So, tell me more about Mr. Froman (other than what you read on a biased web site). You do know -- I assume -- that persons named to high positions are vetted -- which includes an IRS review. And,keep in mind that foreign accounts are not illegal so long as they are disclosed and the income reported. So, do you have proof that Mr. Froman did something illegal? If so, cite and provide your proof.

    But, even if he did something illegal, that proves no more than that he did something illegal. We can't suspend the law as to others simply because some person close to the president may -- emphasis on may -- have done something illegal. As I used to, while with DOJ Tax, tell opposing counsel who made these claims to me as a basis for excusing what their clients did, please give me the names of those who got better treatment and I would pass those names on to enforcement authorities, but in the meantime, their clients would have to take the consequences of the law. They are not off the hook simply because others skirted the law.

    Jack Townsend

  12. Jack, you do know -- I assume -- everything is biased today in one form or another - your blog is biased... but I still read it. Yes I think ( I hope to have an opinion is still acceptable) Obama was the directing hand behind the 501(c)(4) debacle. Mr. Froman is another representative of todays double standard with regards to the "paying your fair share" society.

  13. 'Capital goes where it is welcome, and stays where it is well-treated'

    Capital derived from looting the wealth of your country (as 3rd world dictators and pols have routine done) should not be welcome anywhere. If UBS and CS can do without this -- great. That means Swiss banks can survive without all this ill-earned wealth.

    And while I am no defender of the US, all the cases you cite are of people who ended up in jail (or corps whose officers ended up in jail)

  14. 1. Yes the swiss banking industry is doing just fine and $UBS, $CS have reached an all time high in $AUM for 2013.
    2. Yes they ended up in jail because they were guilty of crimes under US criminal and tax law .....but this is where people here on the blog disagree with each other. Swiss banks did "mostly" nothing wrong under swiss law or swiss bank secrecy law . Of course you can disagree with that notion on so many grounds but - I think the question should be, what right does the American Government have thinking it can impose its legal and tax structures on the world in general and Switzerland in particular ? Just because it still has the world's reserve currency? Why does the USG think banks should be enforcers of the world's largest, most complex, convoluted and "special interest" corrupted Tax system in the world?
    Swiss banks would have just smiled at the DOJs request/demands over the last 3 years if there would not be a strong possibility that they'll be SWIFT embargoed, which means they would be excluded from dollar clearing (like Iranian banks f.e.). This means that a bank would lose its ability to perform dollar transactions, which is a death sentence for any bank in todays economy.

  15. After digging around, I've failed to find anything in the Swiss White-Money Strategy to support your argument. Do you mean Russia or America?

    Innocent until proven guilty used to be an American value. If you think that a bank is guilty, then guilt must be proven. Until then, banks will remain innocent.

  16. You mean you failed to find the fact that pretty much every deposed in the Arab spring turned out to have billions (and sometimes 10s of billions) in deposits in Swiss banks. Or that numerous corruption inquiries from India and other countries have reached a stalemate in Switzerland because the Swiss authorities refused to co-operate.

    You must not have looked very hard (is that what they mean by willful blindness ?).

    Indeed a bank is innocent until proven guilty. The fact that almost none are willing to contest charges in US courts (and whatever their defects, US courts are extremely fair, even to terrorists) indicates that a lot are guilty. Indeed, when UBS was contesting release of account names, lots of these banks were urging customers to switch accounts and money to them. Wegelin was doing so openly in its report, bragging that it was immune to US pressure since it had no US branches.

  17. You seem to assume that I am somehow carrying water for the American position. I am most definitely not doing so.

    I agree that the US is probably one of the least injured countries from the criminality of Swiss banks (atlhough not for lack of trying on the part of the banks). The real injured parties are the people of numerous third world countries that have seen their wealth robbed by brutal dictators and corrupt politician/bureaucrats and stuffed in Swiss banks with Swiss complicity.

    Perhaps a good question might be -- what right do Swiss banks have to aid and abet the hiding of wealth obtained through dubious and criminal means in half a dozen jurisdictions ? I look forward to the day when emerging (and increasingly powerful) countries sign similar treaties with Switzerland -- the Gordian knot has been cut.

  18. ... what right do Swiss banks have......? The swiss banks have the exactly same rights the US have with Delaware,Nevada,Arizona, Wyoming, South Dakota and Florida to aid and abet the hiding of wealth obtained through dubious and criminal means in dozens of jurisdiction . Of course such actions in the past and future for any country in the world should be condemned both on moral and legal grounds but this is a naive way of looking at things. Again I have to repeat "Capital goes where it is welcome, and stays where it is well-treated" . It does not care if it is Moscow,HongKong,Singapore,Cayman Islands,Luxembourg or Jersey. The problem we have here is that all should be equal and not the US trying to improve their competitivenes with regards to their tax haven position for NR aliens.

  19. Criminality of Swiss banks? This generalization is far more criminal than those innocent banks which are blamed without supporting evidence. If one is supposed to oppose crime, then how can such be accomplished with criminal blanket generalizations?


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