Switzerland Still Has the Guts to Fight for Your Privacy - Even if UBS Doesn't
Two months ago a U.S. District Court judge in Miami, Florida, authorized the U.S. Internal Revenue Service to go after information from Switzerland's largest bank, UBS. In other words, the court gave its blessing for the IRS to go on a fishing expedition for supposed American tax evaders at UBS. In my opinion, the court was wrong to make this blanket assumption. But then again, I have already stated my views on the invalidity of this U.S. court trying to override the Swiss laws.In any case, the court order allowed the IRS to serve a summons on UBS. In short, the IRS wants information (including identities) on 19,000 Americans with UBS accounts in Switzerland. It's important to note that UBS has extensive operations and thousands of employees in the United States.
UBS May Have Hung Their American Clients Out to Dry... But Switzerland Isn't Budging
This court order came about because the UBS private bankers may have been stupid enough to advise wealthy Americans on how to evade taxes (at least according to the IRS). The UBS situation was the subject of a series of noisy, demagogic anti-tax haven hearings in the Democrat-controlled U.S. Senate last month.At the time I wrote: "The big question now is whether UBS, the supposed giant of Swiss banking, will have the guts to take a strong stand based on the Swiss bank secrecy laws and fight for the principle of its clients' financial privacy...""Even if UBS is willing to abandon its American customers to the IRS, I suspect that official Switzerland...[is] going to stand and fight for their basic bank secrecy laws -- laws that have been revised and updated to accommodate reasonable law enforcement requirements."Well, UBS went beyond abandoning their American clients in one respect. They announced then and there that the Swiss-based UBS is abruptly ending its private banking services to Americans. In other words, if you're an American banking in Switzerland at UBS, you're out of luck. In fact, thousands of Americans with UBS accounts were suddenly left high and dry. Our Swiss banking contacts tell us that other Swiss banks are refusing to accept UBS American clients seeking new banks there. They obviously don't want to inherit alleged UBS tax evasion problems with the IRS.U.S. clients are especially nervous because the UBS statement said it would work with the U.S. government to identify the names of its clients who may have engaged in "tax fraud." (That phrase has special meaning in Swiss law because tax evasion per se is not a crime in Switzerland.)
You Can't Shake the Swiss Government
But as I predicted, while the spineless UBS bends, the Swiss government is standing firm. That official firmness may be cloaked in the diplomatic Swiss language (that has made Switzerland so famous) but it's still a firm stance nonetheless.Example: This week the Swiss government informally asked the U.S. not to pressure UBS for client data located within the Alpine country. Swiss State Secretary Michael Ambuehl told his U.S. counterparts that any request for client data must be decided by the Swiss government. It's a government issue because UBS would be breaching Swiss bank secrecy law by voluntarily revealing bank account records."I reaffirmed the offer by the Swiss government to cooperate constructively with the U.S.,'' Ambuehl said in his Bern office on Aug. 19. "I underlined, however, that we expect them not to take unilateral steps against UBS to obtain information which is located in Switzerland as long as the agreed, bilateral legal cooperation is ongoing.'' This was undoubtedly a reference to the Swiss-U.S. mutual tax treaty and the mutual legal assistance treaty (MLAT) between the two countries.
Tax Evasion Isn't a Crime in Switzerland
"UBS is seeking to address these requests with both Swiss and U.S. government authorities within the legal framework for intergovernmental cooperation and assistance established between Switzerland and the U.S.,'' a UBS spokesman said in Zurich.According to Swiss law, bank secrecy can only be lifted in connection with a criminal offense, such as tax fraud or money laundering. But tax evasion isn't a crime in Switzerland. Should the finance ministry agree that UBS release the account details, then account holders will be informed before their details are handed over. This gives them the option to go to court to oppose the release, a Swiss official said.Ambuehl said pressure from the U.S. and the European Union for Switzerland to amend bank secrecy laws hasn't increased. He also sees no need to revise them, because they include "strict internal rules and good external cooperation.''
No One Is Abandoning Swiss Policy Here
An alarmed Teodoro Cocca, formerly with Zurich University's Swiss Banking Institute said at the time of the UBS revelations: "This is a direct and coordinated attack on the heart of the Swiss financial system. This is a long-term threat that will not go away, and there is not too much Switzerland can do."It appears that the professor was right about the gravity of the situation, but wrong to think that the Swiss government would supinely abandon the cornerstone of their banking success - strict bank secrecy.There is a great deal the Swiss can do to defend their laws - and they are doing it.By the way, it's worth noting that The Sovereign Society has NEVER recommended UBS. We have always thought they were too cavalier with their client's privacy. Indeed for the last decade, we have advised U.S. depositors considering Swiss banks to avoid UBS AG and any other Swiss bank with U.S. based branches, affiliates or banking operations, other than a mere "representative office." However, that doesn't mean you should abandon the country of Switzerland altogether. As you can see, Switzerland still has some of the strongest banking laws in the world - and the local Swiss government is even willing to take on American politicians to keep that bank secrecy their policy.
UBS May Have Hung Their American Clients Out to Dry... But Switzerland Isn't Budging
This court order came about because the UBS private bankers may have been stupid enough to advise wealthy Americans on how to evade taxes (at least according to the IRS). The UBS situation was the subject of a series of noisy, demagogic anti-tax haven hearings in the Democrat-controlled U.S. Senate last month.At the time I wrote: "The big question now is whether UBS, the supposed giant of Swiss banking, will have the guts to take a strong stand based on the Swiss bank secrecy laws and fight for the principle of its clients' financial privacy...""Even if UBS is willing to abandon its American customers to the IRS, I suspect that official Switzerland...[is] going to stand and fight for their basic bank secrecy laws -- laws that have been revised and updated to accommodate reasonable law enforcement requirements."Well, UBS went beyond abandoning their American clients in one respect. They announced then and there that the Swiss-based UBS is abruptly ending its private banking services to Americans. In other words, if you're an American banking in Switzerland at UBS, you're out of luck. In fact, thousands of Americans with UBS accounts were suddenly left high and dry. Our Swiss banking contacts tell us that other Swiss banks are refusing to accept UBS American clients seeking new banks there. They obviously don't want to inherit alleged UBS tax evasion problems with the IRS.U.S. clients are especially nervous because the UBS statement said it would work with the U.S. government to identify the names of its clients who may have engaged in "tax fraud." (That phrase has special meaning in Swiss law because tax evasion per se is not a crime in Switzerland.)
You Can't Shake the Swiss Government
But as I predicted, while the spineless UBS bends, the Swiss government is standing firm. That official firmness may be cloaked in the diplomatic Swiss language (that has made Switzerland so famous) but it's still a firm stance nonetheless.Example: This week the Swiss government informally asked the U.S. not to pressure UBS for client data located within the Alpine country. Swiss State Secretary Michael Ambuehl told his U.S. counterparts that any request for client data must be decided by the Swiss government. It's a government issue because UBS would be breaching Swiss bank secrecy law by voluntarily revealing bank account records."I reaffirmed the offer by the Swiss government to cooperate constructively with the U.S.,'' Ambuehl said in his Bern office on Aug. 19. "I underlined, however, that we expect them not to take unilateral steps against UBS to obtain information which is located in Switzerland as long as the agreed, bilateral legal cooperation is ongoing.'' This was undoubtedly a reference to the Swiss-U.S. mutual tax treaty and the mutual legal assistance treaty (MLAT) between the two countries.
Tax Evasion Isn't a Crime in Switzerland
"UBS is seeking to address these requests with both Swiss and U.S. government authorities within the legal framework for intergovernmental cooperation and assistance established between Switzerland and the U.S.,'' a UBS spokesman said in Zurich.According to Swiss law, bank secrecy can only be lifted in connection with a criminal offense, such as tax fraud or money laundering. But tax evasion isn't a crime in Switzerland. Should the finance ministry agree that UBS release the account details, then account holders will be informed before their details are handed over. This gives them the option to go to court to oppose the release, a Swiss official said.Ambuehl said pressure from the U.S. and the European Union for Switzerland to amend bank secrecy laws hasn't increased. He also sees no need to revise them, because they include "strict internal rules and good external cooperation.''
No One Is Abandoning Swiss Policy Here
An alarmed Teodoro Cocca, formerly with Zurich University's Swiss Banking Institute said at the time of the UBS revelations: "This is a direct and coordinated attack on the heart of the Swiss financial system. This is a long-term threat that will not go away, and there is not too much Switzerland can do."It appears that the professor was right about the gravity of the situation, but wrong to think that the Swiss government would supinely abandon the cornerstone of their banking success - strict bank secrecy.There is a great deal the Swiss can do to defend their laws - and they are doing it.By the way, it's worth noting that The Sovereign Society has NEVER recommended UBS. We have always thought they were too cavalier with their client's privacy. Indeed for the last decade, we have advised U.S. depositors considering Swiss banks to avoid UBS AG and any other Swiss bank with U.S. based branches, affiliates or banking operations, other than a mere "representative office." However, that doesn't mean you should abandon the country of Switzerland altogether. As you can see, Switzerland still has some of the strongest banking laws in the world - and the local Swiss government is even willing to take on American politicians to keep that bank secrecy their policy.
No comments:
Post a Comment