SWISS POINT OF VIEW

Banking is 20% of the GNP of Switzerland

Can the Swiss make up for a shortfall in banking GNP with candy, watches and cheese?  Not without lowering their standard of living.

What can the Swiss do to keep foreigners banking in their country?

Pretend to support international standards, but in reality support the old system: provide a shelter for money.  Provide absolute bank secrecy.

Some international banks have seen the future and are trying hard to comply with US and other foreign countries’ demands that the Swiss deal above board with their nationals’ money, so that a country can collect taxes owed.

Between 2006 and 2008 when it was clear that the US Department of Justice would go after Swiss banks, many former asset mangers at banks become independent asset managers and took their clients with them.

The Swiss banks consented to this exodus because, fearful of penalties, they wanted to get rid of accounts targeted by the US Department of Justice.

To protect their US clients from investigation by the DOJ the independent money managers converted the accounts of US citizens into other nationalities by transferring ownership to an offshore shell company and/or using so called trust and company service providers.  Now the account is no longer a US citizen’s account.  It returns to the original Swiss bank under the changed ownership.

The beneficial owner is still the US citizen. The Swiss are happy to report they no longer have US citizens’ accounts.  They are even happier that they still have US citizens’ money under another name.  In an as yet unsigned treaty, no information on US accounts before 2008 can be retrieved by the Department of Justice.

US POINT OF VIEW

For decades, acting under Swiss privacy laws, the money of US citizens has been exempt from taxation because it has been hidden in Switzerland.

Beginning in 2008, the US decided to stop this tax evasion.  They have called the harboring of offshore assets to the world’s attention.  As a result, billions of dollars have been added to the US tax coffers.

The US has entered into a treaty with the Swiss government, which requires that privacy considerations be overridden by discovery demands.  The Swiss have fought hard to resist the treaty, which they accuse the US of failing to sign.  The US has not signed this treaty because it leaves too many loopholes for Swiss bankers to slip through as the promise their clients privacy/secrecy.

Furthermore, the department of Justice, litigating against people who do not comply unless they are facing a jail sentence, have had difficult amassing evidence which will hold up in US courts.  Things have recently taken a turn for the better in a California case, and in the Armein indictment in US Southern District in New York.

As matters stand now, only when an insider turns coat and traces the money trail for litigators is there any hope for success.  But the DOJ seems to be targeting more useful individuals and has begun to win cases.

What is perfectly clear from the US point of view is that the Swiss are going to do whatever they can under the umbrella of the law to keep a business that is 20 percent of their gross national product.

Why Dubai’s first conflict gold audit never saw the light of day

Our correspondent Andreas Frank points out. Dubai has long had a reputation as a destination for African gold tainted by conflict and a hub for smuggling through the Middle East and Asia. A report by Global Witness provides a rare glimpse into how the city’s bustling gold trade works – and how local regulators and auditors allegedly tried to cover up at least one instance where supply-chain due diligence was lacking.

At the center of the report, based on documents handed to Global Witness by an Ernst & Young whistleblower, lies a gold refiner called Kaloti Jewellery Group. The company is run by the Jordanian Kaloti family, who have a refinery near Dubai and are building another capable of processing up to 2,000 tons of gold and silver a year, making it the largest such facility in the world.

Gold trading and refining seem to pose a high money laundering risk. On November 4, 2013 a Swiss gold refiner was accused of money laundering
Kaloti case lifts curtain on Dubai Gold Trade
City of Gold  Why Dubai’s first conflict gold audit never saw the light of day
Dokuments

Kaloti suffers reputation damage

Senator Carl Levin has been probing Swiss banks compliance with US demands for transparency.  Over and over again Senators asked, “Why would someone who lives in the US deposit money offshore?”

The Department of Justice notes its investigations have helped spur voluntary disclosures by U.S. taxpayers through an Internal Revenue service program, started in 2009, that offers reduced penalties for people who owe back taxes, interest and penalties.

“The prospect of U.S. prosecution has been forceful enough to cause 43,000 taxpayers to self-report and pay nearly $6 billion in taxes and penalties,” the Justice Department said.

This is the kind of probe and litigation that will help reduce inequality.

During a Senate hearing, Credit Suisse bank laid out a detailed defense, saying that the perpetrators were a small group of Swiss-based bankers, and that while it wanted to hand over more client names, it was caught between U.S. and Swiss law.

“Credit Suisse is ready to provide the additional information requested by the U.S. authorities on U.S. account holders, but we have been unable to do so,” the bank said in a statement provided at the hearing.

Credit Suisse had provided as much information as allowed under Swiss law, it said, and while it wanted to provide more client names, the U.S. Senate had not ratified a bilateral treaty with Switzerland that would allow it to do so.

Subcommittee Chair Carl Levin, a Michigan Democrat, poured cold water on that argument, saying the treaty will only expose U.S. accounts at Swiss banks after 2009, when it was signed.

If U.S. customers closed their accounts before 2009, they could evade detection and years of U.S. tax bills, Levin said, which Credit Suisse bankers acknowledged.

“We can’t collect taxes owed by those folks, which is what the heart of the problem is. … Don’t tell us the treaty is going to get us what we want,” he said. “It won’t.”

Levin also scolded the Justice Department for only having retrieved 238 client names from Credit Suisse – and none from the other banks under investigation. But the Justice Department officials said their work did show good progress.

Credit Suisse said it was a “demonstrably inappropriate assumption” that all 20,000 U.S. clients were tax cheats, saying many U.S. clients, such as expatriates living in Switzerland, had a valid reason to hold a Swiss bank account.   Senators accused the Department of Justice of dragging its feet.  Department of Justice Testimony
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