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Inside Swiss Banks’ Tax-Cheating Machinery

52 points by jeo1234 11y ago

bsimpson 11y ago
I'd love more background on why the foreign banks cooperated. Presumably, the larger ones have US arms to do things like trade on Wall Street. Maybe the American government threatened to penalize Swiss institutions through their US subsidiaries if they didn't cooperate, but I imagine that many of the smaller banks (and the state-owned ones) don't have interests in the US. How can they be penalized for violating the law of a jurisdiction that's literally on the other side of the world?
- maxerickson 11y ago
  Large taxes on transfers from US persons: https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance_Act#Provisions https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance...
- patio11 11y ago
  Transactions in USD must be cleared in NYC; the US' position is that banks which don't play ball re: money laundering lose access to the US financial system.
  - fla 11y ago
    Which basically means they would lose their US banking liscense and coudn't trade in USD anymore. What would be interessting would be to know how some banks could accept these consequences and still survive.
    - gadders 11y ago
      BNP did for a few things.
- throwaway76194 11y ago
  It happens exactly as you suspect, by arm twisting in secret. I can tell you in some detail how Canada did some of its own arm twisting against the United States! Some years ago, Charles Schwab & Company (a major US brokerage) had to close all the accounts of Canadian customers who had accounts in the US. Charles Schwab & Company is a wholly-owned subsidiary of the Schwab Corporation that trades on the NYSE. Schwab Canada was a subsidiary of the Schwab Corporation. There was no other relation between Schwab Canada and Charles Schwab & Company. When the Schwab Corporation sold off Schwab Canada (their Canadian broker/dealer) to a Canadian company, the Canadian government said that Schwab's US operations had these these choices: (a) get a Canadian license; Canadian laws says that they cannot solicit Canadian business unless they open a branch in Canada, or (b) transfer all Canadian clients to their Canadian broker/dealer before they sold it, or (c) face a $2,000,000 fine for doing business without a license; the Canadian government's threatened fine is against the parent company (the Schwab Corporation) Notice that the Canadian government feels free to punish and give orders to the entirely US-based company (Charles Schwab & Company) and to the parent company (Schwab Corporation) because the Canadian government doesn't want it citizens to maintain accounts in the US. Schwab kept holding off for 2 years on doing anything, but finally the Canadian government threatened to start fining them. There were 1400 Canadian customers who had their US-based accounts closed. Merrill Lynch (an even bigger US brokerage) had a lot more US-based Canadian accounts than Schwab, and the same thing happened to them as well. So even though foreign countries should have no jurisdiction over what a country does internally, they actually do because deals get blocked and secret pressure is applied.
- muloka 11y ago
  The OECD also works to establish Tax Information Exchange Agreements (TIEA) between various countries. Countries need to have a certain number of TIEAs to not be considered a tax haven and be white listed.
- ellio 11y ago
  It's mentioned by another commenter, but being cut off from the US financial system, even for banks with no presence here, is a blow that many institutions cannot recover from. The dollar is the world's reserve currency and it allows the US to exert enormous influence.
mucker 11y ago
"Tax Cheating" is evidently another way of saying "sovereign state". The Swiss can do whatever they want. We don't tax the world. Sadly they capitulated in what was naked Imperial aggression by a foreign power. The US is free to prosecute US tax dodgers...in the US.
- forrestthewoods 11y ago
  If every country got to tax money the way the wanted the taxes on $1 of revenue would be $1.75.
  - late2part 11y ago
    True but... most countries have tax treaties and tax codes such that people are not double taxed. Source: was expat.
- newman314 11y ago
  Unfortunately, the IRS does not agree. They want to tax US citizens everywhere
  - muloka 11y ago
    Yup and they're working on correcting this with FATCA.
- ForHackernews 11y ago
  What a silly response. Of course the Swiss can do whatever they want. The IRS doesn't have any interest in taxing Swiss people living in Switzerland, earning Swiss francs working in Switzerland. But people and organizations doing business in the United States, and all US citizens, have legal US tax obligations. If you don't like it, feel free to renounce your citizenship and avoid doing business in any US markets.
  - sneak 11y ago
    Legality aside, how do US citizens (loosely defined as people who were born in the US decades ago) who do not live or work in the US have any moral obligation to pay taxes to the US?
1971genocide 11y ago
Tax Evasion is a Global Problem - every country from UK to Russia to my own country of Bangladesh have rich people hiding their money in foreign countries. I am happy that the US public is forcing their govt to look into it and hopefully a global system is set up to prevent tax evasion everywhere.
- patrickdavey 11y ago
  Interesting, unsure why you were downvoted here. I completely agree that tax evasion is a global problem. There's a fantasic book called "Treasure Islands"(http://treasureislands.org/ http://treasureislands.org/) which goes into it in detail. Showing how multinationals and the very rich structure their affairs so as to avoid the bulk of taxation (while not actually living in these offshore jurisdictions) Is it right? It's reasonably legal (the difference between evasion and avoidance is a very grey thing). According to the book linked above, we give less in aid than countries lose in not being able to tax effectively. Not quite sure how you fix it, probably fewer laws and more transparency. But it'll be quite the fight, there are more than a few $$'s at stake.
dsl 11y ago
By LAURA SAUNDERS Oct. 22, 2015 5:33 a.m. ET Some Swiss banks loaded funds onto untraceable debit cards. At another, clients who wanted to transfer cash used code phrases such as “Can you download some tunes for us?” One bank allowed a client to convert Swiss francs into gold, which was then stored in a relative’s safe-deposit box. Dozens of Swiss banks have been spilling their secrets this year as to how they encouraged U.S. clients to hide money abroad, part of a Justice Department program that lets them avoid prosecution. It is part of a broader U.S. crackdown on undeclared offshore accounts that has ensnared big Swiss banks such as UBS Group AG, but has received scant attention because it mostly involves little-known firms and relatively small fines. A Wall Street Journal analysis of Justice Department documents from more than 40 settlements with these banks provides a rare window into foreign firms’ tax-haven techniques and their myriad methods of keeping clients’ accounts under wraps. The offenders range from international banks to small-town mortgage lenders, which together helped secrete more than 10,000 U.S-related accounts holding more than $10 billion, according to the analysis. “Helping Americans conceal assets from the IRS was a big business for many sizes and types of firms in Switzerland, and now we’re seeing how extensive it was,” said Jeffrey Neiman, who led the Justice investigation of UBS in 2009 that pierced the veil of Swiss-bank secrecy. He is now at law firm Marcus Neiman & Rashbaum LLP in Fort Lauderdale, Fla. The firms that have admitted to the misconduct have paid a total of more than $360 million to resolve the cases and avoid criminal charges. Lawyers for U.S. account holders and Swiss banks estimate that 40 other firms in this program are in talks with the Justice Department. ENLARGE CHRIS PHILPOT FOR THE WALL STREET JOURNAL “Banks large and small are naming individuals and firms that helped U.S. taxpayers hide foreign accounts and evade taxes,” said acting Assistant Attorney General Caroline Ciraolo. “It is now clear that asset-management firms, investment-advisory groups, insurance companies and corporate service providers—not just banks—facilitated this criminal conduct.” More than 54,000 U.S. taxpayers with undeclared accounts have paid more than $8 billion to the Internal Revenue Service to resolve their cases and avoid criminal prosecution. The following methods used by the Swiss firms were laid out in detail in signed statements from settlement documents and disclose misconduct dating back to 2008, although some wrongdoing had occurred for decades. Most firms said they provided clients with numbered or code-name accounts with identities known only to a few employees. The banks also held mail destined for the U.S., in part to calm clients who were afraid the U.S. government might go through it. One client of Bank Sparhafen Zurich AG told a manager the bank’s hold-mail fee was “cheap insurance against having my dealings with you come to the attention of the government revenue authorities.” Many banks also helped U.S. taxpayers further cover up their ownership of accounts in sham trusts and foundations in tax havens such as Liechtenstein, the British Virgin Islands and Panama. ENLARGE CHRIS PHILPOT FOR THE WALL STREET JOURNAL To give U.S. clients ready access to funds, some banks issued prepaid debit cards that were hard to trace. BSI SA of Lugano, which is one of the largest private banks in Switzerland, said some clients in need of cash sent emails with coded phrases like “gas tank still running on empty.” Firms also accommodated clients who were fearful of U.S. money-laundering rules that require scrutiny of transfers above $10,000. St. Galler Kantonalbank AG, a regional bank controlled by the Swiss canton of St. Gallen, said it allowed nine U.S. customers to make a total of $3 million of withdrawals in amounts less than $10,000. The bank in 2009 allowed one client who closed an account holding 1 million francs, which is about $1 million today, to use 400,000 francs to buy gold. The gold and some remaining francs were then put in a safe-deposit box at the bank in the name of a non-U.S. relative of the client, the bank said. Many banks accepted accounts from clients fleeing large Swiss banks that were under pressure from U.S. authorities for practices the smaller firms are now admitting to. Some of them saw the U.S.’s actions against the large firms as an opportunity. In late 2008, when UBS was facing possible criminal charges, Migros Bank AG, a Zurich-based firm that once mainly served middle- and working-class Swiss clients, convened a working group to weigh whether to do business with U.S. clients. They decided it was a profitable business worth expanding. ENLARGE In 2009 and 2010, Migros accepted more than 75 new U.S. accounts, many of them from larger Swiss banks. In late 2010, an executive said that as a medium-size Swiss bank with mostly Swiss customers, the bank wouldn’t “be in the crosshairs for the U.S. authorities.” Yet, by the spring of 2012 as the U.S. pursuit of Swiss banks widened, Migros was pressuring U.S. clients to declare accounts to the IRS. At the same time, it allowed them to withdraw or transfer funds in ways designed to conceal them to the IRS, including transferring assets to secret accounts at other Swiss banks. Firms can reduce penalties by taking steps such as turning over account information and by proving that clients have informed the IRS about their accounts. The penalties for individual clients can be as high as half the account’s value. Lawyers for three of the Swiss banks said they are complying with terms of the settlements, and the lawyer for St. Galler Kantonalbank couldn’t be reached for comment. All firms that have signed agreements with the Justice Department have pledged not to violate U.S. laws in the future and to cooperate with U.S. authorities in efforts to combat tax evasion. UBS paid $780 million and admitted wrongdoing in a 2009 settlement with U.S. authorities to avoid criminal charges. Credit Suisse Group AG pleaded guilty to criminal charges in 2014 and agreed to pay $2.6 billion. Lake Leman in Geneva. Firms that have admitted to misconduct have paid a total of more than $360 million to resolve the cases and avoid criminal charges. ENLARGE Lake Leman in Geneva. Firms that have admitted to misconduct have paid a total of more than $360 million to resolve the cases and avoid criminal charges. PHOTO: DENIS BALIBOUSE/REUTERS The Justice Department said it hopes to reach settlements in this program with other Swiss firms by year-end. Lawyers for U.S. account holders and Swiss banks familiar with Justice Department efforts said that six to eight larger banks remain in separate talks with U.S. authorities. Meanwhile, U.S. officials said they are mining the extensive data uncovered by the program, including the destination of funds transferred out of Swiss accounts, to pursue leads around the world.
vonklaus 11y ago
I find the response to these articles often very baffling. Everyone seems to want to nail these banksters for dodging taxes using clever loopholes. Then, they rail against government incompetence and praise people who work within a narrow framework while getting results ("hackers"). Obviously, this is a generalization and not every person thinks this way, but I often find this sort of response on places like reddit and even here to some extent. If the Federal Gov't wants tax money it better start making a strong case with some serious value propositions. Realize, that post-civil war the Federal Income Tax was allowed to expire, even for funding the war it was only 10%. It had been ruled unconstitutional.[0]People don't want to give the government money at a corporate or personal level. And if they would stop buying warehouses of hammers and dumping it into the middleeast funding helicopters that will never fly and powerplants that don't work, maybe people would at lease be neutral, instead of downright hostile, about the issues of taxes. [0]http://www.eoearth.org/view/article/153529/ http://www.eoearth.org/view/article/153529/
- zouhair 11y ago
  Poor rich, they are a persecuted minority.
  - vonklaus 11y ago
    My point, which I didn't explicitly state, is that maybe instead of demonizing the rich for tax evasion we should be doing more to help the poor and middle class achieve these same ends. Obviously, building a strong economy and job creation are much more important, but lowering taxes and allocating the money the government does have, should be important goals going forward.
- dredmorbius 11y ago
  The Hivemind tells me there is no Hivemind.
- iofj 11y ago
  At times like this it is worth remembering that "wealth" accounts, the ones the banksters are "tax optimizing" for their clients, start at $5000 balance or so and the average is in fact no higher than $45000. I don't know, but I do think that the people these accounts belong to could easily in fact be the "top-50%" and not so much the "top-1%". Hence the baffling response.
gohrt 11y ago
I wonder when a guy who robs a liquor store can get the same deal as these white-collar tax cheats: steal $500, and avoid criminal charges in exchange for paying $250 restitution.
- vonklaus 11y ago
  Do you think that a person or company retaining the money they earned over the fiscal year, or not paying as much as they should to their gov't, can aptly be compared to armed theft of someone-else property? I mean, if we are making analogies about armed theft, like one good one is taxes.
  - mercurial 11y ago
    This is a stupid analogy. People dodging taxes rob from the commons, essentially. If you're not satisfied with what the government does with your taxes and you live in a democratic society, get out and vote, a benefit you enjoy due to your taxes, as well as things like security, a justice system and (depending on your country) an efficient healthcare and welfare system, all paid for by your taxes. Just like a normal government should also spend a significant amount of your money on supporting the less well-off in the society.
    - vonklaus 11y ago
      Yeah mate, makes sense. I'll just get out and vote. It isn't like there are limited choices, entrenched political ideologies, a significant amount of friction, or a massive power distance relationship between constituents and representatives. America is a Democratish society and there is a pretty high level of dilution between my/societies views and laws. I vote(just kidding, I don't actually vote but let's accept the hypothetical) for a representative for congress. That gives me the option to have 4 people representing me in ALL of congress, assuming that the people I wanted to win progressed AND that they represent my views broadly enough. There are 535 people in congress, if we assume my 2 house reps and my 2 senators map my views at a 1:1 ratio (they don't, at all, nor do nearly anyone's in America) then, if you generously round up from .0074, my views are indirectly represented for me and are around 1%. Luckily, we live in a world where there are lots of great choices for Senators, Representatives and Presedential canidates and absolutely no outside interests interloping on the process. So I vote often. Every year, I don't turn up to the polls and vote to not participate. My single vote not being casts detracts a tiny bit of legitimacy from a system I want to fail, and I can hope for a better future.[0] [0]Someone on HN articulated this really well, and I would love to find the quote from him/her, but it perfectly summed up my own thoughts.
ellio 11y ago
For what it's worth to the people saying "we (as in the US or the international community more generally) have no interest in this and shouldn't trample on sovereign nations," I respect your opinion and your disdain for heavyhanded, imperialistic behavior, but don't ignore the evils that these banks perpetuate. They are opportunistic and protect and facilitate some of the worst people on earth, including arms traffickers and dictators who commit atrocities against their own people. Maybe exerting pressure against these banks isn't the right solution, but I have no sympathy for the sort of people who helped the Sudanese commit genocide, and anything that works against them I'm inclined to support. http://www.bloombergview.com/articles/2015-10-20/shh-credit-agricole-kept-its-sudan-business-quiet http://www.bloombergview.com/articles/2015-10-20/shh-credit-...
- rrggrr 11y ago
  Except - they also serve as a safehaven for wealth created in countries where its very likely to be confiscated by totalitarian and unstable governments. Think Nazi Germany, Rhodesia/Zimbabwe and unfortunately, possibly, hopefully unlikely - China.
  - dredmorbius 11y ago
    Most of the wealth "created" in totalitarian states is in fact extracted by kleptocratic rulers. Ferdinand Marcos in the Philippines, numerous African dictators, Vladimir Putin, current the 3rd richest person in the world. If you want to create exceptions for financial refugees, that's well and good. But global protection for every drug lord, terrorist, and petty dictator ain't the right way to do it.
    - mjn 11y ago
      Even closer in the neighborhood, most of the Greek kleptocrats have their money in Swiss banks too. Some of them are now being prosecuted, with information that only came to light because an employee of HSBC took some account lists home (in violation of Swiss law). The French police later found these in a raid, and turned them over in part to the Greek police [1]. I wouldn't be surprised if Swiss banks are also handling the money from organized crime in Bulgaria and Romania. I think eventually, like the US has, the EU will succeed in pressuring Switzerland to cooperate more with European police investigations and turn over this kind of information. Despite not being an EU member, Switzerland is too economically entangled in EU treaties like the common market, to entirely ignore what the EU thinks, at least in cases where the EU actually agrees on what it thinks and is willing to make an issue out of it. [1] https://en.wikipedia.org/wiki/Lagarde_list https://en.wikipedia.org/wiki/Lagarde_list
dredmorbius 11y ago
For those looking for more background (and open access) to offshore banking and tax shelters, I highly recommend the ICIJ's long-running series of investigative reports on sheltered wealth: http://www.icij.org/offshore http://www.icij.org/offshore

52 points by jeo1234 11y ago

I'd love more background on why the foreign banks cooperated. Presumably, the larger ones have US arms to do things like trade on Wall Street. Maybe the American government threatened to penalize Swiss institutions through their US subsidiaries if they didn't cooperate, but I imagine that many of the smaller banks (and the state-owned ones) don't have interests in the US. How can they be penalized for violating the law of a jurisdiction that's literally on the other side of the world?

maxerickson 11y ago
Large taxes on transfers from US persons: https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance_Act#Provisions https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance...
patio11 11y ago
Transactions in USD must be cleared in NYC; the US' position is that banks which don't play ball re: money laundering lose access to the US financial system.
- fla 11y ago
  Which basically means they would lose their US banking liscense and coudn't trade in USD anymore. What would be interessting would be to know how some banks could accept these consequences and still survive.
  - gadders 11y ago
    BNP did for a few things.
throwaway76194 11y ago
It happens exactly as you suspect, by arm twisting in secret. I can tell you in some detail how Canada did some of its own arm twisting against the United States! Some years ago, Charles Schwab & Company (a major US brokerage) had to close all the accounts of Canadian customers who had accounts in the US. Charles Schwab & Company is a wholly-owned subsidiary of the Schwab Corporation that trades on the NYSE. Schwab Canada was a subsidiary of the Schwab Corporation. There was no other relation between Schwab Canada and Charles Schwab & Company. When the Schwab Corporation sold off Schwab Canada (their Canadian broker/dealer) to a Canadian company, the Canadian government said that Schwab's US operations had these these choices: (a) get a Canadian license; Canadian laws says that they cannot solicit Canadian business unless they open a branch in Canada, or (b) transfer all Canadian clients to their Canadian broker/dealer before they sold it, or (c) face a $2,000,000 fine for doing business without a license; the Canadian government's threatened fine is against the parent company (the Schwab Corporation) Notice that the Canadian government feels free to punish and give orders to the entirely US-based company (Charles Schwab & Company) and to the parent company (Schwab Corporation) because the Canadian government doesn't want it citizens to maintain accounts in the US. Schwab kept holding off for 2 years on doing anything, but finally the Canadian government threatened to start fining them. There were 1400 Canadian customers who had their US-based accounts closed. Merrill Lynch (an even bigger US brokerage) had a lot more US-based Canadian accounts than Schwab, and the same thing happened to them as well. So even though foreign countries should have no jurisdiction over what a country does internally, they actually do because deals get blocked and secret pressure is applied.
muloka 11y ago
The OECD also works to establish Tax Information Exchange Agreements (TIEA) between various countries. Countries need to have a certain number of TIEAs to not be considered a tax haven and be white listed.
ellio 11y ago
It's mentioned by another commenter, but being cut off from the US financial system, even for banks with no presence here, is a blow that many institutions cannot recover from. The dollar is the world's reserve currency and it allows the US to exert enormous influence.

mucker 11y ago

"Tax Cheating" is evidently another way of saying "sovereign state". The Swiss can do whatever they want. We don't tax the world. Sadly they capitulated in what was naked Imperial aggression by a foreign power. The US is free to prosecute US tax dodgers...in the US.

forrestthewoods 11y ago
If every country got to tax money the way the wanted the taxes on $1 of revenue would be $1.75.
- late2part 11y ago
  True but... most countries have tax treaties and tax codes such that people are not double taxed. Source: was expat.
newman314 11y ago
Unfortunately, the IRS does not agree. They want to tax US citizens everywhere
- muloka 11y ago
  Yup and they're working on correcting this with FATCA.
ForHackernews 11y ago
What a silly response. Of course the Swiss can do whatever they want. The IRS doesn't have any interest in taxing Swiss people living in Switzerland, earning Swiss francs working in Switzerland. But people and organizations doing business in the United States, and all US citizens, have legal US tax obligations. If you don't like it, feel free to renounce your citizenship and avoid doing business in any US markets.
- sneak 11y ago
  Legality aside, how do US citizens (loosely defined as people who were born in the US decades ago) who do not live or work in the US have any moral obligation to pay taxes to the US?

1971genocide 11y ago

Tax Evasion is a Global Problem - every country from UK to Russia to my own country of Bangladesh have rich people hiding their money in foreign countries. I am happy that the US public is forcing their govt to look into it and hopefully a global system is set up to prevent tax evasion everywhere.

patrickdavey 11y ago
Interesting, unsure why you were downvoted here. I completely agree that tax evasion is a global problem. There's a fantasic book called "Treasure Islands"(http://treasureislands.org/ http://treasureislands.org/) which goes into it in detail. Showing how multinationals and the very rich structure their affairs so as to avoid the bulk of taxation (while not actually living in these offshore jurisdictions) Is it right? It's reasonably legal (the difference between evasion and avoidance is a very grey thing). According to the book linked above, we give less in aid than countries lose in not being able to tax effectively. Not quite sure how you fix it, probably fewer laws and more transparency. But it'll be quite the fight, there are more than a few $$'s at stake.

dsl 11y ago

By LAURA SAUNDERS Oct. 22, 2015 5:33 a.m. ET Some Swiss banks loaded funds onto untraceable debit cards. At another, clients who wanted to transfer cash used code phrases such as “Can you download some tunes for us?” One bank allowed a client to convert Swiss francs into gold, which was then stored in a relative’s safe-deposit box. Dozens of Swiss banks have been spilling their secrets this year as to how they encouraged U.S. clients to hide money abroad, part of a Justice Department program that lets them avoid prosecution. It is part of a broader U.S. crackdown on undeclared offshore accounts that has ensnared big Swiss banks such as UBS Group AG, but has received scant attention because it mostly involves little-known firms and relatively small fines. A Wall Street Journal analysis of Justice Department documents from more than 40 settlements with these banks provides a rare window into foreign firms’ tax-haven techniques and their myriad methods of keeping clients’ accounts under wraps. The offenders range from international banks to small-town mortgage lenders, which together helped secrete more than 10,000 U.S-related accounts holding more than $10 billion, according to the analysis. “Helping Americans conceal assets from the IRS was a big business for many sizes and types of firms in Switzerland, and now we’re seeing how extensive it was,” said Jeffrey Neiman, who led the Justice investigation of UBS in 2009 that pierced the veil of Swiss-bank secrecy. He is now at law firm Marcus Neiman & Rashbaum LLP in Fort Lauderdale, Fla. The firms that have admitted to the misconduct have paid a total of more than $360 million to resolve the cases and avoid criminal charges. Lawyers for U.S. account holders and Swiss banks estimate that 40 other firms in this program are in talks with the Justice Department. ENLARGE CHRIS PHILPOT FOR THE WALL STREET JOURNAL “Banks large and small are naming individuals and firms that helped U.S. taxpayers hide foreign accounts and evade taxes,” said acting Assistant Attorney General Caroline Ciraolo. “It is now clear that asset-management firms, investment-advisory groups, insurance companies and corporate service providers—not just banks—facilitated this criminal conduct.” More than 54,000 U.S. taxpayers with undeclared accounts have paid more than $8 billion to the Internal Revenue Service to resolve their cases and avoid criminal prosecution. The following methods used by the Swiss firms were laid out in detail in signed statements from settlement documents and disclose misconduct dating back to 2008, although some wrongdoing had occurred for decades. Most firms said they provided clients with numbered or code-name accounts with identities known only to a few employees. The banks also held mail destined for the U.S., in part to calm clients who were afraid the U.S. government might go through it. One client of Bank Sparhafen Zurich AG told a manager the bank’s hold-mail fee was “cheap insurance against having my dealings with you come to the attention of the government revenue authorities.” Many banks also helped U.S. taxpayers further cover up their ownership of accounts in sham trusts and foundations in tax havens such as Liechtenstein, the British Virgin Islands and Panama. ENLARGE CHRIS PHILPOT FOR THE WALL STREET JOURNAL To give U.S. clients ready access to funds, some banks issued prepaid debit cards that were hard to trace. BSI SA of Lugano, which is one of the largest private banks in Switzerland, said some clients in need of cash sent emails with coded phrases like “gas tank still running on empty.” Firms also accommodated clients who were fearful of U.S. money-laundering rules that require scrutiny of transfers above $10,000. St. Galler Kantonalbank AG, a regional bank controlled by the Swiss canton of St. Gallen, said it allowed nine U.S. customers to make a total of $3 million of withdrawals in amounts less than $10,000. The bank in 2009 allowed one client who closed an account holding 1 million francs, which is about $1 million today, to use 400,000 francs to buy gold. The gold and some remaining francs were then put in a safe-deposit box at the bank in the name of a non-U.S. relative of the client, the bank said. Many banks accepted accounts from clients fleeing large Swiss banks that were under pressure from U.S. authorities for practices the smaller firms are now admitting to. Some of them saw the U.S.’s actions against the large firms as an opportunity. In late 2008, when UBS was facing possible criminal charges, Migros Bank AG, a Zurich-based firm that once mainly served middle- and working-class Swiss clients, convened a working group to weigh whether to do business with U.S. clients. They decided it was a profitable business worth expanding. ENLARGE In 2009 and 2010, Migros accepted more than 75 new U.S. accounts, many of them from larger Swiss banks. In late 2010, an executive said that as a medium-size Swiss bank with mostly Swiss customers, the bank wouldn’t “be in the crosshairs for the U.S. authorities.” Yet, by the spring of 2012 as the U.S. pursuit of Swiss banks widened, Migros was pressuring U.S. clients to declare accounts to the IRS. At the same time, it allowed them to withdraw or transfer funds in ways designed to conceal them to the IRS, including transferring assets to secret accounts at other Swiss banks. Firms can reduce penalties by taking steps such as turning over account information and by proving that clients have informed the IRS about their accounts. The penalties for individual clients can be as high as half the account’s value. Lawyers for three of the Swiss banks said they are complying with terms of the settlements, and the lawyer for St. Galler Kantonalbank couldn’t be reached for comment. All firms that have signed agreements with the Justice Department have pledged not to violate U.S. laws in the future and to cooperate with U.S. authorities in efforts to combat tax evasion. UBS paid $780 million and admitted wrongdoing in a 2009 settlement with U.S. authorities to avoid criminal charges. Credit Suisse Group AG pleaded guilty to criminal charges in 2014 and agreed to pay $2.6 billion. Lake Leman in Geneva. Firms that have admitted to misconduct have paid a total of more than $360 million to resolve the cases and avoid criminal charges. ENLARGE Lake Leman in Geneva. Firms that have admitted to misconduct have paid a total of more than $360 million to resolve the cases and avoid criminal charges. PHOTO: DENIS BALIBOUSE/REUTERS The Justice Department said it hopes to reach settlements in this program with other Swiss firms by year-end. Lawyers for U.S. account holders and Swiss banks familiar with Justice Department efforts said that six to eight larger banks remain in separate talks with U.S. authorities. Meanwhile, U.S. officials said they are mining the extensive data uncovered by the program, including the destination of funds transferred out of Swiss accounts, to pursue leads around the world.

vonklaus 11y ago

I find the response to these articles often very baffling. Everyone seems to want to nail these banksters for dodging taxes using clever loopholes. Then, they rail against government incompetence and praise people who work within a narrow framework while getting results ("hackers"). Obviously, this is a generalization and not every person thinks this way, but I often find this sort of response on places like reddit and even here to some extent. If the Federal Gov't wants tax money it better start making a strong case with some serious value propositions. Realize, that post-civil war the Federal Income Tax was allowed to expire, even for funding the war it was only 10%. It had been ruled unconstitutional.[0]People don't want to give the government money at a corporate or personal level. And if they would stop buying warehouses of hammers and dumping it into the middleeast funding helicopters that will never fly and powerplants that don't work, maybe people would at lease be neutral, instead of downright hostile, about the issues of taxes. [0]http://www.eoearth.org/view/article/153529/ http://www.eoearth.org/view/article/153529/

zouhair 11y ago
Poor rich, they are a persecuted minority.
- vonklaus 11y ago
  My point, which I didn't explicitly state, is that maybe instead of demonizing the rich for tax evasion we should be doing more to help the poor and middle class achieve these same ends. Obviously, building a strong economy and job creation are much more important, but lowering taxes and allocating the money the government does have, should be important goals going forward.
dredmorbius 11y ago
The Hivemind tells me there is no Hivemind.
iofj 11y ago
At times like this it is worth remembering that "wealth" accounts, the ones the banksters are "tax optimizing" for their clients, start at $5000 balance or so and the average is in fact no higher than $45000. I don't know, but I do think that the people these accounts belong to could easily in fact be the "top-50%" and not so much the "top-1%". Hence the baffling response.

gohrt 11y ago

I wonder when a guy who robs a liquor store can get the same deal as these white-collar tax cheats: steal $500, and avoid criminal charges in exchange for paying $250 restitution.

vonklaus 11y ago
Do you think that a person or company retaining the money they earned over the fiscal year, or not paying as much as they should to their gov't, can aptly be compared to armed theft of someone-else property? I mean, if we are making analogies about armed theft, like one good one is taxes.
- mercurial 11y ago
  This is a stupid analogy. People dodging taxes rob from the commons, essentially. If you're not satisfied with what the government does with your taxes and you live in a democratic society, get out and vote, a benefit you enjoy due to your taxes, as well as things like security, a justice system and (depending on your country) an efficient healthcare and welfare system, all paid for by your taxes. Just like a normal government should also spend a significant amount of your money on supporting the less well-off in the society.
  - vonklaus 11y ago
    Yeah mate, makes sense. I'll just get out and vote. It isn't like there are limited choices, entrenched political ideologies, a significant amount of friction, or a massive power distance relationship between constituents and representatives. America is a Democratish society and there is a pretty high level of dilution between my/societies views and laws. I vote(just kidding, I don't actually vote but let's accept the hypothetical) for a representative for congress. That gives me the option to have 4 people representing me in ALL of congress, assuming that the people I wanted to win progressed AND that they represent my views broadly enough. There are 535 people in congress, if we assume my 2 house reps and my 2 senators map my views at a 1:1 ratio (they don't, at all, nor do nearly anyone's in America) then, if you generously round up from .0074, my views are indirectly represented for me and are around 1%. Luckily, we live in a world where there are lots of great choices for Senators, Representatives and Presedential canidates and absolutely no outside interests interloping on the process. So I vote often. Every year, I don't turn up to the polls and vote to not participate. My single vote not being casts detracts a tiny bit of legitimacy from a system I want to fail, and I can hope for a better future.[0] [0]Someone on HN articulated this really well, and I would love to find the quote from him/her, but it perfectly summed up my own thoughts.

ellio 11y ago

For what it's worth to the people saying "we (as in the US or the international community more generally) have no interest in this and shouldn't trample on sovereign nations," I respect your opinion and your disdain for heavyhanded, imperialistic behavior, but don't ignore the evils that these banks perpetuate. They are opportunistic and protect and facilitate some of the worst people on earth, including arms traffickers and dictators who commit atrocities against their own people. Maybe exerting pressure against these banks isn't the right solution, but I have no sympathy for the sort of people who helped the Sudanese commit genocide, and anything that works against them I'm inclined to support. http://www.bloombergview.com/articles/2015-10-20/shh-credit-agricole-kept-its-sudan-business-quiet http://www.bloombergview.com/articles/2015-10-20/shh-credit-...

rrggrr 11y ago
Except - they also serve as a safehaven for wealth created in countries where its very likely to be confiscated by totalitarian and unstable governments. Think Nazi Germany, Rhodesia/Zimbabwe and unfortunately, possibly, hopefully unlikely - China.
- dredmorbius 11y ago
  Most of the wealth "created" in totalitarian states is in fact extracted by kleptocratic rulers. Ferdinand Marcos in the Philippines, numerous African dictators, Vladimir Putin, current the 3rd richest person in the world. If you want to create exceptions for financial refugees, that's well and good. But global protection for every drug lord, terrorist, and petty dictator ain't the right way to do it.
  - mjn 11y ago
    Even closer in the neighborhood, most of the Greek kleptocrats have their money in Swiss banks too. Some of them are now being prosecuted, with information that only came to light because an employee of HSBC took some account lists home (in violation of Swiss law). The French police later found these in a raid, and turned them over in part to the Greek police [1]. I wouldn't be surprised if Swiss banks are also handling the money from organized crime in Bulgaria and Romania. I think eventually, like the US has, the EU will succeed in pressuring Switzerland to cooperate more with European police investigations and turn over this kind of information. Despite not being an EU member, Switzerland is too economically entangled in EU treaties like the common market, to entirely ignore what the EU thinks, at least in cases where the EU actually agrees on what it thinks and is willing to make an issue out of it. [1] https://en.wikipedia.org/wiki/Lagarde_list https://en.wikipedia.org/wiki/Lagarde_list

dredmorbius 11y ago

For those looking for more background (and open access) to offshore banking and tax shelters, I highly recommend the ICIJ's long-running series of investigative reports on sheltered wealth: http://www.icij.org/offshore http://www.icij.org/offshore