4 ms·

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 Ameri

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.

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.