Swiss Bank Accounts, the U.S. and Me

The ever-escalating story of the Swiss accounts and Swiss banking secrecy took a turn toward the absurd this week. Read about it here, here and here.

The net of this is that in an attempt to protect the matter of banking secrecy in Switzerland, the Swiss government is going to expropriate the data from UBS. This puts the Swiss and US governments eyeball to eyeball in a fight that no one can win.

I believe that this is complete theater. I am sadly an insider to this story. My facts do not jive with the story that is in the press. A detailed explanation:

I am a Swiss citizen. I am also a US citizen. As a Swiss living abroad I have the right to participate in the Swiss health system and the Swiss Social Security. Follows is a notice from the Consul General of Switzerland regarding my eligibility for SS Swiss style.


Now a copy from a Swiss health insurer regarding my status. Note that a requirement for eligibility is that one must have a bank account in Switzerland.



I offer this personal information to provide credibility to the following tale of woe.

I opened up the required Swiss account with, you guessed it, UBS Zurich. I was not trying to avoid or evade taxes. I was just trying to get a better deal on some health insurance. Because of the account with UBS I became one of the 52,000 losers you keep reading about.

In December of 2008 online banking for this account was disrupted. I called. I was told that the account was to be closed. That all of the US resident accounts were to be closed. I was told further that if I did not provide alternative payment instructions a check for the balance of the account would be sent to my US address on 12/31/2008.

I complained bitterly. To no avail. The account was closed. I got the following email from UBS.


I deleted the sender names and some private stuff but the words are very clear. The image from the email is not. I will repeat them:

I am absolutely aware of the fact that you have dual-citizenship, unfortunately all these issues with the US Government concerns all clients based in the US and having domicile in the US. For the US Government it makes no difference whether you have second passport or note. I wish we wouldn't have to close the business with US clients. It is totally unsatisfactory for all our clients and us as well.

From this email one must conclude that the vast majority of US account holders at UBS had their accounts closed and money sent back to the US. The NY Times reported on this aspect of the story on 1/9/2009. This NY Times story confirms what I have been describing.

So what does this mean?

Any wire transfer or bank draft from a foreign financial institution to a US bank account that is greater than $10,000 is an automatic Red Flag item for both the bank and the computers that monitor these flows. The minimum balance on the UBS accounts was $150,000. Therefore anyone who had an account was automatically caught. The quote from the Times was:

“You can either take that check and throw it in the woods, or deposit it somewhere and get busted,” “There’s nowhere to hide.”

It is possible that a portion of the account holders were able to direct the payment to other offshore accounts prior to the 12/31/2008 deadline. But that would not have worked either.

Say that one of the account holders wanted his money to go to Panama, Cayman or Macao. It is possible that UBS would have made the payments to the new secret account. But this activity would clearly come to the attention of senior management at the UBS Head Office. The Swiss laws are clear. They do not sanction tax evasion. The Swiss banks participate with a variety of international law enforcement agencies. They do not want illegal activity on their books. UBS can provide information on account holders if they deem the activity to be suspicious. To do so is not a violation of Swiss banking laws. It is an obligation of the banks to provide information on possible illegal activity.

UBS and the Swiss government ‘gave up’ the bulk of the 52,000 names when the money went back to the US accounts. Those that avoided that way of getting caught could have been turned over long ago based on the ‘suspicious’ activity of avoiding the funds being returned to the host country.

So if UBS has a valid reason to expose those that it has not already exposed and the Feds knew the bulk of the names by mid January and has a strong case for the others what the heck is going on here?

We are about to go to war with Switzerland. Switzerland is building walls that it does not want to build. If all these names are actually available what is the big deal?

The only possible explanation I can think of is that a small amount of the accounts were not closed. The woman who wrote me that “all clients based in the US” could have been wrong. These would be big accounts. Fat cats. If that were the case then UBS and the Swiss government would have something to hide. If that is not the case then both sides of this story are making something from nothing.

Comments

[DaveBrit:]

Bruce, your pitiful story notwithstanding, there is a huge amount of tax evasion going on with Swiss accounts, and the Swiss have been complicit in the past. They have only come around under enormous pressure. Helping people evade taxes was one of the reason for their existence, they knew it and rich US citizens knew it. Your story is not typical. Just as when their complicity in laundering Nazi gold and money came out about a dozen years ago, and a whistle-blower who had been asked to shred documents there had to leave the country because his life was in danger, these institutions are hardly innocent little things. Perhaps you are a bit defensive because you were born and raised there, I can understand that. But I cant imagine the IRS will back down, and UBS and Credit Suisse, with their huge US operations, are vulnerable in this area, just as the folks in Vaduz castle were when their time came to fess up about what they were doing.

Jul 09 02:53 AM

[zorrow:]

UBS, Phil Gramm, Hank Paulsen , Goldman Sachs, tax cheats and you. Working together there is no law of god or man we can't break. Won't you join us.

Jul 09 07:24 AM

[Dean M:]

If it were me, I would have reported the income on my taxes so there would have been no risk of being busted.

“You can either take that check and throw it in the woods, or deposit it somewhere and get busted,” “There’s nowhere to hide.”

Jul 09 07:57 AM

[bowater:]

It's obvious that you guys have not done your research.
The Obama adm. is bullying the Swiss to break their laws to comply with ours. This is Obama's new foreign policy of "listen and learn"? How about if the Mexicans start bullying the US to comply with their laws. this is laughable. the current US Administration should back off bullying the Swiss. Obama and his croneys are subscribing to the "gentle, listen and learn, non dictating policy" to Iran and North Korea. To the Swiss not a chance. The Swiss won't fight back with bombs and killings. Obama has a different policy for them. Dictate to them. Have them comply with OUR tax laws.Soon the EU countries will use this as precedent and demand that the US comply with their tax laws. Then all the EU citizens will take their money out of our banks and our economy will COLLAPSE! The US is a big tax haven for foreigners. Non resident aliens pay no taxes on interest earned in the US. Are we going to give up those names when the EU countries demand them?
Did Obama stand up to the Iranian gov't and demand that they comply with our laws of freedom to assemble,speech,press,... Did Obama stand up to the North Koreans? No.
But he stood up to the Swiss.
Pres. Reagan stood up to the Russians
Pres. Obama stood up to the Swiss.

Jul 09 08:47 AM

[TinyTim:]

"The only possible explanation I can think of is that a small amount of the accounts were not closed. ... These would be big accounts. Fat cats. If that were the case then UBS and the Swiss government would have something to hide."

SURPRISE!!!

Sounds like the Swiss are caught between the IRS and the Fat Cats.

Jul 09 04:32 PM

[marathonman:]

Nice article Bruce. The US government have their tentacles in absolutely everything around this world.

Jul 09 06:31 PM

[Aspblom:]

Non- US residents can have bank accounts in US banks and pay NO taxes here, and their identities are not released to the person's home country. That is why Miami is Latin America's largest banking center. And in Nevada you can have a secret numbered bank account owned by a shell corporation. Legal in Nevada, but NOT in Switzerland.
John in Los Angeles

Jul 09 10:24 PM

[User 444953:]

@DaveBrit

And that coming from a Brit?!?!?! This certainly is hypocrisy at its best! Switzerland is neither worse nor better than any of the offshore centers of the British Empire, and there is a whole bunch of them. The current fingerpointing at Switzerland is nothing else than global powerplay with the goal to take advantage of the current crisis. Every crisis is an opportunity. Right?! In this case it is the opportunity to strengthen own interests and economic power, be it actively as the IRS/US does, or by working behind the scenes like the Brits do.

Rob, Boston


On Jul 09 02:53 AM DaveBrit wrote:

> Bruce, your pitiful story notwithstanding, there is a huge amount
> of tax evasion going on with Swiss accounts, and the Swiss have been
> complicit in the past. They have only come around under enormous
> pressure. Helping people evade taxes was one of the reason for their
> existence, they knew it and rich US citizens knew it. Your story
> is not typical. Just as when their complicity in laundering Nazi
> gold and money came out about a dozen years ago, and a whistle-blower
> who had been asked to shred documents there had to leave the country
> because his life was in danger, these institutions are hardly innocent
> little things. Perhaps you are a bit defensive because you were
> born and raised there, I can understand that. But I cant imagine
> the IRS will back down, and UBS and Credit Suisse, with their huge
> US operations, are vulnerable in this area, just as the folks in
> Vaduz castle were when their time came to fess up about what they
> were doing.

Jul 10 01:07 PM

[Duude:]

Bruce: You're one of the lucky 250 that UBS rolled on earlier this year. There are still some 52,000 account holders not yet revealed. More than likely they're bigger account holders and you and the other 249 were lower-fare sacrificial lambs. The email you received misstated the situation. It probably wouldn't have eased your concerns if they said we only gave up 250, and luck has it you're one of them.

Jul 10 07:28 PM

[Aspblom:]

Regarding Delaware, Nevada, and Wyoming see the following bit from in interview.....
IPS: When we are talking about these states, the problem of incorporation makes them havens of some sort. But we are not talking about banking secrecy, which the U.S. does not have. Is that correct?

BR: The U.S. prohibits the release of personal information on individuals.

Jul 14 08:42 PM

[Morgan:]

I have a small maintenance account in Switzerland to cover local taxes on a vacation apt and utilities etc... On occasion the amounts in the account exceeded $10,000 - sale of a car for example.

The current account with UBS has been closed at their request although I am a dual national and have addresses in both countries - principal residence is USA after 25 years of living and working in Switzerland.

Swiss checking accounts pay minimal interest and 35% is taxed at the source by the Swiss gov't. resulting in less than $100 of interest income.

I am trying to "come clean" but wary of the consequences - does anyone have advice.

Morgan

Jul 30 11:31 AM

[User 521932:]

oh yes they need that money...every bit of it to give to their mafia bosses and warmongering friends, arms dealers, money launderers, oh yes they need every bit of u.s citizen money. have to have it all as the bring the economy to its knees. if you ever try to set up a swiss account it usually reads that three countries cant apply....the three are colombia, nigeria, and USA.....thats the company we keep these days. disgusting.


On Jul 09 02:53 AM DaveBrit wrote:

> Bruce, your pitiful story notwithstanding, there is a huge amount
> of tax evasion going on with Swiss accounts, and the Swiss have been
> complicit in the past. They have only come around under enormous
> pressure. Helping people evade taxes was one of the reason for their
> existence, they knew it and rich US citizens knew it. Your story
> is not typical. Just as when their complicity in laundering Nazi
> gold and money came out about a dozen years ago, and a whistle-blower
> who had been asked to shred documents there had to leave the country
> because his life was in danger, these institutions are hardly innocent
> little things. Perhaps you are a bit defensive because you were
> born and raised there, I can understand that. But I cant imagine
> the IRS will back down, and UBS and Credit Suisse, with their huge
> US operations, are vulnerable in this area, just as the folks in
> Vaduz castle were when their time came to fess up about what they
> were doing.

Dec 09 02:09 PM