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.
