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An relative addition to Scott’s article on banks and the Patriot Act.
From Sovereign Society.IRS Apartheid Blocks
Americans from Swiss BanksOn the Return of Real Swiss Banks
And the SEC “Going Global”You may not have experienced it yet, but there are tens of thousands of Americans already suffering under what can best be described as a diabolical “financial apartheid” – disruptive rules being imposed on Swiss and other offshore banks by the U.S. Internal Revenue Service (IRS) and the U.S. Securities and Exchange Commission (SEC).
These IRS-SEC policies are wreaking havoc among Americans who live or bank offshore.
And as a result, many justifiably upset Swiss and other offshore banks are closing existing accounts of U.S. persons and refusing new American clients. Unless there is some change, other offshore banks may soon follow suit…
Yankees Go Home: The Return of Swiss Private Banks
In my opinion, Swiss bankers have concluded that they don’t need or want Americans any more, with all that costly and legally dangerous U.S. government red tape.
But despite fears, Swiss private banking is in better shape than it looks.
Unlike the American-style behemoths UBS and Credit Suisse, private Swiss banks deal with a small client base on a very personal level. They offer a host of advantages you won’t find in more familiar “Americanized” banks – like the owners guaranteeing your account with their own personal wealth – and they embody the tradition of old-world Swiss banking.
And in spite of everything going on, many of these small, private banks are flourishing. Swiss private banks have pulled in a lot of new money over the past two years, despite the recession and controversy over bank secrecy. In fact, most Swiss private banks continued to report inflows even as assets under management lost market value.
Now much of the new money coming into Switzerland is from regions such as the Middle East, Russia and Asia, where personal tax rates are low. Obviously foreign clients continue to value Switzerland for its security, political stability and stable currency, even if you take the tax benefits off the table.
But for Swiss banks the IRS and SEC are making Americans into financial pariahs.
Two Bad Apples Spoil the Bunch for 5 Million Expats
It is difficult to say how many people are affected, but more than 5 million Americans live abroad, including about 30,000 in Switzerland.Specifically, the U.S. government’s unreasonable demands have prompted the two largest and most Americanized of Swiss banks – UBS and Credit Suisse – to shuffle their American clients into specially-created, SEC-registered banking units that are registered or located in the US. Failing that, the banks simply closed the accounts…with UBS cutting off some 52,000 American clients.
Many smaller private banks, such as the respected Geneva-based Mirabaud & Cie, are also shutting down U.S. accounts.
Compounding the nervousness of notoriously conservative Swiss bankers, the IRS is threatening to sue other Swiss banks to obtain their U.S. client records.
Apparently the IRS assumes any American with an offshore bank account is a tax evader.
Qualified Intermediaries or Spies?
The current unprecedented disruption for Americans banking in Switzerland results in part from the little known IRS “qualified intermediary” (QI) program that began in 2001…In its current form, the QI program allows participating IRS-approved foreign banks to maintain accounts for American clients without having to disclose their names to the IRS. (U.S. persons already are required by law to report all offshore accounts on their annual income tax IRS Form 1040 and on Form TD F 90.22-1 – Report of Foreign Bank and Financial Accounts).
Until now the IRS has required the offshore QI banks to promise to identify U.S. clients, withhold any taxes due on U.S. securities in their accounts, typically a 30% tax, and send the taxes owed to the IRS.
More than 7,000 foreign banks participate in the QI program supposedly helping the IRS to keep track of American offshore investors. But now the IRS claims each year it is losing millions of taxes owed under the QI system.
As I explained here, in 2009 the IRS proposed tough new QI rules, to take effect in 2011.
Under these much stricter rules, foreign banks in the QI program will be forced to investigate, determine and report to the IRS, not only the names and information on individual U.S. offshore account holders, but also on any legal entities (trusts, corporations) Americans control as beneficial owners.
In effect the IRS wants offshore banks to act as financial spies on Americans who bank offshore, just as the PATRIOT Act already requires U.S. domestic banks to spy on their clients and report “suspicious activity” to the U.S. Treasury crimes unit.
SEC Extends U.S. Law Offshore
But there’s another cause of this Swiss-American banking mess and it comes from the U.S. SEC, that wonderful bureaucratic agency that wouldn’t investigate Bernie Madoff even when his fraud was explained to them in detail.The SEC accused UBS with helping its U.S. clients to evade taxes. But it also charged that the bank’s actions that had occurred within Switzerland amounted to the bank acting as unregistered investment advisers and broker-dealers in violation of the U.S. Investment Advisers Act of 1940 and SEC rules.
Using this novel extraterritorial approach, the SEC thus has extended its jurisdiction to include any person anywhere in the world who dares to advise Americans about investing before registering with the SEC.
In settlement, UBS paid $200 million to the U.S. and permanently was barred from acting as investment advisors or broker-dealers for American clients in Switzerland.
Up until now offshore banks and investment advisors could avoid SEC registration by having absolutely no contact with and never soliciting potential U.S. clients. Because of this previous SEC interpretation of registration rules, careful offshore banks and financial advisors would not even respond to inquiries from a U.S. postal or email address.
The UBS case seems to mean that Swiss or other offshore banks now must register with the SEC, an onerous and costly process, in order to legally provide advice to American customers with offshore investment or bank accounts.
“My bank doesn’t want to do that, so we wouldn’t accept an investment account for a U.S. person,” said Pierre Mirabaud, chairman of Mirabaud & Cie.
Guilty Until Proven Innocent (As Long as it Gets the Bill Paid)
How can these astonishing developments be allowed to occur in a modern banking and financial world system linked by globalism?Ravenous for tax dollars to finance President Obama’s costly remaking of America, it appears the IRS has orders to adopt as its official policy the kind of radicalism expressed by Jack Blum, (right) a paid IRS “consultant on tax evasion,” who told The New York Times, “There is no legitimate reason for an American citizen to have an offshore account…When you go offshore, you are doing so to evade rules, regulations, laws or taxes.”
Indeed, I personally heard a top U.S. Justice Department official make a similar statement that traditional internal DOJ policy assumes that any American engaged in offshore financial activity is probably doing something illegal.
So much for presumed innocence until proven guilty!
Over the years the IRS repeatedly has tried to scare all Americans with deceptive publicity campaigns that insinuate that banking and investing offshore is somehow un-American and even illegal—when in fact it is fully legal (a least for now), so long as offshore activities are reported and taxes are paid on all worldwide income.
Welcome to my world…
I have been watching this developing since I first went to the Caymans Islands in 1996 to work in offshore wealth management after ten years on Wall Street.
A few individual US citizens may illegally evade some taxes but in comparison with US corporations and their 100% legal tax structuring offshore it’s pathetically small.
My dear British friend JT whom I’ve known for over ten years earns over $25 million dollars per year (tax free of course) personally helping just one major US financial services company – that’s right, I said one major US financial services company – to structure itself and their acquisitions in such a way that they pay ZERO taxes…
How much does he save them? At least ten times as much as he earns…
I stopped advising US citizens about offshore investments a zillion years ago because I didn’t want to end up in Guantanamo and if you don’t think that happens, then you’re still living in the “American dream” land.
Just another measure to ensure that the ‘powers that be’ have complete and total control over you and where you send your money.
Look at the signs, watch what’s happening, read between the lines and you quickly realize that freedom is an illusion and what traces of freedom we have are disappearing fast.
Scott Oliver – Founder
WeLoveCostaRica.comFunny how over it’s 200+ year history the US went from a business based tax structure to one that taxes PEOPLE into the ground! Then businesses that pay little or nothing in taxes are bailed out by WE THE PEOPLE… at a cost that only insures that the system continues to keep people paying more in taxes each year. It’s a very sad fact that a child born in America today is already burdened with a huge debt the moment they’re born into the system!
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