US Banks on Swiss: RIP

The Buffets and the Gates of the US will be shedding a few tears this week as the United States and Switzerland have reached an agreement that brings the status of the latter as a tax haven for Americans (or will they?). No more hiding their cash away in Swiss banks. No more tax avoidance and money laundering. No more secret accounts and banking secrecy. At one time bankers could be trusted to keep secrets. These days they can’t. There’s always someone somewhere willing to pay more than the secret of what you have locked away in the vaults is actually worth.

The US and Switzerland have been talking over the possibility of putting a stop to the flow of money from the US into the Swiss banks for three years and have just found some common ground. Although it is hard to see just what advantage the Swiss state has got out of the whole affair. Swiss banks will end up being punished if they have aided and abetted wealthy US citizens in their attempts to hide money from the tax authorities. They will also be required to provide details to the US authorities regarding the account holders as well as details about people who are working on the accounts at the banks. Is this the end of Swiss banking?

US: Swiss Banking Secrecy

It seems that this will only marginally change things however, since for a number of years now already the Swiss bankers have been afraid of increased administration that has been imposed by US authorities and have ended up declining US-based clients from opening accounts with them. Although, it will have the added problem of making it very hard for a US citizen that is living or working in Switzerland to manage to actually open a bank account. The Swiss banks will refuse to do so after this agreement with the US. It’s all very well wishing to reduce tax havens, but what more does the US state actually want in terms of controlling US citizens that wish to open bank accounts in the place where they are living and working?


It also seems that the US authorities are under the greatest delusion believing that because the Swiss bankers refuse to open bank accounts that the US citizens that wish to place their wealth in other tax havens won’t be doing so. The Swiss banks are just a few amongst many world tax havens. The latter will naturally be opening the doors with welcome arms. Forbidding anything never stopped people doing it. Anyhow, perhaps we have all been deluded ourselves into believing that the National Security Agency was far more powerful than it actually was or is with its eavesdropping. Surely they could locate right down to the last dime the money that they are losing in tax avoidance?

But, that said, you would have to have been born just about yesterday at 4pm to still believe that Swiss banks would keep your secrets. Switzerland has been in the firing line for many years now with regard to their banking system.

The only thing that the Swiss will get out of it is that they will be able to write off all disputes with the US regarding taxation that has been voided due to money being placed in their banks. But, the future?

The Swiss Finance Minister Eveline Widmer-Schlumpf stated that the reputation of Switzerland’s banking sector and financial services depended on the agreement going through so that people might have confidence in the banking system. But, isn’t it just the opposite that made Swiss banks famous? Wasn’t it the secret and the fact that it was like a confessional box where anything that was said in the protected basement vaults stayed there? Whatever happens in a Swiss bank stays in a Swiss bank? No more, you had better get to Vegas; things apparently still stay there when they happen.


The case of the Swiss banker that was arrested in April 2013 after having travelled to the USA showed the determination of the US authorities to come down upon tax evasion and tax havens with a mighty blow. The banker had entered the US on a vacation visa in New York. Although, once again the impunity of the US authorities to believe that it has the right to arrest anyone that enters the country for no apparent reason beggars belief. Just because you’re a banker doesn’t mean that the US can arrest you, does it? Intimidation? Bad for your image, at least. That’s not the way things are done in the world. Or, they shouldn’t be done like that. We don’t intimidate people that work for structures that are legal whether we like it or not. Change the laws, come to agreements. Stop using priggish, bullying force to get your own way. It’s not the bankers that are responsible for something that was set up long before they were out of diapers and into daiquiris.

People in senior positions in banks in Switzerland were advised to avoid travelling to the US at the start of this year. So, perhaps the only thing that occurred was for the US to lose out on visitors; visitors that were wealthy bankers to boot. It won’t change anything. While loopholes exist, the wealthy will find a way of exploiting the system and the administration is far too big and by the time the cog-wheels get moving for a change, the people have moved on to another place.

Secrecy Gone

In March 2013 Swiss banks such as Wegelin & Co. agreed to pay roughly $58 million in fines. They had admitted to helping hide $1.2 billion from the Internal Revenue Service. UBS also ended up paying a penalty of $780 million for having helped US citizens avoid taxes.

Now, the secrecy has gone in Swiss banks, who in their right mind would bank anywhere near Geneva? In 2012, there were 145 foreign-owned banks based in Switzerland. Today that number has fallen to just under 130. It’s not just the Swiss that were secretive. The foreign-based banks were also complacently happy with doing the same. Today, Switzerland has an offshore banking industry that is worth $2.2 trillion. That’s still the largest in the world. But, for how long?

It seems that Singapore is where the money flows are now going as the Swiss banks are seeing money being withdrawn from accounts in a capital flight. By 2020 Singapore is expected to be the number one destination for tax avoidance.

The solution? Perhaps like the other 670 US citizens did in the first half of this year: relinquish all rights to Americancitizenship and along with it avoid paying your taxation. The figure is the highest since data was first compiled in1998. Eduardo Saverin (Facebook founder) went last year. Isabel Getty (daughter Christopher Getty) threw in the towel this year along with Mahmood Karzai (brother of the President of Afghanistan).  So far, 39, 000 US citizens have come forward and owned up to having secret bank accounts outside of the US in the past few years. But, that’s just a minute sample of what is winging its way to the tax havens of the world.

But, it’s far from just the world’s wealthy. Secret files that were revealed by the International Consortium of Investigative Journalism in April 2013 showed that it was the dentists, the doctors that were at it too. There were even Greek villagers sitting alongside the Russian executives and the Wall Street fiddlers that were hiding their stash of cash in tax havens. It’s not just the mega-buck earners. It is estimated that there may be between $21 and $32 trillionthat is hidden somewhere in an off-shore bank account around the world. The 50 largest private banks in the world saw their assets grow from $5.4 trillion (2005) to $12 trillion (2010). Those private banks provide services to mainly high net worth people and they also happen to provide access to tax havens.

Whatever is happening with this world?

There was a time when the Swiss were known for being bankers, the Chinese were corrupt and the US was fair. Admittedly it was a long time ago, now. The Swiss just make chocolate and watches now.

The Chinese slap fines on companies that dabble with the Shanghai Composite and the US has become corrupt. Or were they just hiding that from everyone else?

About the author


We've been closely watching the Crypto Currency Market if you can call it that, with all the fake data, fraud, and related problems.  One thing stands out - it's not so different than FX, commodities, futures, or stocks.  Market dyn...

Bitcoin and other cryptocurrencies flash-crashed Saturday night, one day after the US Commodity Future Trading Commission (CFTC) sent subpoenas four cryptocurrency exchanges in an ongoing probe into bitcoin manipulation that began in late July - following the launch of bitcoin futures on the CME, according to the Wall Street Journal
CME’s bitcoin futures derive their final value from prices at four bitcoin exchangesBitstamp, Coinbase, itBit and KrakenManipulative trading in those markets could skew the price of bitcoin futures that the government directly regulates.
In delay reaction, Bitcoin fell as much as $433 or 5.6% in Saturday night trading, with some noting that the flash crash happened shortly after a 90th ranked crypto exchange, Coinrail, had suffered a "cyber intrusion", and was likely the more relevant catalyst for the crypto price drop.
While major Cryptocurrencies were down from 4.5 - 5.5%, Bitcoin Cash dropped over 8.4%. 
The CTFC subpoenas were issued after several of the exchanges refused to voluntarily share trading data with the CME after being asked last December. Of note, the CFTC regulates the CTC. 
According to the WSJ, the CME, which launched bitcoin futures in December, asked the four exchanges to share reams of trading data after its first contract settled in January, people familiar with the matter said. But several of the exchanges declined to comply, arguing the request was intrusive. The exchanges ultimately provided some data, but only after CME limited its request to a few hours of activity, instead of a full day, and restricted to a few market participants, the people added.
What is curious, is that if there was indeed manipulation since the launch of bitcoin futures, it was to the downside, as the price of cryptos peaked around the time the crypto futures were launched, and are down well over 50% in the 6 months since.
Coinbase in particular has been under the watch government regulators. On February 23, Coinbase sent an official notice to around 13,000 customers to notify them they were legally required to turn over their information to the IRS
The IRS had initially asked Coinbase in July 2017 to hand over even more detailed information on every one of its then over 500,000 users in an attempt catch those cheating on their taxes. However, another court order in Nov. 2017 reduced this number to around 14,000 “high-transacting” users, which the platform now reports as 13,000, in what Coinbase calls a “partial, but still significant, victory for Coinbase and its customers.”
Coinbase told the around 13,000 affected customers that the company would be providing their taxpayer ID, name, birth date, address, and historical transaction records from 2013-2015 to the IRS within 21 days. Coinbase’s letter to these customers encourages them “to seek legal advice from an attorney promptly” if they have any questions. Their website also states that concerns may also be addressed on Coinbase’s Taxes FAQ. The ongoing legal battle between Coinbase and the US government dates back to November, 2016, when the IRS filed a “John Doe summons” in the United States District Court for the Northern District of California.
On Feb. 13, personal finance service Credit Karma released data showing that only 0.04 percent of their customers had reported cryptocurrencies on their federal tax returns. 
And in April, former New York Attorney General, Eric "we could rarely have sex without him beating me" Schneiderman, launched a probe of 13 major cryptocurrency exchanges according to the Wall Street Journal - claiming that investors dealing in the fast-growing markets often don’t have the basic facts needed to protect themselves.
Former AG Schneiderman’s office said the program, called Virtual Markets Integrity Initiative,  is part of its responsibility to protect consumers and ensure the integrity of financial markets, and its goal is to ensure that investors can have a better understanding of the risks and protections afforded them on these sites.
CFTC Commissioner: Crypto is a "modern miracle"
While the CFTC, IRS and New York Attorney General's office are all cracking down on cryptocurrency exchanges, it seems to all be part of the government's embrace of virtual currencies.  Last week CFTC Commissioner Rostin Benham called cryptocurrencies a "modern miracleat the Blockchain For Impact Summit held at the UN in New York last week. 
But virtual currencies may – will – become part of the economic practices of any country, anywhere.  Let me repeat that:  these currencies are not going away and they will proliferate to every economy and every part of the planet.  Some places, small economies, may become dependent on virtual assets for survival.  And, these currencies will be outside traditional monetary intermediaries, like government, banks, investors, ministries, or international organizations.
We are witnessing a technological revolution.  Perhaps we are witnessing a modern miracle. -Rostin Benham
Rostin hinted at the upcoming legal action against the exchanges during his speech:
Under the CEA and Commission regulations and related guidance, exchanges have the responsibility to ensure that their Bitcoin futures products and their cash-settlement process are not readily susceptible to manipulation and the entity has sufficient capital to protect itself.  The CFTC has the authority to ensure compliance. In addition, the CFTC has legal authority over virtual currency derivatives in support of anti-fraud and manipulation including enforcement authority in the underlying markets.

Meanwhile, the official Bitcoin website removed references to Coinbase, and Bitpay, according to Crypto News - only one of which, Coinbase, was subpoenaed.  just removed/censored the 2 largest US Bitcoin companies (@BitPay Payment processing and @coinbase Bitcoin Exchange). It’s a good move: Bitcoin Core is obviously no longer Bitcoin, and should ideally be removed from both @BitPay and @coinbase too.

The CFTC officially recognized bitcoin as a commodity in September of 2015 when it went after Coinflip for operating a platform for trading bitcoin options without the proper authorization. Since the agency effectively asserted its dominance over the bitcoin market with that decision, this is the first time it has given its blessing to an bitcoin options trading platform. Expect a burst of institutional trading activity to follow - especially since they approved institutional options trading in July
This post sponsored by Total Cryptos @  


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