Revoke UBS' banking license
"Rather than risk losing the approximately $20 billion of assets under management in the United States undeclared business, which earned the bank approximately $200 million per year in revenues, managers at the Swiss Bank, including defendent Birkenfeld, assisted these wealthy US clients in concealing their ownership of the assets held offshore by assisting these clients in creating nominee and sham entities. These entities were usually set up in tax haven jurisdictions, including Switzerland, Panama, British Virgin Islands, Hong Kong and Liechtenstein . . . . by concealing the U.S. clients' ownership and control in the assets held offshore, defendant Birkenfeld, the Swiss Bank, its managers and bankers evaded the requirements of the Q.I. program, defrauded the IRS and evaded United States income taxes."
(In that statement Q.I stands for Qualified Intermediary, of which more below.) The statement added:
"The Swiss Bank trained bankers traveling to the United States in techniques to avoid detection by United States law enforcement authorities, including training bankers to falsely state on customs forms they were traveling to the US for pleasure and not business."
In other words, they were training them in criminal activity. Read the rest of the statement of facts - it is quite astonishing that this could even happen. As a media report on the matter said, the defendant:
"even agreed to buy diamonds for a US client using Swiss funds and 'smuggled the diamonds into the United States in a toothpaste tube'.''
Things are looking so bad for UBS, in fact, that media reports are speculating that:
"In a worst case scenario, UBS could lose its banking license which could have adverse effects on the global private banking franchise."
Quite right. UBS must, quite simply, have its banking license taken away. It has, according to this rather compelling evidence, been wilfully aiding and abetting criminal tax evasion - on a large scale. There are, we hear, four thousand US clients now being investigated.
We have described a number of different approaches for tackling offshore abuse and abusive taxation systems, some of which require international co-operation. But some of these measures can be taken unilaterally. This measure - withdrawing banking licences - is one such measure. Switzerland has been abusively and aggressively invading US sovereignty by encouraging and helping US citizens to commit crimes under US law, by asserting Swiss bank secrecy - and now the United States is starting to fight back. As the Financial Times remarks:
"The year has also brought a renewed challenge to bank secrecy. Matters began badly when German prosecutors launched a high-profile campaign against alleged tax dodgers after having acquired stolen data about customers of the trust subsidiary of LGT, Liechtenstein’s biggest bank."
Is the US fighting back on tax evasion? We hope so. The mood is certainly changing.
The UBS case has an interesting historical pedigree, linking both to the former Clinton administration and to the current Republican . It revolves around the curious concept of "qualifying intermediaries" - financial institutions that can act on behalf of their clients and who serve as conduits for clients' funds - so that there is no legal requirement to disclose who the clients are. The qualifying intermediary regime was set up by former U.S. Treasury Secretary Robert Rubin in the Bill Clinton administration (now director of the Executive Committee of Citigroup.) What he did, in effect, was to set up a new secrecy space in America, in order to attract foreign capital. He knew what he was doing. It was a clear move to reinforcing the US position as a tax haven. The regime subverts the obligation of the United States to exchange tax information under the tax information exchange clauses in US income tax treaties and in US Tax Information Exchange Agreements (TIEAs) that the U.S. has signed with a number of foreign countries (which are supposed to improve transparency.)
Birkenfeld, of course, was acting as a Qualified Intermediary. It brings dishonour to the Clinton administration, and particularly Rubin. The current Republican campaign is compromised, too, notably through former Texas Senator Phil Gramm - who is vice chairman of UBS in the United States. As the Houston Chonicle put it:
"Gramm, now an investment banker with UBS, has vigorously stumped for Sen. McCain, R-Ariz., and serves as an unpaid general co-chairman of McCain's campaign, generating speculation that the former Texas A&M economics professor might become Treasury secretary in a McCain White House."
The offshore world has created a wholesale contagion - of the entire political system. Gramm is just one example. There are legions of others. Former British Prime Minister Margaret Thatcher's financial affairs were handled out of the British tax haven of Jersey - in offices right outside the school gate where TJN's director John Christensen went to school. Her New Zealand-born husband Dennis Thatcher claimed non-domicile status. Her son Mark - currently caught up in allegations of coup plotting in Equatorial Guinea - is currently believed to be skulking in the British-linked tax haven of Gibraltar. Britain's Conservative Party has been bankrolled by the offshore-steeped Lord Ashcroft who is deeply embedded in the deeply murky and opaque tax haven of Belize. And so on, and on, and on.
The crime-infested offshore system infests politics around the world. The time has now come to stand up to it.