The American Way of Getting Dirty Money Back from Swiss Banks – Lessons for India

HSBC whistle blower Herve Falciani told NDTV that there are 600 Indian names in the list of secret 127,000 accounts with 180bn euros. The Swiss Franc Minister told the Indian Finance Minister Arun Jaitley at the WEF meeting in Davos recently that the details can be shared with India only if criminal cases are lodged against the account holders. Otherwise the information is secret according to him. He says that this is only the tip of iceberg, India was given only 2MB of 200GB data.

It may be recalled that the US had attacked the Swiss banks directly to get at the information. This may be a pointer in how to proceed. India could pressurize HSBC directly or work closely with the French Government in the matter.

Following a yearlong criminal investigation, Swiss bank Credit Suisse AG pleaded guilty to aiding wealthy U.S. citizens in hiding taxable income, agreeing to pay roughly $2.6 billion in penalties for the crime (to be divided up between the Justice Department, the Federal Reserve, and the New York State Department of Financial Services, for some reason).

Credit Suisse was charged with a pattern of misconduct that included actively recruiting clients, courting them at airports, golf courses, family weddings, and elsewhere with the promise of shielding their earnings from the IRS, and then also destroying documents pertaining to these concealed accounts, which numbered somewhere around 22,000 and held around $13 billion in total.

Credit Suisse is Switzerland’s second-largest bank: a fact that allowed Attorney General Eric Holder to trot out “Too Big to Jail” in a press conference.

It was only the most recent high-profile victory in the Obama administration’s longstanding battle against offshore tax havens, which has included thus far a $780 million deferred prosecution deal back in 2009 with UBS, Switzerland’s largest bank, and a $57.8 million penalty this past January against Wegelin & Co.—a guilty verdict that has effectively shut that bank down for good.

Founded in 1741 under the name Leinentuchhandel und Speditionsh andlung, it was the oldest bank in Switzerland, and the 13th oldest in the world.

Both Credit Suisse and UBS have subsequently sent letters to their clients requesting that they either declare their secret assets to Swiss tax officials or alternately have their assets liquidated and transferred as cash to a new bank of their choice.

Swiss banks will begin handing over customer financial data to tax officials for the first time, in compliance with the U.S. Foreign Accounts Tax Compliance Act (FATCA). FATCA requires that foreign financial institutions (“FFIs”) identify their American clients to the IRS, or face a 30 percent gross tax on a variety payments from U.S. sources.

According to a study released in August by PriceWaterhouseCoopers, “350 billion Swiss francs in net assets under management from foreign-domiciled private clients have left Switzerland in the last six years,” due to this international crackdown on Switzerland as a tax shelter. France, India, and Britain have all entered the fray as well, hoping to reclaim untold riches in lost government revenue.