17 March 2018
Dan Barnes


Dan Barnes - Information Corporation

47Posts 89,822Views 8Comments
Future Finance

Future Finance

Finextra and Oracle have gathered together some of the industry's top thought leaders to discuss, debate and analyse the key trends and issues within transaction banking, regulations and retail banking. This group will focus on upcoming regulations, new service offerings and industry debate shaping the new financial services landscape with regular blog posts, video interviews, webcasts debates and surveys.

Switching sides on banking secrecy

27 February 2014  |  1505 views  |  0

I recall my parents explaining the secret model of Swiss bank accounts when I was a child in the mid-1980s. The purpose of the accounts, I was informed, was so that people who had stolen money could hide it. It seemed reasonable, to a young boy, that there would be a service to cater for criminals. Pirates had islands, highwaymen had crossroads, the modern equivalent had Swiss bank accounts. Why not?

I was not the only person who accepted this scenario. The whole world did. That the accounts did not have to be used by criminals gave the world some rose-tinted mirrorshades to hide behind. Obviously there were lots of reasons why someone might pay a fee to have their money hidden. I mean, really hidden.

Let us examine banking secrecy. My bank account is secret. Every bank account is secret. No bank publicises their customers’ accounts; if a person has an account in a foreign country there are limited ways an overseas government can get access to those details. So if I have an overseas account, only in extreme circumstances will authorities get access to those details. And as we are talking about wealthy people in the world of private banking, so there will be other people making money from these peoples' cash flows; they will not be keen to see that cash walk away.

So, if that is not enough, there are also anonymous accounts. The cost-benefit analysis for using an anonymous account must include, at some point, the risk that someone might take away your money if that account had your name on it. Using one does not make you a criminal. It might make you look like a criminal though. Mitt Romney, the US presidential candidate took a lot of grief for having a Swiss bank account.

Now the Swiss banks are under fire because some US citizens were avoiding tax in these secret bank accounts. But who? At one point Credit Suisse had 22,000 US clients with accounts totalling as much as US$12 billion. So far 238 names have been handed over.

That figure has been criticised by Senator Carl Levin, chair of the US Senate Permanent Subcommittee on Investigations that is currently investigating Credit Suisse for assisting individuals with tax evasion. Should the others be handed over?

Credit Suisse’s chief executive Brady Dougan points out they are not criminals. Of course, without knowing who they are it is impossible to know anything about them. There is certainly no evidence that they are criminals. This is the Catch 22 that the US now faces; secrecy prevents any case from being brought. On top of that, the Swiss government has established laws that place Credit Suisse at risk of breaching one set of laws, or the other if it complies.

It is a mess. While Levin claims that the public is “angry about offshore tax abuse” but it is not like the public have not been looking this square in the eye for half a century. If I knew about this, aged six years old, then a lot of other people knew about this. The anger is not new, the legal intervention is new. So while I support the authorities’ tax evasion efforts, I feel that the change of legal stance is somewhat hollow.

TagsSecurityRisk & regulation

Comments: (0)

Comment on this story (membership required)

Latest posts from Dan

Google search: What’s my credit score?

01 July 2014  |  2805 views  |  0 comments | recomends Recommends 0 TagsRisk & regulationInnovationGroupFuture Finance

Trade finance creates a 10 billion dollar risk

11 June 2014  |  2476 views  |  0 comments | recomends Recommends 0 TagsRisk & regulationWholesale bankingGroupFuture Finance News Analysis

Bad as gold

29 May 2014  |  2733 views  |  0 comments | recomends Recommends 1 TagsRisk & regulationWholesale bankingGroupFuture Finance News Analysis

Is Bitcoin mo' money or no money?

29 May 2014  |  2222 views  |  0 comments | recomends Recommends 1 TagsBlockchainRisk & regulationGroupFuture Finance

Dan's profile

job title Writer
location London
member since 2013
Summary profile See full profile »
Award-winning, freelance financial journalist. Specialist in many areas, including; sell-side execution services, buy-side trading, market infrastructure, emerging markets, regulation, wholesale banki...

Dan's expertise

Member since 2013
47 posts8 comments
What Dan reads
Dan's blog archive
2014 (22)2013 (25)

Who's commenting on Dan's posts