Swiss say goodbye to banking secrecy | Hacker News Reader

Swiss say goodbye to banking secrecy

swissinfo.ch

132 pointsjonbaer89 comments

The joke in Switzerland is the U.S. Treasury took actions against Swiss banking secrecy to defend its own business [1]. Indeed, Delaware and Nevada are notoriously light on what paperwork they require to spin up an entity [2].

[1] https://www.bloomberg.com/news/articles/2016-01-27/the-world...

[2] http://www.financialsecrecyindex.com/PDF/USA.pdf

Another joke is that the U.S. is the last remaining tax haven in the world, because despite the U.S. requiring everybody else to share information with them (eg FATCA), they refuse to share information with anyone else.

The U.S. is not a participating country of AEOI.

Foreign banks should have called the US' bluff.

I'm not familiar with the details of what you're talking about, but never forget this timeless wisdom uttered 2500 years ago:

"Right, as the world goes, is only in question between equals in power, while the strong do what they can and the weak suffer what they must."

It seems like real estate is increasingly filling the role of banking secrecy any way. Real estate LLCs offer the same secrecy as a former Swiss bank account with the benefit with added benefit of having your investment grow potentially 5% a year long term. I don't see governments in the US or UK doing anything about this however.

This article provides a good look at this phenomenon in New York City but its happening in many cities throughout the world:

http://nymag.com/news/features/foreigners-hiding-money-new-y...

I think real estate as the new bank account has far worse implications. Hiding money in foreign real-estate deprives the local economy of tax coffers as these folks won't actually live there and won't contribute to the tax base in the form of federal, local and state taxes. As well it hurts the country where those seeing to hide money are domiciled. As cities become even more crowded and the housing stock tightens even further, developers "building safety deposit boxes in the sky" to lure hot money seems like it might have bigger societal implications than parking money in a passbook savings account in Switzerland.

> Hiding money in foreign real-estate deprives the local economy of tax coffers as these folks won't actually live there and won't contribute to the tax base in the form of federal, local and state taxes.

They have to pay property taxes at least. And since they're not living there they don't use any of the taxpayer funded services either. Sounds like a net gain for the local resident taxpayer.

Someone who actually lives in a place pumps money into the local economy in addition to paying property and local taxes.

Someone using a real estate as a bank account only pays real estate taxes.

Given the above and the fact that housing and land are extremely scarce commodities in a city, how exactly is someone using housing solely as a bank account a net gain for a resident tax payer?

This is of course just quantifying the financial aspect. What about the social aspect? What happens to the fabric of a neighborhood when development caters to people who don't actually live there?

How is that a net gain resident tax payer?

Land may be scarce but housing isn't. We can keep building half-empty 60-story condos and taking rich foreigners' money until the cows come home.

And what about the rental market? That's also part of the housing stock no?

I feel that governments ought not have a right to my private financial information without a warrant. If they think I have committed a crime, they ought to be forced to prove such a crime. This is no different than every home having 24/7 interior surveillance with the hope that a crime could be discovered.

Governments, especially so-called "progressive" governments have the wrong belief that our money belongs to the government first and citizens are permitted to keep their 'share.' I know many people here think that a total loss of financial privacy is 'fair,' because of some sort of misguided class-warfare, however how would you feel if your entire computer and web history were transmitted to the government with the purpose of identifying crimes you might commit as opposed to being in response to a warrant that establishes probable cause that you actually committed a crime. Having money in an overseas account does not even come close to reaching a threshold of probable cause for tax evasion. However having overseas money (or in my case, a domestic French account,) doesn't mean you are a potential criminal any more than being black means you are a potential criminal. This is financial "stop and frisk."

In the US this loss of financial privacy and these 'disclosures' amount to a warrantless search. I welcome any counter argument.

Just to be clear, I'm not a 'fat cat' billionaire -- just an American living in France that has the 'privilege' of being taxed (heavily) by both the US and France. My French bank has to disclose information about my accounts to the US Treasury and I have to fill out an FBAR each year to 'prove' to the US that I am tax compliant, thanks to FATCA.

If it weren't for the obvious class warfare aspect, liberty minded progressives would be losing their minds over this violation of the fourth amendment. They'll howl over warrantless wire-taps but many remain silent with the financial equivalent of wire-taps.

I am not advocating tax evasion, nor do I support or defend those actually evading lawful taxation; I am opposed to a police state where everyone is a criminal until proven otherwise.

Eloquently put. I could not agree more. The US has a guilty-until-proven-innocent tax code and parallel court system run by the IRS whose Constitution-defying existence is baffling to me.

Can you elaborate on how the IRS unconstitutional? Is it not covered by the 16th amendment to the constitution?

> parallel court system run by the IRS whose Constitution-defying existence

> Can you elaborate on how the IRS unconstitutional?

You have asked someone to elaborate on something they never said. Note you missed a key word, "court", criticisms of which are well documented.

I see. It was not clear to me that the IRS court system rather than the IRS itself was being called unconstitutional in that sentence. Thanks.

The US govt doesn't take kindly to anyone hiding money to avoid taxes, whether that's setting up a chain of shell companies in the Caribbean or hiding money in the matress.

I disagree with your premise only because any kind of financial secrecy leads to tax evasion, and taxes are how the government exists. It sucks making money over seas and that's because all the fat cats try to stuff their money over there. Nothing against you but a fair law treats everyone the same.

Your argument rings of the "sovereign citizen" movement in the US which is basically a bunch of idiots that chant hail the USA while they simultaneously dodge the IRS.

I disagree with you equivocating those that disagree with US finance laws to sovereign citizens. The fact is we are the only nation that have such far reaching laws that cross borders. It's completely ridiculous to think that what I earn and am taxed for in another country is also taxed in a country I don't physically have a presence.

The US government also historically goes to great lengths to protect its citizens abroad. For the most part, a US citizen sucked into a civil war or other terrible situation can show up at the embassy and everything will be okay.

Might not be worth the amount of tax you pay but it's like expensive insurance in a way

Historically is correct. They would do that in the 60s, 70s, and early 80s. They don't do that anymore. When the civil war in Yemen turned really bad UK, French, and other western countries evacuated their citizens. The US sent a reminder that US citizens should leave.

Outside of military the US does very little for its international citizens.

As far as I can tell, your argument seems equivalent to "private communication makes it easier for criminals to communicate, so let's make all communication non-private to make it easier to catch criminals". Yes, private banking makes it harder to catch tax evasion, and private communication makes it harder to catch criminals. Not impossible, just harder. Neither of those justifies removing that privacy.

What is the sensitive data here, i.e. what privacy is invaded? There are aggregates and there are transactions. I see zero privacy issues with the state knowing my aggregates (income, wealth, earned interest, ...) but I certainly do see privacy issues with disclosed transactions (what I bought, where I traveled).

Where I live my income is public information (that is - both my wealth and income, is public to everyone). Obviously, with that experience, I don't think it's odd that the authorities know my total account balance - my neighbor knows it.

Here's my point of view as a Swiss citizen: Many of us tend to see banking secrecy as just another check and balance. The Swiss government is supposed to be the employee of its people, not the other way round. Banking secrecy gives a tool into people's hands against overly aggressive taxation. For Swiss this has worked well, in general the tax revenue is just fine and taxes are kept reasonable. I'm fine if it gets cut for foreigners though - Switzerland isn't responsible for the checks and balances of foreign citizens towards their nation.

But historically you have made a lot of money off these foreigners. Will that matter to lose the business?

somewhat, but (a) I think this transition is mostly complete already and the Swiss economy has survived it so far, (b) banking in Switzerland is about 8% of GDP, not significantly more than in many other developed countries and (c) a big chunk Swiss banking revenue is AFAIK still in the domestic market. Will it show up somewhere in a spreadsheet? Certainly. Will it destroy Swiss banking or Switzerland as we know it? Most probably not. [1]

That being said, if 2008 has taught us anything, it's not to underestimate greedy bankers and their favourite puppy 'leverage'.

[1] Some small private banks specialised on this sort of business may go under though.

U.S. bureaucratic lingo is hilarious (F[U]BAR, FATCA[T]).

Follow the money: The civil "servants" and pension beneficiaries always profit most from such schemes. I'm not even sure that the progressives have much of a say here, though they're certainly useful idiots.

Be careful what you wish for. Enforceability is something that keeps our tax rates low relative to other countries (we have one of the lowest tax burdens among developed countries, not that you'd know it if you pay attention to our politics).

If you want to see what happens when enforceability becomes uncertain, look at countries like Greece, which are the convergence point of the process that starts with the very wealthy being trivially able to escape taxation and proceeds, normalizing tax evasion by successively less wealthy cohorts of society, until virtually nobody pays their stated tax obligations, the government raises rates to make up for it, and the entire system becomes a joke.

Uh, what? Germany has a high enforceability and high tax rates. You can legally move to Monaco anyway if you're very rich...

Germany has in fact low tax compliance relative to Europe, and far lower than that of the US, which stands out among all OECD countries for compliance.

Source? (The other commenter is not going to earn a response from you, so I wanted to ask. I have a not-new account and my real name is attached to it).

I'm sure we can find a better cite than this, but for starters:

http://reason.com/blog/2012/04/17/globally-speaking-american...

(It's easy to find cites for the claim that the US is abnormally tax-compliant, but not so easy to find tables like the one that article creates).

Since Sweden was not on the list I looked up 2014.

Out of 1 669 679 MSK predicted taxes, 63 750 is considered missing as the result of under the table deals and undisclosed incomes. A bit under 4% of the total, which translate to a tax-compliant rate of 96% for 2014. (https://www.skatteverket.se/download/18.3f4496fd14864cc5ac9c...)

Income tax is not paid by the employee but automatically by the employer. This make enforceability an issue between companies and the state, and laws that invade the privacy of companies (if that concept even exist) are not the same as laws that invade the privacy of citizens. I would say that enforceability in this case do not result in low tax rates.

I don't think you can get the totality of tax compliance from the number of missing returns.

Later

Here's a study comparing Sweden's compliance rate with that of Italy's, and finding them roughly similar:

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4823977/

It's not just about filing returns, but about the percentage of each person's earned income that is properly accounted for on those returns.

The data used to estimated the missing tax is the discrepancy between outgoing vs ingoing, ie that more stuff is being paid than should be possible with the available capital in the national economy. According to the tax office official data, the global worth of undeclared income was 150 000 MSK in 2014, 5% of BNP, for which 42.5% would have gone to taxes.

Looking at the system at that level will not be 100% but then the numbers are rounded anyway. The question I ask in the context of this discussion is if the 96% as estimated by the Swedish Tax Agency, is bigger or smaller than the 83.1% provided by IRS, knowing that both number include a certain amount of uncertainty. Both numbers are provided by the state agency of each country so some assumption of good-faith and competency should be applied.

It seems important to mention that the study looks at the behaviour of a few hundred people in Italy and Sweden playing a _game_ which simulates earning money, paying tax and possibly being audited. I.e. the study is not actually about the compliance rate of real taxation.

tptacek's description of the paper he cites, i.e. "Here's a study comparing Sweden's compliance rate with that of Italy's, and finding them roughly similar" leaves out the crucial point that the whole paper is about a game, not real taxes.

Yep, you're right. Sorry! That was a dumb cite.

I agree that disclosing all my bank transactions would be active surveillance and would violate privacy (even more so in countries like the US where cash is phasing out of use).

But to my knowledge that's not what actually happens in western countries. Data reported to government agencies seems to always be limited to aggregates or data that acts like an aggregate (the amount of interest earned). I have a hard time seeing a privacy violation in that, since you provide a much more detailed version of that data to the government in your tax report.

On top of that there's of course also the transactions that are reported to the government because they look like money laundering. That's more questionable, but I think it's still reasonable.

Dont forget however that governments have legalized (with the justificiation to fight tax evasion) those illegally obtained CDs that make the rounds in europe. It could be any kind of information.

http://www.dw.com/en/german-court-ruling-permits-use-of-stol...

Are you sure you're paying any tax money to the US? My understanding is that the US and France have a tax treaty, France's taxes are higher than in the US, and you are receiving tax credits for the income tax you're paying in France. You shouldn't have any obligations to the US unless you've got some income in the US while you live in France.

I believe the OP was objecting to the notion that FACTA requires US citizens residing abroad to go to great lengths to document their foreign income, to prove that they aren't doing anything nefarious.

Note that this is different than what US citizens residing in the states need to do, for a number of reasons, and is relatively new: https://en.m.wikipedia.org/wiki/Foreign_Account_Tax_Complian...

The IRS requires a number of conditions to be satisfied before they will allow you to file as an expat.

It is also possible that someone can be paid in a fashion that doesn't incur additional local taxes but that the IRS sees as income.

If you live somewhere that uses a VAT or import duties instead of an income tax, well, good luck getting a credit for that.

Our privacy is being violated by laws such as these, there no question about it. I wish there was a way to avoid this kind of information exposure, because i m afraid "accidental leaks" with unknown consequences will happen. These systems not only expose private information, they also duplicate it and many tax authorities don't exactly have strict security standards. IMHO it would be better if there was a system in place that allowed people to pay taxes in the country where their money resides and then pass the collected tax money to other countries anonymously.

I agree with you in principle but there is kind of a logical problem as I see it. What does constitute probable cause for tax evasion? Should a tax man drive around with your recorded income and taxes and then make a values judgment based on you house, clothing and car? Being able to account for the contents of an account doesn't seem entirely unreasonable, I don't know what good alternatives are, just trust people to pay tax? I've been through tax examinations and it's not fun but what's a legitimate alternative?

US Tax policies are predatory and criminal in nature. The way IRS treats citizens goes well beyond libertarian meme of "Taxation is theft", it is more like "IRS is a mafia, more ruthless than ever".

I guess at the heart of it there is "hunger of more of other people's money". The only way out I see is to put an actual constitutional upper limit on how much total money government can spend. Then the departments would be fighting among themselves possibly cannibalizing each other instead of our hard earned money.

This is so long overdue, it's almost useless. Where were these laws in the roaring 80s and 90s when rich people were actually making money (instead of today's stagnation)? Everyone who has cash to move has probably moved their money in obscure location outside the reach of the west (e.g. UAE). These new secrecy deals are just there to solidify the sovereignity of old money in europe.

The only people really affected are the ones without any money.

The Americans living abroad not being able to get bank accounts because the local banks are too afraid of US fines or the double taxation of income for those living abroad.

If you want to have financial privacy, start learning about cryptocurrencies.

Getting to know bitcoin is obvious, but there are also other kids on the block. Monero is the most successful cryptocurrency that has privacy built in: https://getmonero.org/home

In the medium term no banks in any country will be able to provide you financial privacy.

We're not there yet, bu it is coming.

And as a bonus with cc you get money that cannot be "frozen" because some government says so or money that disappears because your bank/government screws up.

In the future cryptocurrencies will be more real money then fiat currrencies. For some countries this is true alredy today.

"Here, put your money in this magic box. It may double in value in a week or it may be worth pennies on the dollar tomorrow. Nobody will know what you do with this money if you shake the box right. Put the box under your bed -- if you lose it, all your money is gone."

Bitcoin and the Swiss banking industry are apples and oranges.

>Bitcoin and the Swiss banking industry are apples and oranges.

I'd say it is a babies to cemeteries comparison.

Banking privacy is dead or dying. Cryptocurrencies offer enormous potential however with regard to privacy they are still in the experimental phase and require time to mature and develop.

Cryptocurrencies log all transactions in a world-readable log. Their only privacy is pseudonymity, which is very easily breached. And it's quite a hassle to acquire without going through an exchange which logs all your personal information for AML anyway.

> Cryptocurrencies log all transactions in a world-readable log.

True for now but there's some interesting experiments in this space, such as zero knowledge proofs, currently in dash and porting to ethereum (https://en.wikipedia.org/wiki/Non-interactive_zero-knowledge...).

> And it's quite a hassle to acquire without going through an exchange which logs all your personal information for AML anyway.

Also true, but crypto to crypto exchanges are relatively lax on regulation. It'd be trivial to trade into an anonymous coin, mix, then back to a public coin for some degree of anonymity.

This used to be the case, but not anymore. As mentioned in one of the parent comments, there are now cryptocurrencies that provide anonymity as well, check Monero [1] and Zcash [2].

[1] https://getmonero.org/home

[2] https://z.cash/

And you can bet if they gain any traction, they will be dealt with swiftly by the US government under the guise of "war on drugs".

This has been repeated so many times now that it makes my head hurt to think anyone actually believes you're going to have anonymity in banking/money exchanges.

Do you think we are in the final days of cash? Will we return to the pure debt based economies of the ancient world and never change course?

The US government's relationship with the global banking network is the result of very particular conditions following the end of the second world war and the end of the cold war. As these conditions shift over the next 10-20 years I'm not sure we can predict that these anti-privacy priorities will be maintained.

> very easily breached

What happens when someone exchanges one currency for another?

The days of high ranking German officers stashing art and bullion proceeds into a numbered accounts are gone, and have been for decades.

Modern Swiss banking privacy is for the DuPont heirs. Their job is to carefully study international tax code, remittance policies of specific countries, volatility of currencies, and a bit of family law within the locales of their clients to minimize divorce losses. Swiss banks exist because they offer a continuity of service. You bank with Julius Baer because your father banked with him. He was at your christening. The overlap between those who crypto-currency user and a private bank client (as anything other than a 'haha, alright let's throw 100k EUR at it and see where it lands' in a speculative fashion) is minimal.

This is a token gesture to the US government saying effectively - hey, fine, Homeland Security, go through any record you like, as long as it's not a Swiss national record. If we were unknowingly complicit in a wire transfer from a Saudi oil account to a Yemeni terror cell, by all means, go for it. Simultaneously, those Carnegie steel heirs are still protected because their name might be listed as "Director" few holding AG's but "sorry, no earning assets there. Any retained earnings go directly to the parent company, we'd love to help you out but it's a Lichtenstein AG. You'll Have to speak to their banking administration." (Oh fun fact, Lichtenstein has more registered companies than it does citizens.) This [0] is how an average run-of-the-mill Swiss Bank constructs their protection. Look at how that institution itself is structured --

    Private Investment Bank Ltd is a fully licensed Bank in
    the Bahamas, established in 1982. It is wholly-owned by
    Banque Cramer & Cie SA, Geneva, Switzerland, which
    is a subsidiary of Norinvest Holding SA, a company
    having family origins in the financial as well as in the
    industrial sector, dating back to 1871."

Rest assured, this is just the tip of the iceberg. (That bank isn't particularly reputed for their private banking services.)

Think of banking privacy a lot like the security within your home. An average person with a Kwik-key frontdoor can get bump-keyed or pin-raked in well under a minute[1]. This is basically like opening an auxiliary bank account in a confidant's name to protect against divorce asset issues in a low net-worth scenario (a good attorney will be able to bypass something like that trivially, leading you down forfeiture road).

You throw in a security key like this fancy schmancy German engineered key[2] that's resistant to standard rake-pick techniques, you've upped the entry barrier (haha ugh bad pun intended) from "common thief" to "a professional has likely targeted specifically your house on the Hamptons for that original Matisse you bought at Sotheby's". The banking equivalent of that German key is consulting with UBS or HSBC's private wealth division. If you come from old money, your family has already established all the right safe guards against shirt-loss in divorce, the right non-profit foundations structured, and proper holding companies located in the right tax domiciles (think: Google and 11% in Ireland) structured on any profits yielded.[see: 4]

Sufficient protection for civil suits (i.e., that professional art thief), but your 'lock' won't hold up to the hydraulic battering ram[3] that SWAT uses to break down your door after a ADA goes before a judge alleging you're involved in a terror plot and/or involved in a large drug operation, providing the judge with what seems to be sufficient evidence to sign off on a no-knock warrant. (Though I'd suppose, those battering rams would certainly provide enough 'knock'.) Your HSBC private wealth account might provide you with enough insulation against municipal prosecutors, but certainly not the US DHS at that point.

Here's the thing though - at that point, Swiss banks don't want your money. They'll keep the DuPont and Koch fortunes safe from gold-diggers but they don't want darknet money used to purchase guns, child porn, drugs, or anything even remotely connected to terror. Anything involving proceedings at the first-world federal investigator level (IRS grey-suits notwithstanding, those meetings occur with the run-of-the-mill regularity like the clockwork of a good Patek Philippe [sorry, I couldn't resist]) is a severe impedance for business as usual.

[0] https://www.banquecramer.ch/dam/jcr:7813a747-9c8c-4101-8091-...

[1] The good lock-pickers won't even leave deformation marks on the unit, since they've basically got their hands calibrated to the point where they can feel when their pick engages on a pin.

[2] http://www.theamazingking.com/images/locks/dom-key.jpg

[3] https://en.wikipedia.org/wiki/Door_breaching#/media/File:Trg...

[4] https://www.banquecramer.ch/dam/jcr:7813a747-9c8c-4101-8091-... Here's how a typical private bank structures the assets of their clients to protect against divorce.

link #4 is the same as link #0

I enjoyed your analog analogies.

Sort of. Gold, the commodity, is a better analog. Its price might fluctuate with the markets but it shouldn't vanish at this point.

Bitcoin is like a cult.

People praise it for going up, deny anything is wrong when it goes down, ignore the mysterious person who created it, spurn the heathen alternate cryptocurrencies.

Sure I like the idea but I don't like the Bitcoin culture.

> ignore the mysterious person who created it

Does that matter? It's not like they have any control over it.

To me it does. How do you know? We don't even know if it's a they a him or her.

I understand the blockchain concept but still we can't accept it as infallible.

Nobody should be shouted down for asking questions.

> To me it does. How do you know? We don't even know if it's a they a him or her.

It would be fallacious to reason about the soundness of bitcoin based on the person who created it anyway, given that you are not being asked to trust it based on reputation - they are many better sources of information to use when making a decision about the soundness of the currency.

> I understand the blockchain concept but still we can't accept it as infallible.

No one is saying to accept it as infallible, and in fact not knowing who created it helps with that sort of thing, given that you have to actually evaluate it for what it is instead of just saying, "Well, X created it and I love everything else they've done."

By "ignore the mysterious person who created it", do you mean badger random old Japanese men at their homes and publish hundreds of unwanted photos of them?

You say that like it's a bad thing

Bitcoin and its flaws are rather well understood at this point but perhaps only by a few. Indeed if you do not understand it, stay out.

FTA:

> However, poor countries will not be accorded this privilege because they lack the resources to fulfill the conditions for automatic information exchange

So bankers will be offered as a sacrifice but the dictator pillaging his country will be protected. How cute.

Only for certain countries: https://www.sif.admin.ch/sif/en/home/themen/internationale-s...

Tax evaders from USA are safe.

Note that EU is listed as a single country. The footnote reads:

>The AEOI agreement with the EU applies for all 28 EU member states and is also applicable for the Åland Islands, the Azores, French Guiana, Gibraltar, Guadeloupe, the Canary Islands, Madeira, Martinique, Mayotte, Réunion and Saint Martin.

> Tax evaders from USA are safe.

No, the USA forced Swiss banks to open up their administrations to the DOJ already in 2013.

https://www.justice.gov/tax/file/631356/download

I very much doubt that.

When you open a bank account there they'll go to very great lengths to make sure you're not from the US and you don't fall under FATCA (forein account tax complience act), and if you do, then .. well, you usually can't just open an account there, but there are branch offices of course that are ready and willing to do business with people and entities associated with the IRS, probably they are a bit more costly though.

This applies even to Swiss citizens with American green cards, unfortunately.

Note private banking has always had different rules from consumer banks.

The AEOI is a mutual agreement the US doesn't want to share their banking details with some nations on that list.

That said iirc the Swiss have a separate agreement with the US that agreement is based on the 1996 tax treaty and allows the IRS and SFTA to look through the banking records of each nation.

I can't find the article, but Switzerland started sharing banking information with the U.S. a few years ago. This only makes it official.

Why does confidentiality play a big factor here?

If you have undeclared earnings (undeclared to avoid paying taxes), you'll want somewhere to hide that money.

Time to use Monero.

Black money is converted to Black wealth long time back via Quid pro quo http://qz.com/843902/1-of-indians-now-hold-nearly-60-of-the-...

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