Ethics and governance in the European Financial centers

Saturday's Globe and Mail has reported that the United States appears to have forced open a crack in the fortress-like protections the Swiss government grants clients of its country's banks, a victory that could upend the business of dodging domestic levies through international tax havens.

UBS would escape fine but would provide 5000 names.

If the Swiss can be broken, anyone can be broken," said Reuven Avi-Yonah, a University of Michigan professor who has advised the U.S. Treasury on international tax law. "Other tax havens don't have the diplomatic clout of Switzerland."

Raymond Baker, director of the Global Financial Integrity, an organization that works to end illegal international money transfers, said it's critical that U.S. officials push for greater information sharing so tax evasion and other financial crimes can be investigated.

"What happens with the UBS case will be noted around the world, but what will set a true precedent for tax havens around the world is what we do next," Baker said (Source : AP).

Reuters has reported that Swiss prosecutors said on Wednesday they are investigating allegations that an unnamed high-ranking Swiss official took a bribe from a U.S. client of UBS to help cover up tax fraud.

Federal prosecutors said in a statement the tax authority had filed charges against unknown persons which it was now investigating, without giving further details.

A U.S. client of the Swiss bank, which is at the centre of a U.S. tax fraud case, pleaded guilty on Tuesday to using Swiss bank accounts to hide money from the U.S. taxman and said he paid a Swiss official $45,000 to help cover up the fraud.

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UBS is more and more disappointing. They had a video on Corporate Social responsibility, with the participation of Jermyn Brooks, Director Transparency International. It is no longer online but I have it as it is a very good example of the deceptive use of Corporate Social Responsibility for the good image while not respecting rules all the more than there are links between money laundering, tax evasion and financial regulation.

What Jermyn Brooks said is quoted in a brochure : “UBS was instrumental in creating the Wolfsberg Group, named after their own management training center in Switzerland. With the help of the anti-corruption organization, Transparency International, 12 of the worlds largest banks – banks which would normally be guarded about sharing internal procedures with their competitors, collaborated to develop and publish the “Anti Money Laundering Principles” called the “Wolfsberg Principles” …which have received worldwide recognition as good practice – filling gaps in national laws and regulations.”

Switzerland is alone before the US tax admin and the US courts.

A pact existed between the jurisdictions with bank secrecy. They simultaneously accepted the OECD criteria but an unbalance was created in favor of Luxembourg because the signature of the agreements was not coordinated to leave the gray list together. Switzerland, which had affirmed the importance to coordinate points of common interest of the financial centres was fooled.

Switzerland is all the more losing vis-à-vis Luxembourg than one of its banks is blamed in the Madoff fraud. This bank acted in the framework of Luxembourg laws and regulations and of Luxembourg business practices with very high conflicts of interest.

Switzerland is all the more losing vis-à-vis Luxembourg than Luxembourg launched the LIGFI to improve its image without Switzerland: two Swiss (Gilbert McNeill and Rene Brülhart) are in this project but not as representative of Switzerland.

Switzerland is all the more losing vis-à-vis Luxembourg than its ethics is more credible than the one of Luxembourg beyond the banking secrecy: thus it was remarkably ranked by TI for the implementation of the OECD anti bribery convention whereas Luxembourg, where the criminal liabiliy legal person does not exist despite an injunction from the OECD late March 2008, was unable to provide data.

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