Ethics and governance in the European Financial centers

AP has reported that the US Justice Department stated in a court filing yesterday that Swiss bank UBS AG "systematically and deliberately" violated U.S. law by dispatching private bankers to recruit wealthy Americans interested in evading taxes and must be forced to reveal the identities of 52,000 of those clients.

The signature of an agreement based an the OECD tax model between Switzerland and the USA a couple of days ago did not hushed up the issue.

Le temps has reported that Switzerland is willing to introduce specific provisions in the tax agreements that are to be signed.

- On the one hand, the request of the foreign jurisdiction would describe the behaviour in question, the name of the author, as well as the documents on which the jurisdiction bases its suspicions. If the foreign authority seeks to make raise the bank secrecy protecting the author from supposed tax evasion, the name of the Swiss bank should also be indicated in the request. This requirement of precision aims at preventing fishing with information by foreign tax authorities.

- On the other hand, Switzerland should negotiate the way in which the foreign jurisdiction can collect evidence to refuse requests that are based on evidence on an unlawful basis, according to the Swiss law.

I know that there is a change in progress in Luxembourg. Not with the LIGFI which is an association of the past as it is promoted by leaders of the jurisdictions that never ever repudiated, at least publicly, drifts and abuses in Luxembourg. It is about a major change which transcends the parties. The stake is to substitute the best elements for an old guard.

To comment the recent tax agreement between the USA and Luxembourg, Le Temps interviewed a couple of Swiss professionals.

What they say admits that financial centers knowingly fool the OECD by accepting the agreement as the OECD framework is not relevant to counter tax evasion.

The agreement requires that the request shall be written, justified and personal, based on a suspicion against a specific person that is addressed to a bank or a precise branch. The circumstances of tax evasion must be described with accuracy.

This is the OECD tax Model for cooperation.

As I wrote, it is exactly as if a travel agency would sell tickets only for detailed requests (e.g. I want a ticket for the flight from X to Y at HH:MMabd) but would not provide information about a destination (Are there flights to go from X to Y, what are the schedules... ?) for  the client to get the ticket. Only a few tickets would be sold.

Professionals that support tax evasion confirm what I recently wrote to Angel Gurria :

According to Thomas Kalbermatten, bank Analyst at Credit Suisse, quoted by Le Temps, "Il sera, en pratique, très difficile pour les autorités fiscales étrangères qui appliquent les standards de l’OCDE de fournir ce degré de details" (free translation: “It will be, in practice, very difficult for the foreign tax authorities which apply the OECD standards to provide this degree of details”)

According to Didier de Montmollin, partner at Secretan Troyanov, quoted by Le Temps, "Si la Suisse va dans la même ligne que le Luxembourg, le résultat ne sera pas du tout si problématique pour la Suisse. Le secret bancaire sera relativement préservé, et le client restera maître de son éthique fiscale". (free translation: “If Switzerland goes in the same line as Luxembourg, the result will not be so problematic  at all  for Switzerland. Banking secrecy will be relatively preserved, and the client will keep his/her tax ethics under control”)

Which ethics?

The one that the LIGFI wants to promote?