For those who want to squirrel away money where nobody else can find it, the best hiding places are Costa Rica, Malaysia, the Philippines, and Uruguay. This is revealed in a new list, which the Organization for Economic Cooperation and Development (OECD) made public on April 2, 2009.
The OECD says four countries mentioned above have done little to comply with demands to make their banking systems more transparent. According to a BBC report (April 3, 2009), “Three of the blacklisted countries have said that they should be removed from the list. There is also a list of 38 places that have agreed to improve standards but not yet done so, such as Gibraltar, Liechtenstein, Andorra, and San Marino.”
The three saying they should not be on the list are Malaysia, the Philippines, and Uruguay.
Legendary Swiss Secrecy
Until recently, Swiss banks were noted worldwide for their discretion. Valuables could be placed in their vaults without fear their contents might be revealed to outsiders. Then, in 2008, scandal involving UBS Warburg broke. The company is based in Switzerland and has been described by The Economist (July 12, 2007) as “the world’s biggest manager of other people’s money.”
As reported by Nick Mathiason in The Observer (June 29, 2008), the Internal Revenue Service (IRS) in the United States had long suspected that Russian émigré and real-estate billionaire Igor Olenicoff was hiding income. After a long and patient investigation, the IRS confronted Olenicoff with the evidence it had and offered a deal. The Russian could have a light sentence if he handed over the names of those who helped him evade taxes. Olenicoff gave the IRS Bradley Birkenfeld who had been a senior banker in America with UBS from 2001 to 2006.
The Observer reported that Birkenfeld “signed a U.S. court statement detailing how he smuggled diamonds in toothpaste tubes, deliberately destroyed offshore bank records on behalf of clients, and helped Olenicoff evade taxes of $200 million on offshore assets worth $7.26 billion.”
UBS Warburg had 19,000 American clients, some of whom may have taken advantage of UBS’s tax-avoidance services. The Wall Street Journal reported the huge cost to the Treasury of people not paying the taxes they owe. “The U.S. loses about $100 billion annually due to offshore tax evasion,” The Journal reported on July 17, 2008, “according to a Senate probe that is taking aim at Swiss bank UBS AG and Liechtenstein’s LGT Group for allegedly marketing tax-evasion strategies to wealthy Americans.”
Embarrassed Swiss May Change
As The Observer noted, “It is an understatement to say that Birkenfeld’s allegations have sent shockwaves through the Swiss financial establishment, which prides itself on selling secrecy to the world’s super-rich.” Back at the BBC (February 20, 2009), the broadcaster quotes the Zurich-based Tages Anzeiger newspaper as saying the UBS affair is “the death knell” for Swiss banking secrecy.
The BBC adds, “The former German Finance Minister, Hans Eichel, went further. Asked to put a time limit on how long banking secrecy could survive he said: ‘I give it a year and a half.’ ”
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