According to the DOJ the 52,000 names had a total of $15 billion in their black accounts. A sizable amount of money. The question that has been hanging in the air is how much money is still in Swiss black accounts that has not been flushed out at this point? How many other Americans have accounts that were not with UBS? How many accounts are there from non-US names? What is an estimate as to the size of this problem?
The August edition of Swiss Review provides some insight. While Swiss Review is not the end all source of information on this topic their writing is not independent of the Swiss Government who provides a portion of the operating budget. With that in mind I was shocked to find the following in the August edition of SR:
“Switzerland has become a paradise for foreign capital on which tax is not paid. The uproar from foreign governments is understandable.” These are not the words of a critic of the banks, but of private banker Konrad Hummler. He says that around 30%, or CHF 1,000 billion, of the CHF 2,800 billion or so of foreign assets in Swiss banks is untaxed “black money”.
Mr. Hummler probably knows as much about the topic of black accounts in Switzerland as anyone. His Bio:
Konrad Hummler is managing partner of Wegelin & Co., private bankers, and has acted for many years as personal advisor to the chairman of the board of directors of the Union Bank of Switzerland (UBS). He serves as a colonel in the general staff of the Swiss Army.
Mr. Hummler has put a number of nearly 1 Trillion dollars on the problem. This is much higher than any estimate that I have seen before. I thought it could be as high as $500b. It appears that I was understating things by a factor of 2. Some perspective based on the comments by Mr. Hummler:
-The $15 billion owned by the 52,000 American names represents 1.5% of the total.
-The average US account balance at UBS was $300,000. ($15b/52k). Extrapolating from that number one gets an estimate on the total number of black accounts at 3.3 million. Based on this calculation a range of estimates on the total number would be between 2 and 4 million.
Mr. Hummler’s comments are unlikely to go unnoticed by the global taxing authorities. The idea that there is this much money waiting to be claimed by the host countries makes it certain that the attacks against Swiss banks will continue far into the future. Everyone will want their share of $1 Trillion.
I believe that the trees are shaking and the leaves falling on this issue as I write. I recently reviewed a letter from a large Swiss private bank (not Wegelin & Co) that was sent to a US client it reads, in part, as follows:
“To ensure transparency toward the IRS, we would ask you to sign the enclosed form W-9 and return it to us by 30 September 2009. We will then forward form W-9 to our US depository, which will in turn disclose your holdings to the IRS.”
While this letter may not represent the thinking and action of other Swiss banks it is likely that they will be forced to follow suit in the not too distant future. Mr. Rolf Ribi the author of the story in Swiss Review states in his lead in: Banking confidentiality is facing, “the beginning of the end”. I would disagree with Mr. Ribi. We are far from the beginning of this process. The end will come much sooner than is expected. Black accounts in Switzerland are a thing of the past.
A Hat Tip to Mr. Hummler for providing this insight.
on Mon, 08/31/2009 - 08:29
#53761
The process of liquidity provisioning through header stripping will continue unabated.
on Mon, 08/31/2009 - 09:01
#53798
Generally, US banks don't tax or report on bank deposit interest paid to non-residents. Heritage Foundation estimated that due to that, US banks have attracted over $1 trillion in deposits from non-residents. http://www.heritage.org/research/taxes/em843.cfm
Here's a picture of the growth in non-resident bank deposits from the 70's through 2001 or 2002. http://www.ncpa.org/images/1213.gif
If the US gets huffy about Swiss bank secrecy, how long before France and other countries get huffy about US giving bank secrecy to non-residents?
on Mon, 08/31/2009 - 09:46
#53840
The Miami financial services structure.
on Mon, 08/31/2009 - 09:13
#53810
They will never go after the reconstituted BCCI, only small fry get skewered.
on Mon, 08/31/2009 - 09:32
#53830
Ah yes, I can hear it in the wind, I am not going down alone, I am taking everyone with me.
on Mon, 08/31/2009 - 09:58
#53849
Tax evaders are right: who wants to sponsor a country that supports (or is by nature) a Ponzi scheme:
http://www.zerohedge.com/article/head-china-sovereign-wealth-fund-openly-admits-asset-bubble-addressed-creation-more-bubbles#comment-53836
on Mon, 08/31/2009 - 20:56
#54698
Guess there is no honor among thieves. Of course offshoring undecleared income is the only moral thing to do . . .
Sounds like Wall Street morals to me.
on Mon, 08/31/2009 - 14:54
#53861
I can see this blowing up
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
on Mon, 08/31/2009 - 11:00
#53894
not so much black accounts ... as black gubbermunts ...
cause & symptom. Hail to the chief.
Who is the chief btw?
on Mon, 08/31/2009 - 11:14
#53904
If reports in the Indian media are anything to go buy Indian politicians,bureaucrats and industrialists own more than a trillion dollars alone stashed away in swiss banks.This was one of the main issues the election in May 2009 was fought.
on Mon, 08/31/2009 - 12:05
#53951
they were fighting over who could steal more of other people's money no doubt
good game
on Mon, 08/31/2009 - 11:31
#53917
who did you say Hummler works for?
then again UBS is hardly a private bank in the accepted definition
on Mon, 08/31/2009 - 12:16
#53961
Hummler is the Boss of Bank Wegelin, a small swiss
private bank, owned by partners. Konrad Hummler is
very frustrated because of stupid swiss politicians who
are afraid of the IRS, and stupid swiss bankers who
abused the Swiss Banking Secrecy so badly. (in order to
get huge Bonuses for Net New Money). But the damage
is now done and too many bankers have pleaded guilty. So
Now the IRS has opened all doors, and will not give up, until
they know everything about every US Citizen that has a
swiss bank account. And then comes Germany, France, Italy,
Spain and last but not least Russia.
UBS, Credit-Suisse, Bank Baer and so on, have all so
called Wealth Planing Departments, where tax evasion
is , or was daily business. So the total amount of "tax
evasion money" could be very high indeed.
But the real question is, do clients still see an adavantage
by having money on swiss banks. If the war against global
terror spreads across the world, and the chances are very
hight that it will, switzerland is still the only neutral country
with stable politics etc. that used to be a selling argument
in the past as well (I mean a part from the banking secret).
If any already dangerous situation gets out of control
(Afgahnistan-Pakistan, North-Korea, Iran, Irak)
People may be happy to have some money on swiss accounts.
Another selling point is that a lot of Swiss Private Banks
have no Investment Banking Division, that can blow up
the Bank. This is a very important factor for very rich clients.
For now, swiss banks do not better or worse than their peers
around the world. We have to agree, that the real big
earnings power in the Financial Sector came from the
Investment Banking Division. It seems, that the FED and
the Swiss National Bank as well, don't have any intention
to start to freeze this mispriced derivative markets. Instead
they try to keep it alive. Swiss SNB is already in talks wit UBS
who says that they are thinking of buying back the derivative
crap worth USD 30Bio. The market cap of UBS isn't even
80 Bio. The Bankers have learned nothing, zero, nada from
this crash we had. I hear already bankers talking on the
bahnhofstrasse in Zurich: Yes we had a bad market, but
do not blame the financial industry for that, or the FED. It
was a bad market, and everything is fine now.
on Mon, 08/31/2009 - 12:31
#53985
ever wonder why during two world wars, the country of switzerland never was touched?
on Mon, 08/31/2009 - 12:47
#54018
because of the Banks, but also the country has
the HQ of the Red Cross and UNO, and was always neutral
during every war. And Switzerland has no commodities,
and from a strategic point of view, it makes sense to keep
it out of the war as long as possible, since it has no military
power.
on Mon, 08/31/2009 - 13:02
#54058
The Swiss most likely have a decent sized oil reserve in their northern territory. Additionally, every male swiss citizen has spent at least 6 months in the military.
But let's be honest. The reason why Hitler didn't invade is because of the banks. Plain and simple. The Swiss hid a ton of the Hitlers gold...by way of the Jews.
on Thu, 09/03/2009 - 08:11
#57261
Swiss facts for Dummies: Switzerland has a non-professional defensive only army, due to several factors mostly geographic it is a highly defensible country, the Germans did not invade Switzerland because it made no sense due to the high cost of the invasion and no gains from it.
on Mon, 08/31/2009 - 17:12
#54501
The WWII record is clear: the Swiss politicians pimped themselves out to Hitler.
After the war was over the OSS computed the economics of Switzerland and figured that, per capita, she provided more towards Hitler's war machine than native Germans!
Sweden sits in the same pew, too. SKF ( ball bearings ) was war critical for Germany.
Post war document captures verify that Hitler was going to eat them last: Switzerland was to be partitioned between Germany and Italy along language lines.
Stolen Jewish wealth, fenced in Zurich, made post-war Switzerland rich.
Above and beyond that: the gold reserves of Europe were fenced in Zurich, too.
on Mon, 08/31/2009 - 13:07
#54067
"By way of the Jews". Silver Bullet, please shut the fuck up.
K thanks.
on Mon, 08/31/2009 - 13:17
#54078
Jeanbon: Thanks for your comments. It sounds like you know this story well. I would love to pick your brains.
bkrasting@gmail.com
on Mon, 08/31/2009 - 14:38
#54249
Not everyone is flat out evading taxes, many simply want to avoid seizure of assets so I think the real test isn't whether the Swiss divulge account information but whether they will turn over assets on demand. The trend suggests they will. So does all the money go to Lichtenstein now?
on Mon, 08/31/2009 - 15:20
#54353
well that is what madoff was trying to do, at least , for some things. that is why he had the money in israel so he could evade american taxes....of course get any bureaucrat in our government to go around talking about where that money went and who actually has it, and this is called career suicide in the united states government. they all want to put in their 20 and retire to florida and go fishing and boating and kick back and relax on their government retirements so they sell us out instead of looking out for us. but this will change soon i predict as the sour taste of treason sinks in to the useful idiots.....(hopefully)
on Mon, 08/31/2009 - 16:09
#54426
Buy Singapore dollars/short the CHF pair trade. It's all going to Singapore and Monaco. Some tax havens will remain... Where else will corrupt politicians hide their money?
on Mon, 08/31/2009 - 18:07
#54587
Trillion...so what. Why should it be 2 to 4m minor accounts of about $300k.
Between various despot regimes in the Far East(Indonesia, Burma,Philipines,N.Korea), former Russia(take your pick inc.judo boy), Africa(endless list)...you surely have $500bn alone.
Suharto is said to have siphoned of north of $30bn by the 90s. Marcos $2-4bn by the 80s, and given financial innovation, commodity booms,various regime changes one can easily see how a bank of 100 suspects could easily amass half a trillion dollars in black money in swiss accounts.
The rest are small fry....
Its like people slowing down on motorways to rubber neck an accident...theres nothing to watrch here. Move on.
on Tue, 09/01/2009 - 11:22
#55088
One angle not explored is the issue of creeping capital controls taking shape in the USA. Fence the $$'s of individuals and non-institutional clients inside the USA so they can be looted by the banksters while their trillions remain squirreled away in offshore SIV's or opaque insurance products.
on Wed, 09/02/2009 - 18:06
#56866
There is confusion here. The 500 billion represents undisclosed assets; NOT income or profit. There is no tax on assets (last I heard). Most of these monies sit idle garnering little to return and perhaps loss. Imagine the accounts repatriated without fines. Now imagine the accounts have lost 30-50% on their equity sides. They may be bringing home write-offs and tax deductions(due to losses)! Lets say though the 500 billion returns 1% after fees, currency conversion,etc. Thats 5 billion$ profit. Now 30% goes to the taxes in Swiss and 30% to the US Feds: the Us gets roughly 1 billion US $'s. Well whooop deee doooo. They just gave 25 trillion US$'s to wall street. Exactly who are we kidding here?
on Thu, 09/03/2009 - 06:31
#57221
Keep in mind the US Foreign Bank Accounting Reporting rules. Presumably these accounts are or were unreported, so the FBAR rules would allow the IRS to seize somewhere from 20% to 40% of all unreported accounts. So the concession by UBS does represent a potential major windfall for the IRS.