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A Different Version of the "Dumb" Swiss Banker Story

Bruce Krasting's picture




 

 

bloomberg#2

 

bi

 

A funny story out from Switzerland today. It was widely covered in the press (Link). I think the story that is "out there" is bullshit. My take:

 

The story in the media is that a Mr. Beda Singenberger, a Swiss Private Banker "accidentally" sent a list of US clients with black money accounts to the Department of Justice. The DOJ promptly smashed all 60 of them. Money was forfeited, fines were paid and some folks are doing time.

Fairyland. It doesn't work like that.

 

Beda was using a time-honored Swiss tradition referred to as either the "Double Blind" or simply, "Belt and Suspenders". A Swiss lawyer would set up a Trust Agreement for a newly formed trust that was legally domiciled in Lichtenstein. An actual trust was set up in Lichtenstein, but this is just a recording formality that has a small initial cost.

The new Trust is given a secret name; call it "Cassandra". The Swiss lawyer then proceeds to set up an investment account with a friendly Swiss banker. The name on the new account is Cassandra. There is no other information regarding the account other than that the account is legally registered in Lichtenstein.

 

A US person with this set up has two layers of protection from the IRS/DOJ. The first in the Swiss banking secrecy laws. For years it was believed that these laws would protect black accounts. That all fell apart in 2008. There is no Swiss banking secrecy that can provide a shield from the IRS any longer.

But, the second level of protection is impenetrable. The DOJ can lean all they want on the Swiss banker to divulge names. But, in this case, the only thing the banker has is the name Cassandra, and the name of a Swiss lawyer who set the Trust up.

The Swiss lawyers are completely protected. They, like US lawyers, are not obligated to reveal information regarding client activity. The Swiss version of the Attorney/Client confidentiality privilege will not be violated - ever.

 

You have to trust me on this - If I have all the details on how this works, then you can be 100% certain that the nice folks at the DOJ are also aware of the details. The boys at the DOJ hit a wall over client privilege. They must have been working overtime to break this last wall down.

The private Swiss bankers get money from clients, and they invest it. Nothing special, stocks and bonds. To do this basic investing requires a clearing relationship with some NY based entity. Assume that the SEC knew that Beda was dirty, and they wanted to nail him. The DOJ could easily put a block on the assets of the Swiss Private Bank. They would then send a nice letter that says, "Come talk to us".

Note: This was how the Wegelin Bank got shut down in the US.

 

At this point, an expensive D.C. tax lawyer gets involved and "he" has a sit down with "somebody". Cards get put on the table.

The Swiss banker is totally screwed. Not only are the assets of his US customers frozen, but other assets that belong to folks from Iran, South America, China, Africa etc are also blocked. If the banker ends up losing the assets of some pirate from Somalia, the banker will be found dead.

On the other hand, if the Swiss banker turns over the US names  he is in violation of Swiss banking laws, he may end up in Swiss jail, and for sure, his banking career is finished. (He knows who they are - there are cash withdrawls and other decisions that require regular face-to-face meetings.  Zurich is fun - great shopping with all the cash!)

So the Swiss banker's US lawyer cuts a deal. The Swiss banker will "accidentally" provide the names to the DOJ. In return, the DOJ releases any funds/assets that are not US owned.

 

The DOJ is pleased as punch. They finally broke down a double blind. Any other US person who thought they were protected by the Trusts and the lawyers, are now crapping in their pants. (There are thousands in this position today) If they were smart, they would do a disclosure/settlement deal with the DOJ. (Big Fines - No Jail time - No perp walk)

The Swiss banker can go on living. He may look stupid, but at least he doesn't have the Taiwanese mafia after him. And who knows, his remaining (non US) clients will appreciate what he did for them (screw the Americans). They might just give the banker a bit more loot to manage as a result. Everybody is happy - except a few folks in the US who got caught with their pants down.

 

So that's my story. The message in my version is that the DOJ is playing hard ball and winning. They are Terminators, nothing stops them. There is a positive spin to this story - folks who cheat the system are getting nailed. The dark side is that the Terminators are out there, and working 24/7. They have big computers and very big balls. Think of a rhino that puts its head down, and just charges through the bushes. Everything gets trampled in the process.

 

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Wed, 03/13/2013 - 22:52 | 3328469 willwork4food
willwork4food's picture

Bullshit. What's to prevent a Swiss banker from only disclosing half of his primary accounts and making sure he/she keeps major US accounts secret just to placate the assholes at the DOJ?

Wed, 03/13/2013 - 15:47 | 3327193 poggi
poggi's picture

"They are Terminators, nothing stops them."

 

Except for orders from headquarters to ignore banksters.

Wed, 03/13/2013 - 15:45 | 3327184 onlooker
onlooker's picture

Bruce   thanks for the good read. Is it posted on you site ---Bruce Krasting.Com?

 

Wed, 03/13/2013 - 16:03 | 3327295 Bruce Krasting
Bruce Krasting's picture

no space. But yeah, all my stuff is there.

Wed, 03/13/2013 - 15:40 | 3327135 Joebloinvestor
Joebloinvestor's picture

Playing hardball and winning against foreign banks?

Maybe, but I doubt it.

 

Wed, 03/13/2013 - 17:32 | 3327655 the grateful un...
the grateful unemployed's picture

yeah i thought the punchline to the joke, how dumb was the Swiss Banker? he forgot where he put my secret account..

Wed, 03/13/2013 - 15:31 | 3327086 kaiserhoff
kaiserhoff's picture

5% fee on principle, in the age of ZIRP?  And the money laundering fees, travel, yada, yada, you make money on this how, exactly?

This is not for some little old lady trying to avoid tax on her inheritance.  There would have to be some serious criminality, or creditor fraud for this deal to look appealing.

 

Wed, 03/13/2013 - 20:27 | 3328101 Bruce Krasting
Bruce Krasting's picture

This happens because:

 

-There is some form of illegal activity. It runs the gamut. From drugs to diamond heists.

-A bunch of it is there to keep it away from a spouse, not the IRS.

-A very significant amount is inherited, and never claimed for US taxes. Example:

Dear old Uncle Willie, the wool merchant from Argentina, dies and leaves a Swiss account with 10mil.

The choice, come clean and pay $6m in US taxes, or keep it quiet and go to Zurich once a year and live the good life. Many people choose to keep the money hidden.

That's a crime, but it's not criminal. Or is it?

Wed, 03/13/2013 - 20:38 | 3328134 kaiserhoff
kaiserhoff's picture

Thanks Bruce.

I don't know exactly how big you have to be before nothing is a crime, but the US has some really nasty statutes regarding drug money laundering.  As you say, much of it may be civil, but once you get started on this, it wouldn't be easy to stop.

Wed, 03/13/2013 - 22:35 | 3328409 willwork4food
willwork4food's picture

Which explains why cops on the street pulling over someone over a taillight and discovering 10k cash like to confiscate it..for the people, even though it was uncle ted taking his life's savings down to the local bank.

Wed, 03/13/2013 - 15:07 | 3326942 Maos Dog
Maos Dog's picture

From reading several stories on this event, it seems that the people caught in this scandel were "little fish" guys with like 5 - 6 mil in assets. This tells us a few things:

1) Despreation of the government to go after these "little fish"

2) This is an act by the government meant to terrorize the lower rich - moderately rich. 

3) Call into question the trust fund laws.

 

NO WHERE IS SAFE ANYMORE GUYS

 

 

Wed, 03/13/2013 - 17:01 | 3327538 Winston Churchill
Winston Churchill's picture

Never was.

Just varying degrees of safe.

Bruce and I share something in common,so I'm sure he doesn't declare

his Swiss accounts either.No income =no tax due.

Wed, 03/13/2013 - 20:32 | 3328113 Bruce Krasting
Bruce Krasting's picture

You reading this, knowing I have played on this street, and you think I cheat?

Not a chance. All risk no reward.

 

I know some guys who took this gamble. One of them did time in the Allendale Federal Pen.

 

This is a losers play. Don't do it.

b

Wed, 03/13/2013 - 22:31 | 3328395 willwork4food
willwork4food's picture

Comment Paid for by the DOJ.

Wed, 03/13/2013 - 15:14 | 3326971 negative rates
negative rates's picture

It never was.

Wed, 03/13/2013 - 15:46 | 3327186 Maos Dog
Maos Dog's picture

Well, true, it never was, can't argue that. It's always a numbers game. However, when you are only hiding like 5 mil so your family doesent get raped by inheritence tax on your tiny fortune, and you use a "safe" overseas trust, the numbers were pretty much in your favor.

Now, not so much. 

Wed, 03/13/2013 - 15:06 | 3326939 Mercury
Mercury's picture

Gold.

Wed, 03/13/2013 - 17:55 | 3327714 lasvegaspersona
lasvegaspersona's picture

Gold

Wed, 03/13/2013 - 22:28 | 3328381 willwork4food
willwork4food's picture

White Gold..

Wed, 03/13/2013 - 14:53 | 3326869 SmittyinLA
SmittyinLA's picture

I don't see any stories of "the rich" getting jailed for tax evasion sans Wesley Snipes, and as far as the US govt squeezing Swiss Bankers?

I think the Swiss have more leverage over US politicians who have more to hide than Russians and Chicoms combined.  

Wed, 03/13/2013 - 14:49 | 3326844 ptoemmes
ptoemmes's picture

If only the DOJ was as aggressive with TBTF banks and bankers on a variety of - ahem - issues.

Wed, 03/13/2013 - 14:45 | 3326826 Colonial Intent
Colonial Intent's picture

A govt dept doing something right?

cue the negative comments.......

Wed, 03/13/2013 - 14:45 | 3326817 H E D G E H O G
H E D G E H O G's picture

"Department of Justice", that's cute. Why in the fuck aren't they going after the illegal banksters right here in the good ole USSA? Fast & Furiously wasting time (and fiat) in SweitzerLand. Love your articles Bruce, really, but it's all smoke and mirrors, just pay the clowns and let them go home. BTW, hope they don't get wind of my secret $641.39 Social Security savings account, they might want to CONfiscate that shit too. WTF, it can't get anymore surreal, can it?

Wed, 03/13/2013 - 15:58 | 3327266 rtalcott
rtalcott's picture

The J in DOJ is like the last D in DOD.

Wed, 03/13/2013 - 14:44 | 3326812 PontifexMaximus
PontifexMaximus's picture

He is not a private banker. He's ceo of Sinco Treuhand AG, Idastrasse 15, Zürich. Details can be checked under
http://zh.powernet.ch/webservices/net/HRG/HRG.asmx/getHRGHTML?chnr=CH-02...

Wed, 03/13/2013 - 21:27 | 3328235 alex_g
alex_g's picture

A link in English and a bit clearer:

 

http://www.list-company.com/company-info/4028809a13dd74c80113ddd6f6391c7...

 

"SINCO Trust Ltd is a trust and finance boutique in operation to an international clientele from over 50 countries. She is founded in 1978 by Mr. Beda Singenberger and is still today 100% owned by her founder."

Wed, 03/13/2013 - 14:46 | 3326803 Bruce Krasting
Bruce Krasting's picture

To Rob below, and others, who asked how the bankers know who the clients actually are:

 

The name in the file is Casandra, the country of origin is Lechtenstein. There are no documents on file that reveal the true owner, or where they have a passport. The official files are a dead end.

 

But....

 

The business of black accounts is about making withdrawls and discussing investment strategy. This gets done every few years. To fly to Zurich to visit with a banker or a lawyer is a great pleasure. No problem to walk out with 50,000 francs and then go to the Bahnhafstrasse for some expensive shopping. It's red carpet treatment.

We're not talking big banks with tellers and such. A floor or two on a back street is all that is necessary for a Private Bank. Of course everybody knows everybody. They sit in a small conference room, drink drink bottled water, and count fresh bills. Smiles all around. All this for a 5% fee on the principal every year, thank you very much. But there are no records on this for a DOJ guy to demand.

 

 

Wed, 03/13/2013 - 16:27 | 3327392 Pseudo Anonym
Pseudo Anonym's picture

bruce, are you suggesting that when the depositor, lawyer and banker meet, the banker asks the depositor (the undisclosed owner of cassandra) for his/her passport before the banker accepts/remits money?  at least in cayman it's not even necessary for all three to meet.  the banker receives instructions to execute and that is where it ends; or should end.

Wed, 03/13/2013 - 20:34 | 3328120 Bruce Krasting
Bruce Krasting's picture

No papers, please. An introduction from a friendly Swiss lawyer is all that is required.

Wed, 03/13/2013 - 14:50 | 3326853 otto skorzeny
otto skorzeny's picture

so is it a great pleasure or should these people be exposed as cheats?

Wed, 03/13/2013 - 15:13 | 3326963 negative rates
negative rates's picture

Try both.

Wed, 03/13/2013 - 14:31 | 3326701 Mountainview
Mountainview's picture

A US citizen is free to open an account in his proper name. After Swiss law it was up to him to declare his fund to US tax authority..

Wed, 03/13/2013 - 14:44 | 3326685 otto skorzeny
otto skorzeny's picture

the DOJ and their lame bully boy tactics are a fucking joke. let me guess-nobody with any clout ( including congress scum and CIA secret accounts)will get their balls put in a vice. "folks that cheat the system"-more like anybody that doesn't want their taxes going to the bullshit that goes on in the US-and yet Bruce bitches about the taxes he has to pay.

Wed, 03/13/2013 - 16:02 | 3327290 Rainman
Rainman's picture

Thousands of federal workers owe more than $ 3 Billion in back taxes. Just sayin'.

http://news.investors.com/politics-andrew-malcolm/012612-599002-obama-white-house-staff-back-taxes.htm

Wed, 03/13/2013 - 14:22 | 3326631 Rob Jones
Rob Jones's picture

I'm sorry, but I don't understand how the Swiss banker can reveal the names to the DOJ if he doesn't know them. I thought that only the Swiss lawyer knew the actual name. How did the banker get the names?

Wed, 03/13/2013 - 14:44 | 3326813 Bruce Krasting
Bruce Krasting's picture

Rob, I answered your question above. I thought I was making a reply, turned out it was a comment.

Wed, 03/13/2013 - 17:18 | 3327610 bank guy in Brussels
bank guy in Brussels's picture

Bruce you indeed seem to be confirming that Switzerland is 'over' ... sad to see, actually, because many small honourable people were 'saved' by Swiss banking, and there is moral value in that.

But the key points in your story above, are being addressed by the fabulous Dr Jim Willie re the new Eastern financial order that is emerging.

The key flaw in the Swiss arrangement you describe, was the need for the Swiss private bank to trade via a New York linked entity.

That need, to connect with the US in any way, is precisely what is being demolished by the new Eastern financial order ... as Jim Sinclair and Jim Willie pointed out, the stupid 'sanctions against Iran', locking them out of the SWIFT bank transfer system, woke up everybody outside of the US and Europe.

China, Russia, India, Brazil ... just about all of Asia ... realised they could be next. There has to be a whole financial and trading system independent of US meddling, US-based trading, and US-Nato wire transfer protocols.

Jim Willie says that now, the safest place to keep your stashes of gold etc. is Hong Kong ... which is apparently saying a big 'f-ck you' to US 'investigators' ... it is THE place which is safe out of the US-Nato loop, which cannot be said of Singapore or Dubai, both vulnerable to Western agents.

- - -

And don't be surprised if the secret plan of the UK coming up in 2014 ... is to be the new Switzerland, providing trading and safety and shelter independent of the US, a big United Kingdom of the Cayman Islands.

They may well give the banking privacy Switzerland can no longer give, being cornered by the EU. This I think is the background of why Britain is soon to leave the European Union.

Britain has shite for an economy outside of financial services, they see the writing on the wall for the end of the dollar as the reserve currency, the break-up of the euro-zone, and they can see the whole Eastern and Southern non-Nato world setting up an alternate financial system.

Britain's best hope to be prosperous at all, is to be the Western Hong Kong - Switzerland of banking, with privacy, safety and a 'f-ck you' to an American government gone too far into fascism.

The UK has already set up a Chinese Renminbi Yuan Swap Facility, to get ready. This is also likely why they picked a Canadian to run the Bank of England ... to show the world they are international, not provincial.

Wed, 03/13/2013 - 20:44 | 3328123 YHC-FTSE
YHC-FTSE's picture

We sort of have a well established off-shore tax haven. It's called Jersey & Guernsey. You probably know it better than I do. No banking secrecy laws as such, but confidentially common law and a strict policy against proceeds of crime keep most prying tax men away. I hear it's very popular with the well to do and decent foreigners/expats saving for their kids' uni fees. Americans are probably not welcome because, well they are generally not welcome anywhere, and they have that FATC Act that requires everyone on the planet to strip naked at the whims of one of their beaurocrats.

 We didn't choose the Goldman alumni to run the BOE. He is being imposed on us by the same sadists who are busy turning the whole world into one big debt pile. Maybe he won't be a total turd when he begins in July, but I don't trust anyone with the letters GS in their cv.

Thu, 03/14/2013 - 05:34 | 3328976 supermaxedout
supermaxedout's picture

Jersey & Guernsey  The channel islands. This is the playground of the Rothschilds et al. These are the only real safe places as long as the UK is not interested to force these jurisdictions to open up their books.

oops, the Cyprus island banks are going to be audited by the Euroland banking authorities. oops,  So Cyprus is finished as a hub for the hidden economy.

But Im sure there are still places on this globe without any banking super vision at all. I remember a day from during my twenties when our smal sailing boat made a few hours stop on the  island of Labuan between the Philippines and Borneo.  We just stayed a few hours because we had an urgent technical problem. This island belongs officially to nobody. Its a Free Port since ever. There were only heavy armed small trading ships going in and out. The whole area is infested by pirates.  But we had to pass this area on our way to Singapore which we tried to do as fast as possible. Its a no stay area for every foreigner as long he is not connected with the powers in the area. It is known that  US military is involved  in the whole Sulu area since appx 1900 (Spain lost its colony the Philippiones as a result of the US/Spanish war to the Americans). There is lots of all kind of untouched commodities including lots of gold overthere. But something sticked to my mind then. This place Labuan island with its mix population (indian, Chinese and local tribes men) had several banks with Westerners working in it. Im sure this place is off limits for any auditor or tax inspector. He would not survive one day because I believe the situation is the same still nowadays as it was in 1980.

Wed, 03/13/2013 - 18:01 | 3327726 Rainman
Rainman's picture

Britain and USA need each other like a quarrelsome old married couple....especially if bombs start dropping.

Wed, 03/13/2013 - 19:37 | 3327946 negative rates
negative rates's picture

I feel the same way, there was a hint of double talk in the wording which suggests that any welcome invester would get plastered once the chit actually hits the crystal fanonator.

Wed, 03/13/2013 - 17:53 | 3327707 Optimusprime
Optimusprime's picture

Fascinating.  But how is England, with its disarmed populace under millions of surveillance cameras, and just as tethered to multicultural dogmas attending the displacemernt of the native population with brown immigrants, in any better shape then the US?  And how really in any position to tell the US to fuck off?

Wed, 03/13/2013 - 14:39 | 3326787 kaiserhoff
kaiserhoff's picture

Or maybe a Liechtenstein lawyer, or a couple more intermediaries, so where's the missing link?

Wed, 03/13/2013 - 15:10 | 3326952 negative rates
negative rates's picture

That bitch looks out of water man.

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