An insider at a Swiss bank warned Britain’s financial watchdogs that bankers in its UK office were offering services that could facilitate tax evasion and money laundering. Did the regulators turn a blind eye? The FT investigates the City’s role as a global hub for illicit finance.
One Monday in March last year, an announcement by the US justice department caught the attention of a former employee of the Swiss bank BSI. BSI’s bosses had agreed to violate the first rule of Swiss banking. To escape prosecution for abetting tax evasion, the bank would disclose the names of its clients and reveal the tricks it had used to hide their wealth.
The former BSI employee, who asks to be referred to only as Andrea, had worked in the bank’s UK office on Cheapside in the heart of the City of London. In 2008, Andrea was among the industry insiders who were starting to worry about London’s role as a global hub for illicit finance. That September, Andrea had warned the UK’s financial watchdogs that BSI bankers were using secretive techniques that could allow clients to conceal assets, potentially facilitating tax evasion and money laundering. The regulators took no public action against the bank and, as far as Andrea knew, no private action either.
Andrea had been spurred to contact the City’s regulators by a US Senate inquiry into tax evasion. Drawing on the testimony of a whistleblower from UBS, the biggest Swiss bank, the inquiry had exposed some of the chicanery that Swiss bankers used to help their clients hide money. A criminal investigation followed and in 2009 UBS paid a $780m fine to avoid prosecution for complicity in tax evasion. From there, the prosecutors’ campaign widened dramatically. Credit Suisse, UBS’s main rival, pleaded guilty to conspiring to help Americans evade tax and paid a $2.6bn fine. The onslaught brought down Wegelin, the oldest Swiss bank, which closed its doors in 2013 after 272 years in business. Its final act was to plead guilty to US charges of tax fraud.
In the wake of Wegelin’s demise, the US justice department launched a scheme that encouraged Swiss banks to make a clean breast of their complicity in tax evasion. In exchange, the US would forgo criminal charges. Dozens of banks applied. At the time, BSI’s owners were trying to close a deal to sell the bank. They knew they would only be able to do so once it had settled with the US. So BSI became the first Swiss bank to come to terms under the new scheme. The bank agreed to pay a fine of $211m, nearly three times its 2013 net profit. It also consented to hand over the account details of clients who should have been paying US tax, to make a “complete disclosure” of its cross-border banking activities, and to inform US prosecutors about any other banks that it knew had moved money into secret accounts.
The settlement documents laid out some of the techniques BSI had used. They closely resembled those described in Andrea’s tip-off to the Financial Services Authority, the City watchdog, and HM Revenue & Customs, the UK’s tax authority….
Read the whole article here;
WRITTEN BY
Tom Burgis
PUBLISHED BY
Financial Times, United Kingdom
Loading...