The news that the Federal Government has forced UBS to give up the details of 4000 of its customers’ transactions has other financial institutions finding new ways to protect their clients. This has been greeted with dismay by one community. The following letter to the New York Times was intercepted and we provide it here in the interests of transparency.
Dear Sir,
As an international bank robber, may I say how much I deplore the underhanded way in which financial institutions are able to keep private details of how much money each of their clients has deposited. This makes my job so much harder. Indeed, we in the bank robbing community are working to improve our image after decades of negative coverage from conservative media and this could be enhanced by increased transparency, which would enable us to target only those banks and clients who have, for example, profited from the subprime mortgage market. We are also environmentally conscious. In our efforts to reduce greenhouse gases not only do we now use smokeless explosives, but transparency would enable us to leave alone the accounts and deposit boxes of carbon offset traders and Al Gore’s Hollywood friends.
Sincerely,
Machine Gun Kelly, Ma Baker, Bonnie Parker and Clyde Darrow
See also: Baptists and Bootleggers
Today, after a long and protracted battle between the U.S. and Swiss government, Swiss bank UBS AG agreed to turn over the names of at least 4,450 U.S. holders of accounts in Switzerland who may have violated U.S. tax laws. While the Obama administration may paint this as a victory, this number is less than 10 percent of the 52,000 names it had originally asked for. It is even lower than the estimate of 5,000 to 10,000 names that news reports speculated UBS would turn over once the agreement was announced.
Yet in a sense, this settlement is at least a partial victory — for privacy rights, international relations, and the rule of law. The U.S was forced to back away from its outrageous demands that would have set a precedent endangering U.S. competitiveness as well as civil liberties throughout the world.
The case began earlier this year after UBS – with the Swiss government’s full cooperation – turned over the names of 250 customers suspected of violating U.S. tax laws. But the U.S. government then turned around and asked for a whopping 52,000 additional names. The Swiss government naturally objected to such a fishing expedition as a violation of the nation’s privacy laws.
Switzerland rightly argued that such a large volume of names could not be justified by probable cause or “reasonable suspicion,” a requirement of the tax treaty Switzerland had negotiated with the U.S. In addition, such a fishing expedition would have gone against the spirit of the Fourth Amendment of the U.S. Constitution, which protects Americans from “unreasonable searches.” A forensic analysis commissioned by UBS from Alix Partners found that many international students, diplomats, and Americans who work in Switzerland – and banked in Switzerland by necessity – could have been swept up in this dragnet.
It’s far from clear that if the shoe were on the other foot, and a foreign country were to demand the names of 52,000 customers of an American bank, the U.S. would have complied. The United States Model Income Tax Convention of 2006, used as a template by the U.S. to negotiate tax treaties, states that no country should be required to honor “a request in which a Contracting State simply asked for information regarding all bank accounts maintained by residents of that Contracting State in the other Contracting State, or even all accounts maintained by its residents with respect to a particular bank.”
The Swiss government maintains that the surrendering of these names, in contrast to the Obama administration’s previous demand, does not violate Swiss privacy laws because there was “reasonable suspicion” of tax breaches covered under the U.S.-Swiss treaty. Regardless, American civil liberties advocates on either side of the political fence should be alarmed by the U.S. government’s sweeping disregard of privacy interests in its original demands to the Swiss government, and should encourage their home country to never treat privacy and another country’s sovereignty so cavalierly again.
Yesterday my colleague at CEI, John Berlau, released a statement about the recently announced deal between Swiss bank UBS and the IRS. It is being reported that the bank may end up turning over at least a portion of the over 50,000 names just to get the U.S. off its back. As it seems, any agreement reached in this case will be the result of UBS being bullied by the IRS to divulge its customers names simply because it says so. The potential slippery slope is evident. In this scenario, the Federal government can persuade foreign companies to ignore the laws of their home nations basically by force. Berlau makes the point that I have been making in all of my blog posts on this issue, that advocates of civil liberties:
“should be alarmed by the U.S. government’s sweeping disregard of privacy interests in its demands to the Swiss”
These actions by Federal authorities are setting a bad precedent for the privacy of American citizens. When the government can demand to know every detail of your financial life, what is there to stop it from exerting control over it? In addition, as I have said in past posts (and here), the disregard for the sovereignty of fellow nations exhibited by these demands is also concerning. I agree with Berlau in his assessment that being in a similar situation, the U.S. might not be so willing to allow American companies to ignore its laws in order to acquiesce to another nation’s demands.
If UBS stood firm by making an agreement that doesn’t violate Swiss law or the privacy rights of those U.S. citizens, maybe long-standing privacy protections will hold up for now. But it is doubtful this is the case. It is more likely that UBS has capitulated, at least to a degree, and the slope begins to slide into scary territory. Unfortunately, some will frame this in class warfare terms, and declare that we should have no sympathy for folks with secret Swiss bank accounts. Because its unfair, accordng to the feds, that they are cheating and getting out of paying taxes like the rest of us have to. Except for the fact that we don’t know if that is completely true, and maybe the question we should be asking is whether the taxes we pay are fair at all.
Lawyers for the U.S. government and the Swiss bank UBS AG have announced that they have reached a deal on releasing to the US the names of UBS account holders. No new details of the agreement have been released, other than what was previously speculated on a week ago.
I will be watching for and examining details that are released. Whatever deal is reached, the Obama administration’s conduct in the case, disregarding both privacy interests and the sovereignty of other nations, has been deplorable. It has set a precedent that could endanger U.S. competitiveness as well as civil liberties throughout the world.
As Fred Smith and I had explained in a Washington Times op-ed, after UBS, with the Swiss government’s full cooperation, turned over the names of 250 customers suspected of violating U.S. tax laws, the U.S. government turned around and asked for a whopping 52,000 names. The Swiss government objected to such a fishing expedition as violating the nation’s privacy laws.
Switzerland rightly argued that such a large volume of names could not be justified by probable cause or “reasonable suspicion,” a condition of the tax treaty Switzerland had negotiated with the U.S. In addition, such a fishing expedition goes against the spirit of the Fourth Amendment of the U.S Constitution, which protects Americans from “unreasonable searches.” A forensic analysis commissioned by UBS from Alix Partners (scroll down the right side of this page to open the PDF) found that many international students, diplomats, and Americans who work in Switzerland – and banked in Switzerland by necessity — could have been swept up in this dragnet.
It’s far from clear if the shoe were on the other foot, and a foreign country were to demand the names of 52,000 customers of an American bank, the U.S. would have complied. The United States Model Income Tax Convention of 2006, used as a template by the U.S. to negotiate tax treaties, states that no country should be required to honor “a request in which a Contracting State simply asked for information regarding all bank accounts maintained by residents of that Contracting State in the other Contracting State, or even all accounts maintained by its residents with respect to a particular bank.”
Previous reports had indicated that UBS would surrender 5,000 names, a large amount but still less than a tenth of what the U.S. had originally called for. It will be important to scrutinize if there is indeed “reasonable suspicion” for however large the volume of names that are released. American civil liberties advocates on whatever side of the political fence should be alarmed by the U.S. government’s sweeping disregard of privacy interests in its demands to the Swiss, and should encourage their home country to never treat privacy and another country’s sovereignty so cavalierly again.
Today, Wall Street Journal reports that a Miami court has set meeting Friday between the IRS and UBS to look at where they are in settlement negotiations over the case of the IRS demanding that the Swiss bank turn over the names of more then 50,000 U.S. citizens alleged to be tax evaders.
As I have said in past posts on this issue (in which I have been admittedly hard on UBS-but with a purpose), and as UBS seems to now be reiterating, turning over those names would be in contradiction of Switzerland’s banking privacy laws and its legal view of tax evasion. Banks in Switzerland are not required to ignore their country’s banking secrecy laws simply because another nation requests them to do so. This is a sticking point for the IRS, who is using the DoJ to try and get after UBS. Another factor in the fight to get UBS to crack is the growing pressure from other nations and international NGOs like the Organization for Economic Cooperation and Development (OECD) with its agenda, and Financial Action Task Force (FATF) with its “retaliatory measures,” mentioned in earlier posts. These groups are using the straw men of money laundering and terrorism to force Swiss capitulation. It has reached a point of absurdity. Aside from the U.S. government’s attempts at intimidation, the German government even suggested placing Switzerland on the international blacklist. I guess “Everybody Hates Switzerland” now, until they can get their hands on that money.
Of course, the average citzen is not concerned about the rights of those who can afford to have swiss bank accounts. Although they should be. This not only raises concerns about financial privacy, it also raises concerns about sovereignty, civil rights, and a host of other things. A person’s financial records should be considered as sacred as their medical records. However, we may soon be entering an era where both are collected and archived by the government. Only a person who believes Stalin was an OK guy would think that was a good idea.
In a running theme, I again cover the topic of the U.S. government’s heavy-handed dealings with swiss bank UBS. A nod to my colleague John Berlau, whose letter in today’s Financial Times gives a nod to former ambassador Faith Whittlesey and her commentary in FT expressing concern over the Obama administration demanding the names of 52,000 Americans who do business with UBS. As I stated in previous posts on this issue, these actions by federal authorities are setting a bad precedent for the privacy of American citizens. As usual, I am left at the end my post with questions: When the government can demand to know every detail of your financial life, what is there to stop it from exerting control over it?
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