Digital Age Banking Secrecy Pitfalls – Tax Investigations Without Borders

The digital age has changed banking secrecy forever. The internet knows no borders. There’s now an active market for stolen bank customer data promising the thief quick riches and it’s never been easier to find the buyer. The socialist run federal states in Germany are a prime example of the buyers having democratic support to uncover tax crimes in pretty much any way necessary.

The reason you’d have brought your money to Switzerland at the time of the great wars (WW I , WW II) was because it was a) a physically safe place. The banks were small. The number of people who ever saw your face or name was small. You couldn’t google customer names or read about their dealings if they were foreign (at least no easily). b) There were laws that made it extremely difficult for foreign regulatory entities to penetrate into the data domain. (these laws have been effective as the french Maginot Line to changing circumstances of the 21st century). c) tight-knit relationship between government and bankers which allowed very effective control of the little data that may have been around (this has also massively changed with more populist parties gaining power). d) a time when parties and therefor politics was very aware that countries can be run by fascists, communists and dictators making shelter an attractive business proposition. e) the chances your bank relationship manager would be a Swiss citizen intent on keeping his friends and family in Switzerland were close to 100%. Also the private banks preferred to promote or employ married employees in senior positions, they are less likely to make what could be termed short term decisions and probably wanted stability for their mortgage payments. f) The divide between top managers in banks and the relationship manager and administrative workers has most likely massively widened since the 1900s. g) most banks didn’t operate offices outside the country, that’s why it was called Swiss Banking (that’s one of the ways the Banking Maginot Line broke with respect to the US, the IRS/DOJ were threatening effectively freezing the interbank lending to UBS by charging them with crimes. In oher words they put the knife to the throat and waited for a reaction, and got it. There was no high level US politicians ready to risk their reputation by standing up for international legitimate processes. It’s also not inprobable that communications of top Swiss officials and their bargaining tactics were not secret.)

Today there’s a lot immigrant workers at all levels in banks. They obviously have less feeling of attachement, maybe even miss their home country – or ask themselves why it’s financially less stable. The bank workers mentality has changed a lot and they can take pictures with cameras, leaving no visible trace of data theft, transfer data to USB sticks. They can physically write down names, amounts in accounts and then transfer that data to excel on their home PC and a few steps further down the road find a government buyer. Then there’s increasing likeliness of penetration of bank’s firewalls and thef of data by government sponsered or criminal agents. Think of the data hoover the NSA runs…

All this is a result of two big trends: democracies taking over and the digital age.

Today more money can be saved with tax efficient structures, optimisation and international regulatory arbitrage which makes hiding money, the way say your grandparents would have, a high risk strategy and not at all advisable. Most companies and investors will save money by turning their money white. Investing with low fixed costs and using all legal possibilites for tax savings will cost less than hiding it on a risk adjusted basis and factoring in costs. The cost of investing and managing undeclared assets requires a premium which has risen substantially and also involves higher risks for all those involved.

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