To be clear trusts have a so-called “Flew Clause” in the trust deed which means that you can move the trust within 24 hours from one to another jurisdiction. That is also possible with bank accounts if the organization is globally well-established and has subsidiaries. Therefore, an account can be moved from Switzerland to Singapore within few hours. In other words the wrongdoers you refer to have had plenty of time to set up another offshore structure and move assets, let`s say, in a Cayman Asset Protection Trust or simply to move a bank account to another jurisdiction. This is why Americans have requested “leaver lists” from Swiss banks.
In India, when you mention black money, most people tend to associate it with Swiss bank accounts. How true is that image?
Thanks to my experience of having worked in eight tax havens across the world, I have to say that banks in Switzerland often hold such accounts, but you also will find them in popular and politically stable tax havens such as Jersey, Guernsey, Singapore, etc. To be even more clear, tax-avoided money is not only stored in bank accounts but also invested in non-financial assets such as art work (sculptures, paintings etc), jewellery, yachts, real estate and so on. Some of it, called chattels, is stored in so-called warehouses all over the world, obviously mainly in tax havens such as Switzerland, Luxembourg, Singapore and so on.
Which are the new tax havens that have emerged over the past decade with Swiss banks coming under increasing pressure from various governments to disclose names of account holders?
In 1960 there were about 10 tax havens known and today Tax Justice Network counts about 80 and the number of tax havens is still increasing because it is a money-making business for every country. In the past decade I would say that places like Singapore, Mauritius, Ghana, Ireland even Shannan (Tibet), which has started offering generous tax breaks in an attempt to make itself a home for private equity fund and investment companies. However, Switzerland and Cayman have at least doubled or even tripled its secrecy business within the last decade.
About the latest efforts in India to uncover black money accounts, a senior lawyer, Ram Jethmalani, said, “It is a case of mountain in labour producing a mouse.” What do you think?
I believe he is right because the big players in tax havens are global financial institutions, multinational conglomerates, audit companies and ultra high net worth individuals who channel their businesses through trusts, companies, partnerships, special purpose vehicles, mutual and hedge funds etc. domiciled in those tax havens in order to accumulate tax-free profits and repatriate one or the other way the profit to their home countries or investing it abroad.
Which country is the biggest culprit when it comes to dumping unaccounted money in Swiss banks?
This is impossible to say and you only can assume, but I would say again that big players are the US, Russia, South America, Africa and India as well. Again it is not only unaccounted money but also non-financial assets in banks in Switzerland, not Swiss Banks e.g. HSBC, Deutsche Bank. I do not think that it is fair to say that Indian politicians, movie stars and sports men are more culpable than from other nations. It is simply a game played by greedy people in this world who have lost their social responsibility to societies they live in.
Do you think back money from the Indian subcontinent that is stashed away in Swiss banks is being used for terror activities? Do you think Swiss banks that keep unaccounted money owe an answer for indirectly financing Islamic and Christian terrorism?
Obviously, terror activities need to be financed and it needs to be done in a very secretive way. Therefore, the culprits would usually set up complex structures of trusts and companies covering several secrecy jurisdictions in order to disguise the beneficial owner and the purpose of the transactions. Switzerland does have a lot of advantage in this respect considering the Swiss Bank Secrecy Law and the way authorities investigate criminal behaviour as we have learned from the past. For instance I filed a complaint at the Federal Prosecution Office in respect of Julius Baer and accused the bank of being a criminal organization. The data I provided made it clear in my view but the complaint was turned down within 10 days. In addition all the information confiscated of Julius Baer, Cayman by Swiss authorities has never been investigated by the Prosecution Office of Zurich. Investigators turned a blind eye towards the facts and preferred to follow through with “if you cannot destroy the evidence, beat the witness” and that was me! That’s why one of the reasons why it is pretty easy to indirectly finance criminal matters through banks in Switzerland.
What are the major hurdles for the Indian government in disclosing names of people with unaccounted money in tax havens? The current government is citing legal hassles arising out of double taxation treaties. How convincing is that argument?
In my view there should be no legal reason or any kind of a double taxation treaty which protects tax evaders because those have stolen money from the public and to be precise form the man on the street and therefore those culprits should not be protected by law or any treaty. It is in our interest to know who those culprits are because honest tax payers have to cover the amount of taxes evaded.
In my view you have to look at the matter in a different way: some powerful people in India evade taxes and those people are more than happy if Switzerland does not agree to provide information. On the other hand Switzerland has the interest to keep the assets in the banks and therefore provides the reasoning why it cannot provide information such as names and accounts. This approach serves the powerful in India and Switzerland. It is a game played by influential bodies in both countries where the man on the street is cheated at the end of the day.
Indian Prime Minister Narendra Modi said before elections that each Indian would get Rs 15 lakh (Rs 1.5 million) in their bank accounts from the billions recovered from Swiss banks. Do you find it laughable?
I hope that the Indians are not that naïve to believe such a thing will ever happen.