Thursday, January 17, 2013
Banks are infuriating to deal with. It took nearly 15 weeks to finally complete a work related transaction that ultimately took 15 minutes to process. My own bank, also a conglomerate, doesn’t even have branches in Massachusetts, requiring me to use the envelopes and stamps to get non electronic funds deposited because their mobile deposit ap won’t accept larger amounts. Many blame the banks for the 2008 fiscal meltdown (though those causes are far more complex.) The banks reached a settlement last week with Fannie Mae that stops the investigation and costs a fraction of a percentage of the impact of the failures. I am surprised then to find that I’m not only sympathetic to but am outraged at what’s happened to a large bank.
According to the BBC Switzerland’s oldest bank Wegelin, which was established in 1741, will close operations after it pays $57.8m in fines to US authorities. “The bank had admitted to allowing more than 100 American citizens to hide $1.2bn from the Internal Revenue Service for almost 10 years.” Under Swiss law there was nothing illegal about what they did taking money in from customers and holding it. It was never the practice of the bank to find out who the money belonged to, where it came from and whether another government should earn tax income from the deposits it held.
For years wealthy Americans have secured their assets in places away from prying American officials eyes. There are laws on the books that require American citizens to report assets to the government. For years law enforcement officials have been frustrated by their inability to confirm that resources were kept outside of the U.S. It was illegal and if evidence was collected those people should have been prosecuted. Unable to figure a way out to leverage pressure on the citizenry, the U.S. government instead went to the banks in countries like Switzerland cajoled and applied monetary and even threats of military impact to get what they wanted.
The invasion of a sovereign country is not just done militarily now. U.S. officials have demonstrated that they have found a way to bully another country to get what it wants. Switzerland resisted the initial regulations in 2008 but after four years of threats of sanctions and other measures the Swiss Government relented and updated their laws.
On January 1, 2012 the Foreign Account Tax Compliance Act took effect. The U.S. became the only country in the world (besides Eritrea) that levels income tax based on citizenship, not based on where wages or income is earned. Thanks to this Act non U.S. governments are being required to report earnings to the Internal Revenue Service to make sure that people living and working outside of U.S. borders pay for U.S. services. Turning U.S. allies into tax collections is particularly repugnant. And if they don’t comply? The U.S. will exert its considerable influence. Count on the United States Government to take actions that make banks sympathetic.