Global Financial Integrity

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Tax Havens/Bank Secrecy

Someone Gets Fired at BNP Paribas

A few weeks ago, we wrote on this blog that New York Regulator Benjamin Lawsky was demanding that top executives at BNP Paribas be fired as part of their settlement deal for violating U.S. sanctions and money laundering rules during settlement negotiations. Today, The Wall Street Journal reported that Lawsky was successful:

BNP Paribas has tentatively agreed to oust a senior adviser at the French bank at the behest of New York’s top financial regulator as part of a proposed settlement of BNP’s alleged violations of U.S. sanctions, according to people familiar with the matter.

Benjamin M. Lawsky, who runs New York’s Department of Financial Services, requested the bank remove Vivien Lévy-Garboua, the people said. Mr. Lévy-Garboua has served as head of compliance and internal controls for BNP in North America and currently acts as an adviser to senior bank officials.

It is pretty typical for the bank’s chief compliance officer to be fired after a scandal like this. News reports have the eventual total at ‘at least a dozen’ executives, so we’ll see if the discipline goes farther up the food chain. BNP has announced the symbolic early retirement of Chief Operating Officer Georges Chodron de Courcel, who was expected to leave at the end of the year. No one should mistake that for real discipline, however.

 

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Why Swiss Banks Can’t Be as Secretive in 2014 as 1934

UBS is a Swiss bank that was fined for banking secrecy crimes

Swiss banks can’t be as secretive today as they were many years ago. The World Won’t Let Them.

For years, secrecy jurisdictions such as Switzerland helped U.S. depositors use their own secrecy laws to avoid U.S. income taxes. Banking secrecy was firmly established in Switzerland in 1934 when it became a criminal offense to reveal a client’s identity. As a result, Swiss banks have helped hide around $2.1 trillion in offshore accounts. Today this is an increasingly unacceptable amount of money to hide away.

Since the 2008 financial crisis, banks in secrecy jurisdictions have faced increasing international pressures to make banking information more transparent. Such banks have been urged to take on the automatic exchange of information on bank accounts.

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Event Recap: How Illicit Financial Flows are Europe’s Common Enemy

On Wednesday, representatives from the Senate, European Embassies of Luxembourg, the Netherlands, and anti-corruption NGOs, including GFI’s Tom Cardamone, gathered in the U.S. Senate’s Kennedy Caucus Room to discuss the growing dangers of illicit financial flows in Europe as major contributors to the European financial crisis.

U.S. Senator Jeff Sessions (R-AL) spoke about his experience with Russia’s systematic aggression in the Balkan areas, and advised they take a stronger stance against Russian encroachment. Dependence on American financial and military hegemony in the region is not a sustainable security solution, he added. Sessions, who also served as Attorney General of Alabama, urged that Central and Eastern Europe push for anti-corruption and transparency laws.

I am convinced that prosperous and open societies make the world better. The values of financial integrity are exactly what we need.

All agreed that financial integrity is the linchpin of stability and security. Hon. Becky Norton Dunlop, Vice President of the Heritage Foundation, said:

Ensuring transparency is key to dealing with corruption.

This is not just a Republican issue. This is not just a Democratic issue; this is an issue for all Americans.

The crisis in Crimea was preventable, argued Natasha Srdoc, Chairman of the Adriatic Institute for Public Policy. Regional stability is greatly undermined by Western European banks promoting fraudulent transactions in the Balkans. Had Ukraine formally broken its ties to Russia and joined the EU, it could have deterred Russia from annexing Crimea. Yet joining the EU may also have exposed the corruption schemes of Ukrainian elites, including that of former President Viktor Yanukovych and former PM Pavlo Lazarenko, whose own anonymous shell company was based in Wyoming.

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Why Offshore Tax Havens Should Matter to Everyone

The Cayman Islands often function as tax havens for Fortune 500 companies.

Offshore tax havens impact everybody in the United States, raising the individual tax bills of each American citizen. In fact, every U.S. taxpayer had to pay approximately $1,259 extra on their tax bill this year due to lost...

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Why Indian Prime Minister Narendra Modi’s First Act Was To Go After Illicit Financial Flows

In his official first act after winning the biggest democratic election in world history, Indian Prime Minister Narendra Modi announced the formation of a Special Investigative Team (SIT) to probe illicit financial flows, or ‘black money’ as they are commonly referred to in India.

Illicit financial outflows are a massive problem for India. GFI research finds that India lost $343.9 billion to illicit outflows from 2002-2011:

 

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Chart: Russian Bank Deposits in the U.S. Before and After Sanctions

russianrubles

According to data provided by the U.S. Treasury, approximately $13.5 billion in bank deposits held by Russians left U.S. banks in March:

What happened between February and March? On February 26th, Russian military forces began to invade Crimea, setting off the international crisis in the region. Within a few weeks, Western nations imposed sanctions on some Russian individuals.

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Credit Suisse, The US Department Of Justice, And The Rest Of The World

By Koen Roovers

Originally posted on the Financial Transparency Coalition blog

Last week, Credit Suisse, a staple of the Swiss banking industry, pleaded guilty to conspiring to help US citizens “hide their wealth” for decades, in order to avoid taxes. The debate that has emerged in the wake of US Attorney General Eric Holder’s announcement seems to focus on whether or not the fine—roughly US$2.6 billion—is fair. Is it high enough?

It might not be much more than a couple of month’s earnings for this major bank. In the wake of the guilty plea, does this settlement prove the suspicion of many that ‘banks are too big too jail’?

Even so, the punishment might be some conciliation to the US. But is it naïve to think that the bank was only involved in this practice in the US? While the US might have the capacity and power to bring a powerful bank like Credit Suisse “to justice”, other countries might not be in that position.

The official website of Credit Suisse makes mention of 55 other countries of operation, besides the US and Switzerland. Among this list are a number of South American, Asian and African nations. Some of these very countries are at the center of the problem of illicit financial flows – money leaving a country undetected, untaxed, and unaccounted.

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Tax Havens Are the Biggest Foreign Investor in the United States… Not China

There has been a lot of talk in recent years regarding the extent of China’s investment in the United States. Most of this has been centered on China’s admittedly large holdings of U.S. debt, but the fear has spilled over to other forms of investment as well. A 2012 report filed by the US-China Economic and Security Review Commission, an entity created by Congress in 2000, went as far as recommending that the Committee on Foreign Investment in the US be amended to add a required litmus test for Chinese investment, specifically. This test would make it mandatory to analyze the “net economic benefit” of all proposed Chinese investment in the United States before it is approved.

Being fair, a lot of this has to do with national security, with the rational that Chinese acquisitions of telecommunication companies (for example) might pose a threat to the “cyber and physical infrastructure services critical to maintaining the national defense, continuity of government, economic prosperity, and quality of life in the United States.” How much of this is legitimate I’m not sure of.

Still, does China own an outsized portion of US assets compared to the rest of the world? The short answer is no, not even close.

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