U.S., SWISS AGREEMENT ON SECRET UBS BANK ACCOUNTS REPRESENTS THE TIP OF A VERY LARGE ICEBERG

U.S., SWISS AGREEMENT ON SECRET UBS BANK ACCOUNTS

REPRESENTS THE TIP OF A VERY LARGE ICEBERG

August 19^th, 2009….UBS has at long last succumbed to pressure from the Swiss government, agreeing to provide the IRS with the names of certain would-be taxpayers suspected of sheltering funds in those top secret Swiss bank accounts we’ve all heard so much about. At first blush, this seems like a big deal. After all, those tight-lipped, look-the-other-way Swiss banking types that we’ve grown so fond of over the years weren’t supposed to just cave like that, right? Well, the forensics investigation team at Steve Lee & Associates (www.stevelee.com) doesn’t think this is such a big deal after all.

The mainly unstated implications of the UBS case seems to be that the IRS (with a little help from their diplomatic and law enforcement colleagues in the US government) has busted wide open the doors of one of the world’s most secure tax havens. Their victory awards them depositor records on a platter: they finally have the goods on some of the world’s worst felons – the terrorists, the mobsters, the Madoffs. Or not, says Steve Lee & Associates.

Managing Partner Steve Lee sees the IRS’s victory as pyrrhic. “We think it is excellent news that the Treasury will obtain recoveries from exposed tax evaders. If these individuals owe taxes to Uncle Sam, that obligation should be satisfied.” But Lee warns that the IRS has very limited influence when dealing with small private banks that do not operate or possess traceable assets or deposits in the United States. “Switzerland attracts significant wealth associated with monies legally earned, but where the depositors want to hide ongoing investment income. We see that hot wealth associated with white-collar crime, racketeering, narcotics and weapons trafficking, and illegal gaming is being hidden from the US government in more exotic domiciles. In some of these countries, the stakes are higher and the risks are greater, and bureaucrats and bankers associated with secret accounts are likely to be more concerned about a client’s wrath than prosecution or pressure from the IRS or US law enforcement.”

So where are these domiciles? Through its investigations, the forensic economics swat team at Steve Lee & Associates – knowledgeable of the individuals and entities that obtain funds through criminal enterprises -- has identified (in descending order) the most frequent spots where white-collar criminals have stashed their ill-gotten booty (perhaps if the list focused exclusively on tax, it would have to be restructured -- and Switzerland would rank more highly):*

1. Belize
2. Panama
3. Cayman Islands
4. Dubai
5. British Virgin Islands (BVI)
6. Grand Duchy of Luxembourg
7. Monaco
8. Lichtenstein
9. Hong Kong
10. Taiwan
11. Switzerland
12. US Virgin Islands
13. Austria
14. Nevis (Caribbean)
15. Republic of Andorra
16. Campione d’Italia

How did the top three countries “earn” their positions? Lee explains, “In Belize, a vastly ineffective extradition treaty with the US has enabled many criminals to purchase economic citizenships with impunity by domiciling sufficient assets. Panama has been a haven for white-collar criminals since the fall of Noriega. In the Cayman Islands it has been possible to charter a bank or insurance company to deposit or shelter significant assets. These entities have no reciprocal operations or known assets in the United States, so the IRS has less leverage over them than it does with a public bank like UBS.”

But Lee is all too familiar with these operations from his firm’s past global rendezvous: “It’s a tough crowd to pursue. They don’t play nice in the sand box and they don’t like it when you separate them from the money they obtained illegally. That doesn’t stop us. Switzerland – and UBS in particular – was the low hanging fruit. And in the end, the IRS got less than four thousand five hundred names out of the fifty-two thousand they sought. It’s going to get a lot tougher when the IRS goes after the big money that is sequestered in markets like Dubai, Central America and the Caribbean.”

What’s more, Lee notes that “criminals of particular ethnicities appear to favor specific havens just as their forebears favored particular immigration ports-of-entry. The tendency to hide money where friends and extended family hid theirs is very helpful to us in international asset searching and recovery outside the USA.”

The heated match between UBS and the IRS has taken the limelight, and the impetus to quickly and efficiently tackle suspicious hotbeds of white-collar crime and expose familial fraudulent networks is here to stay. Financial detectives Steve Lee & Associates unlock these vaults.

* This list was devised based on the large number of investigations done by SL&A involving capital flight out of the United States.

Steve Lee, Managing Partner at Steve Lee & Associates can be contacted at:

stevelee@stevelee.com.