Bad news: You need more than a passport, some pocket change, and a healthy disdain for the IRS.
- By Uri Friedman
Uri Friedman is deputy managing editor at Foreign Policy. Before joining FP, he reported for the Christian Science Monitor, worked on corporate strategy for Atlantic Media, helped launch the Atlantic Wire, and covered international affairs for the site. A proud native of Philadelphia, Pennsylvania, he studied European history at the University of Pennsylvania and has lived in Barcelona, Spain and Geneva, Switzerland.
In launching a new attack ad that dismisses Republican presidential candidate Mitt Romney as a "guy who had a Swiss bank account," the Obama campaign has once again thrust the debate over offshore banking into U.S. political discourse. As the Swiss newspaper Tages-Anzeiger noted on Wednesday, the words "Swiss bank account" still carry a stigma even though there’s no evidence that Romney — who revealed back in January that he had failed to disclose $3 million in a since-shuttered account with the Swiss bank UBS — evaded U.S. taxes on the interest earned by the assets he parked in Switzerland.
"There are only 2 reasons to have a Swiss bank account: hedging against the dollar or avoiding paying fair share in taxes," Obama campaign spokesman Ben LaBolt tweeted on Tuesday.
LaBolt, of course, overlooked a third reason for having a Swiss bank account: living in Switzerland. But as for the Obama campaign’s broader effort to paint Romney as an out-of-touch corporate raider, is it still fair to associate Swiss bank accounts with lavish yachts, trust funds, or other accoutrements of wealth? Even more to the point, can I — a young journalist in the United States with minimal savings — get my own Swiss bank account?
It may have been a cinch a couple of decades ago, but my chances are pretty slim today. Switzerland’s reputation — as a bastion of bank secrecy laws that help unsavory characters conceal their riches — doesn’t really square with reality these days, and that has implications for who is eligible to open a bank account there.
The climate in Switzerland began changing in 1998, when Swiss banks reached a landmark settlement with Holocaust survivors whose families’ assets were stolen in World War II and tucked away in vaults in Geneva and Zurich, and later faced criticism for holding the assets of international pariahs such as former Filipino dictator Ferdinand Marcos. Over the past decade, Swiss banks have increasingly come under pressure to comply with financial sanctions on rogue actors and butted heads with U.S. authorities over abetting tax evaders — most recently in a case in which a U.S. judge forced the Swiss bank Wegelin to forfeit $16 million.
The upshot of all this is that Switzerland’s more than 300 banks are now more selective about which American clients they accept — and more concerned about complying with U.S. regulations — than they were a decade ago. In 1997, for example, Fortune magazine informed readers that you can "become the James Bond of your dreams" without opening up an expensive, über-secret "numbered" Swiss bank account, pointing out that banks such as Credit Suisse and the Union Bank of Switzerland (now UBS) permitted Americans to open up a checking account with an initial deposit of as little as $3,500 — via "fax or even old-fashioned mail service," no less.
Sure, the Swiss Bankers Association (SBA) says that it’s still possible "in principle" for any adult to open an account at a Swiss bank (ideally in person) so long as the person verifies his or her identity with a valid passport and presents documents that demonstrate who owns the deposited funds and where they originated. (Note: When you arrive in Zurich, the bank’s compliance officials will probably want to make sure that your assets don’t stem from criminal activities and that you’re not a so-called "politically-exposed person" — think a Qaddafi — or someone with close ties to such a figure.)
I’m not, of course. But SBA spokesperson Sindy Schmiegel Werner explained that small Swiss retail banks are still unlikely to grant me a simple checking or savings account because securing my deposit just isn’t worth incurring the expenses involved in complying with the regulations of multiple jurisdictions — costs that are only rising with new laws such as the Foreign Account Tax Compliance Act, which the U.S. Congress passed in 2010. When big Swiss banks offer accounts to U.S.-based clients these days, it’s typically in the form of private banking and wealth management services for rich Americans.
Take UBS, for example. The Swiss bank ended all cross-border business with the United States in 2009 after reaching a settlement with the U.S. government in a tax-evasion investigation. Now, according to UBS Wealth Management spokesperson Yves Kaufmann, the only way U.S. citizens living in the United States can open a bank account with UBS is through its Swiss Financial Advisers (SFA) unit. Kaufmann notes that prospective clients for the bank’s wealth management arm must have roughly $1 million in investable assets and that U.S. citizens who participate in SFA often do so as a way to diversify their assets outside the United States. The Wall Street Journal reported on Wednesday that UBS’s U.S. wealth management business more than doubled new assets from clients in the first quarter of 2012, indicating that the "bank’s strategy of shifting its focus to managing assets for wealthy clients and reducing risk is starting to pay off."
But if new regulations mean that Swiss bank accounts don’t hold as much allure for American tax cheats anymore, there seems to be another solution that’s coming into vogue. According to a Bloomberg report on Tuesday, there’s a sevenfold increase in Americans renouncing their U.S. citizenship since 2008:
The U.S., the only nation in the Organization for Economic Cooperation and Development that taxes citizens wherever they reside, is searching for tax cheats in offshore centers, including Switzerland, as the government tries to curb the budget deficit. Shunned by Swiss and German banks and facing tougher asset-disclosure rules under the Foreign Account Tax Compliance Act, more of the estimated 6 million Americans living overseas are weighing the cost of holding a U.S. passport.
In other words, we could have a larger problem than wealthy Americans such as Mitt Romney stashing money in Swiss bank accounts. They might just pack up and head off to Switzerland for good. Maybe that’s what the Obama campaign was hoping for?
Thanks to Yves Kaufmann, spokesperson for UBS Wealth Management, and Sindy Schmiegel Werner, spokesperson for the Swiss Bankers Association.