Delaware Beats Switzerland as Most Secretive Financial Center
November 2nd, 2009Via: Reuters:
Move over Switzerland. The tiny state of Delaware beats the Alpine country in a contest for the most secretive financial jurisdiction, a tax justice rights group said on Saturday.
The United States, led by the eastern seaboard state, took in $2.6 trillion in deposits from non-resident corporations and individuals in 2007, according to a survey of financial jurisdictions analyzed by the Tax Justice Network.
The survey of laws, practices and size of inflows in 60 jurisdictions found Delaware coming in first, followed by Luxembourg and then Switzerland. The Cayman Islands and the United Kingdom round out the top five.
“While the U.S. has been jumping up and down and saying ‘Aha, bad, wicked Swiss banks,’ the U.S. is doing exactly the same things as far as non-resident bank account holders,” said Sarah Lewis, executive director of the group, based in the U.K.
Switzerland has been the poster child for financial secrecy over the past year. The United State sued Swiss global banking giant UBS AG, which paid a $780 million fine to settle a lawsuit against it by the government. As part of the deal, UBS admitted it actively helped Americans evade U.S. taxes.
The ranking is based on a composite of total offshore activity and measures such as whether a jurisdiction obtains beneficial ownership information about companies and the degree of cooperation in turning over requested financial information.
Delaware is attractive because it does not tax profits realized outside the state and does not require companies to be physically present, according to the Tax Justice Network.
UBS and Credit Suisse have about 200 entities in the state, according to the group.
Unfortunately this Tax Justice Network has missed the point. It isn’t Delaware in particular, it’s the fact that virtually every top-tier investment and/or banking house has been incorporated in Delaware.
“Total U.S. deposits of non-residents rose from about $1 trillion in 2001 to $2.6 trillion in 2007, according to the study.”
The $1.6 trillion in undisclosed money being referred to flowed into some number of these top tier banks.
Which begs the question: Why? In the 6 post-9/11 years studied — a period of unprecedentedly restrictive foreign asset disclosure rules, a period where the US is globally viewed as being LESS laissez-faire and MORE regulatory — why would Goldman Sachs, CIT Group, BofA, Wells Fargo, et al be viewed as such hot new places for wealthy foreigners to safe-keep their tax-haven assets?
The rational conclusion is, they wouldn’t. Which means this isn’t “tax haven” money flowing in.
My 2-cent opinion is that the sweeping new post-9/11 banking reforms were somehow also used to create a back-door for all that Caymen Island/Swiss/Luxembourg/whereever illegal-activity-laundry money to get repatriated back into the US system in quantities that couldn’t or wouldn’t have happened before. This is Catherine Austin Fitt’s drugs/arms funds that’s flooding back home to Papa.
I suppose this could help answer a host of confusing questions as well. Why hasn’t the US collapsed? Why has the stock market run upward in the face of reality? Why are Treasury auctions greeted by ever greater (and ever more invisible) buyers? Why do the bailout coffers never seem to empty? Etc. etc.
It appears it may not just be the Fed that opened a liquidity spigot. Somehow, some way, even in the face of a financial War on Terror, more “shadow money” has managed to flow into the US in just the past few years than anywhere else in the world!