AS the law now stands, a U.S. citizen who has a substantial amount of
cash that he wants to hide from the Internal Revenue Service has no
real problem. He can take it out of the country, entirely legally,
deposit it in a secret Swiss bank account, then arrange to have the
bank return it as a foreign “loan”—and defy the IRS to say it is not.
That is only one of the milder variants of a sophisticated array of
illegal ploys that have been made increasingly easier in recent years
by the proliferation of Swiss banks in the U.S. and U.S. banks in
Switzerland and the Bahamas. U.S. officials most intimately concerned
with the problem conservatively estimate that the misuse of secret bank
accounts may be draining the nation of hundreds of millions of dollars
a year. Last week Assistant Treasury Secretary Eugene T. Rossides gave the Nixon
Administration's belated blessing to the means of crackdown proposed by
Representative Wright Patman, in a bill designed to tighten the rules
on foreign financial transactions. The measure, in its probable final
form, will require U.S. banks to keep records of foreign transactions
by their customers and to report unusually large withdrawals.
Individuals will have to report all transfers of money exceeding $5,000
in or out of the country and open their own records of foreign bank
accounts to Government inspection upon request. The Treasury first promised its cooperation last July, then suddenly
reversed itself after a delegation of bankers privately protested that
a Patman proposal to allow the Treasury Secretary to require records of
all domestic checks and deposits as well—some 40 billion a year in
all—might impose an impossible paperwork burden. Now that the
Administration has reversed itself again, Congress seems likely to
adopt the Patman bill soon. The bill will aid Government investigators in tracing the often devious
routes by which money goes abroad and returns anonymously to the U.S.
Robert M. Morgenthau, former U.S. Attorney for the New York area,
asserts that some Swiss bank accounts are used to deposit the profits
of heroin trafficking. Less often recognized is the dubious or
downright illegal use of Swiss bank accounts by seemingly respectable
businessmen. Margins and Taxes. An increasing number of Swiss banks have established
offices in New York and sent representatives to Las Vegas. They have
standing accounts with Wall Street brokers, and do far more trading in
bonds and securities than their domestic customers could possibly
require. In fact, Americans dealing through the banks have been able to
buy and sell on the stock exchanges, ignoring SEC requirements on
margins, evading taxes on profits and indulging in forbidden insider
trading. At the same time, major U.S. banks —the Bank of America, Chase
Manhattan and First National City—have set up shop in Switzerland, a
move that entitles their Swiss branches to all the protection and
secrecy of Swiss banking law. In several Swiss cities, the largest
volume of business is done by the local branches of American banks.
Americans now own or control several banks in Switzerland and in the
Bahamas, which offers an equally attractive haven of secrecy and now
has 52 banks for a population of 180,000.
