"Swiss tax deal opens door for money laundering" | AccountingWEB

"Swiss tax deal opens door for money laundering"

At a symposium on economic crime in Cambridge last week, Jonathan Fisher QC of Devereux Chambers, who specialises in tax investigation cases, described the opportunity HMRC's voluntary disclosure schemes presented to money launderers as "colossal".

He continued: "The recent arrangement made between the UK and Switzerland for withholding payments whilst maintaining a taxpayer’s anonymity is a variant on the theme. In many respects, it is a grubby little deal because, in addition to protecting serious tax criminals from prosecution, it affords organised criminals an opportunity to money launder the proceeds of their criminal activities through Switzerland whilst continuing to conceal their identity from the UK authorities...

"The penetration of HMRC systems and processes by criminal organisations for money laundering purposes undermines its reputation and integrity. At the very least, there is sufficient material in the public arena to justify an urgent independent and coherent analysis of the nature and scale of the problem... It would be unfortunate indeed if, in addition to the dubious distinction of having become the largest reported losers of confidential data in the world, it emerged that Her Majesty the Queen was presiding over the one of the largest and most sophisticated money laundering operations in history! Unfortunately, this possibility cannot be discounted, and if the author’s hunch, based on a combination of academic study and practical experience, were to be correct, urgent remedial action would need to be taken."

Fisher concluded his speech by calling upon the House of Commons Treasury Committee to carry out a closer investigation of the issue.

Do members of this group agree with his analysis - and is it an issue that should be opened up to further scrutiny?


The organised protection of criminals.

The Black Knight | | Permalink

Is that not the reason this has been done ?

You simply put your drugs, and other trade income in a swiss bank account, suffer a bit of tax on the interest (so now you can also say you are a contributor) and via a few trading companies, trusts etc bring the money back, or leave it for your retirement in another country.

Presumably it's out of reach for POCA as well ?

Who would not take advantage of rules provided for this purpose ?

Unfortunately this is how we deal with problem solving, Straight under the carpet JFDI , What problem ? lets pat ourselves on the back.

This is just the practical application of Spin.

davidwinch's picture

Proceeds of crime

davidwinch | | Permalink

I have great respect for Jonathan Fisher QC.

Clearly, as regards Swiss bank accounts, HMRC have gone for a 'deal' which is far from perfect (from their point of view) but is an improvement on no information and no tax.

Equally clearly if a person has hidden proceeds of crime in a bank account overseas he will - if caught and if there is sufficient evidence - be subject to action under PoCA 2002 to take those proceeds away from him.  It will be no defence to say that he has paid some tax on interest earned on the loot.

Jonathan's full comments are HERE.

One of his points is this:

"Perhaps, however, the most fertile area in which HMRC is vulnerable to penetration by criminal actors relates to the abuse of the tax collection system for money laundering. The vulnerability here is enormous, since a taxpayer needs to do little more than deliberately make an overpayment of tax in respect of his personal income or trading profits. In due course, HMRC will send the taxpayer a rebate. HMRC’s willingness to accept provisional figures in tax returns is a gift to a taxpayer since it affords him an opportunity to abuse the system whilst camouflaging his action with a veneer of commercial respectability."

The issue which Jonathan has perhaps not sufficiently addressed in this context is how the launderer makes the initial (over) payment to HMRC (for example by taking actual cash to the bank?) without attracting the attention of the authorities at that stage.

Thoughts anyone?


Cash? Ssshh

The Black Knight | | Permalink

Surely a cash payment of a tax liability merely confirms to HMRC that cash transactions are being used,and they would only have to ask where that cash came from ?

and  How would a confiscation order be made against an anonymous account holder ? May even be in another name ? In fact the sensible thing to do would be to use someone elses identity, Mistress etc.

The self assesment system is designed for fraud. The opportunities are endless, there are no checks and it is a choice of how much tax you would like to pay. We have lost count of how many incorrect tax returns we have seen with large (in comparison to the tax bill) underpayments, ranging from the naive to the deliberate.

Because the system is now all electronic I don't think HMRC have any idea of the scale of the problem.

I wonder whether there is actually a need to launder amounts of less than £50K as there is virtually no chance of being caught anyway and this (or at least £30K) could be described on your tax return as dividends with no extra tax.

The centralisation of HMRC and loss of local knowledge means that builders can receive £50K + in cash, for an extension to avoid the vat. Should have been a high value cash dealer, but probably did not know. This is surely a very easy way of laundering substantial amounts of cash, and quite common.

John Stokdyk's picture

Dave Hartnett grilled on the issue by MPs.

John Stokdyk | | Permalink

The Guardian reported that HMRC permanent secretary for tax Dave Hartnett fielded questions from the Treasury sub-committee on the Swiss tax deal on Monday as they investigated HMRC's efforts to close the tax gap. The prospect of breaking down Swiss banking secrecy within the next 10 years "seemed very unlikely", he said.

In response to the point raised by tax campaigner Richard Murphy that the deal has delayed international efforts to break down Swiss secrecy, he replied: "I am not saying Swiss bank secrecy was going to break down tomorrow. But the US is making big progress, the direction of travel is substantially in the direction of openness. This deal has guaranteed that anonymity is reinforced."

There were also a few interesting exchanges on his involvement with settlements of corporate tax disputes with the likes of Vodafone and Goldman Sachs. We'll be producing our own report on the hearing in the next day or two.

PS - Some interesting points from David & The Black Knight on the cash factor and SA system - thanks.

b.clarke's picture

Where does the agent stand?

b.clarke | | Permalink

Maybe I'm looking in the wrong places, but I have yet to see discussion of the position of the agent when a client wishes to use the Swiss deal. A crucial difference between the LDF and this deal seems to be that the client can choose to suffer a "tax" deduction while at the same time not disclosing his name, address and assets to HMRC.

The existence of such funds suggests that past tax returns have been incomplete and that therefore there has been criminal tax evasion. Surely that means that, if a client instructs me on that basis, I have to do a report under ML Regs in any event... I interpret the "D" in LDF as meaning that, because the client's cards are going on the table anyway, there is no need to report.

But then maybe that is too simplistic.



good points

The Black Knight | | Permalink

but if the swiss treatment is allowed; Is there a criminal offence at all any more ? Particulary if the clients non disclosure was not deliberate because he believed that the swiss kept your details secret for this very purpose, as has been recently ratified by HMRC.

Presumably these sorts of clients already know not to tell their accountant these things otherwise they would have appeared on previous returns or the accountant would (prior to the MLR) have ceased to act.

The danger is that now they will tell you, because they have got away with it and believe they are home and dry !

IHT planning

The Black Knight | | Permalink

do these amounts escape IHT as well ?

could be effective death bed planning to open a swiss account, only kidding but I bet it has already been done.

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