Kenneth Rubinstein interviewed on CNBC Asia regarding offshore bank accounts

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Asher Rubinstein’s article, “After UBS Deal, Does Offshore Banking Have a Future?” was published on Forbes.com.  Please click here to view the article on Forbes.com.

After UBS Deal, Does Offshore Banking Have A Future?

Swiss-account holders will still get stability, privacy and protection from private parties—but not from the IRS.
Asher Rubinstein 06.17.10, 4:45 PM ET

In Zurich this week, the talk of the town is the Swiss Parliament’s vote to approve the settlement by which UBS banking files will be handed over to the IRS. People are questioning whether the erosion of Swiss banking secrecy will lead to a decline in the prestige of Swiss banking overall.

Now that the UBS matter appears to be heading toward resolution, another question is whether charges will be filed against other banks, in Switzerland or elsewhere, for facilitating tax fraud by hiding income in accounts once thought to be impervious to tax authorities, but now shown to be vulnerable.

The Swiss Parliament’s vote to approve the UBS settlement was expected. Most Swiss bankers and lawyers understood that UBS files would be surrendered to the IRS, because the results of refusing to disclose the bank data would likely have been the Department of Justice re-instituting further civil and criminal actions against UBS in federal court in Miami.

The Department of Justice, which prosecuted on behalf of the IRS, would likely have argued that UBS was in contempt of court and violated the settlement agreement. The penalties might have included revocation of UBS’ lucrative banking license in the U.S., and seizure of UBS’ billions of dollars of assets in the U.S. The consequences would have been devastating to UBS, its account holders and the broader financial markets.

But still, the world–and especially some Americans with Swiss accounts they thought were “secret”–waited for Parliament to act. Delays in Parliament were caused by political maneuvering and the tacking on of special interest provisions to this must-pass legislation (just as happens in the U.S. Congress), but everyone expected the UBS settlement to be approved eventually because of the potential downside if it were rejected.

Now that it has passed, one question is whether Parliament’s approval is good for Switzerland. Many Swiss people do not think so. For one thing, the Swiss are historically and proudly independent, and many were not pleased at having to back down to the U.S. Many Swiss people were prepared to sacrifice UBS for its misdeeds, in return for Swiss sovereignty standing firm and Swiss banking secrecy laws left intact.

Had Parliament not voted in the affirmative, the debates may have extended to a referendum among the Swiss population. The Swiss populace may well have rejected the settlement, standing up against the U.S. and in favor of longstanding Swiss banking secrecy which has, until recently, served Switzerland so well.

Switzerland has for decades benefited from being the premier banking nation in the world, the country where everyone from other countries–business oligarchs, shady dictators and retirees alike–put their money. Switzerland has much of the world’s wealth in its vaults, under its management and earning huge fees for its banks. Switzerland, and the Swiss, have grown rich as the bankers of the world.

Will this notion of elite Swiss banking change because of Parliament’s vote and the defeat of Swiss banking secrecy? Probably not. What has changed is the reason for banking in Switzerland. Tax evasion by hiding income in Swiss accounts is no longer a viable reason. Yet the political, social and economic stability of Switzerland are all still intact. And notwithstanding Parliament’s vote, Swiss banking confidentiality is also still intact, so long as the account is tax-compliant. Confidentiality from one’s private creditors and other financial challengers remains. Switzerland will continue to be a strong banking and financial services center, even a confidential one, albeit a tax-compliant one.

While the IRS offensive against UBS may have been the first significant dent to Swiss banking secrecy, other recent events have demonstrated that banking secrecy vis-a-vis governmental tax authorities is no more, whether in Switzerland or elsewhere. For instance, all the “tax haven” countries, including Liechtenstein and Monaco, along with Switzerland, have signed Tax Information Exchange Agreements with the U.S. and other countries. The tax havens have also agreed to abide by banking transparency standards and bank information sharing standards set forth by the OECD, the Organisation for Economic Co-operation and Development, a transnational quasi-governmental organization supported by the European economic powers and the U.S.

Moreover, information sharing and cooperation among governments is now routine, as seen by Germany paying millions of Euros for stolen bank data, using that data to prosecute German tax evaders, and then sharing that data with multiple other foreign governments.

The HIRE Act, recently passed by the U.S. Congress, sets very rigid rules requiring Americans to disclose offshore accounts and foreign entities, and punishes noncompliance with very severe penalties.

It is not illegal to have a foreign bank account, and there are many good reasons for having one: asset protection, access to foreign investment products, international diversification, doing business globally, owning real estate in a foreign country. But the disclosure and tax reporting obligations are now stringent. While banking privacy and asset protection from private civil creditors may be ongoing, there can be no expectation of banking secrecy in the context of tax reporting and disclosure.

As UBS surrenders its client data to the IRS, we can expect the IRS to set its sights against other banks. The 15,000 U.S. taxpayers who have already made voluntary disclosure to the IRS about their foreign accounts, and the U.S. taxpayers who were indicted for tax fraud and have been cooperating, have provided the IRS with a wealth of information about other banks, in Switzerland and other countries, that have aided and facilitated tax noncompliance. It is unlikely that the IRS will stop with UBS, but will use this public relations victory as leverage to pursue other banks in Switzerland and elsewhere.

The bottom line for foreign accounts once thought to be secret: they’re not. Account holders must bring their accounts, wherever located, into compliance. Switzerland and other foreign banking centers offer safety and stability, but they no longer offer tax secrecy.

Asher Rubinstein is a partner in the law firm of Rubinstein & Rubinstein, LLP, in New York. His practice is devoted to domestic and offshore asset protection, wealth preservation and tax planning. He may be reached via www.assetlawyer.com

Asher Rubinstein interviewed by Swiss TV regarding Swiss bank accounts

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Asher Rubinstein on CNBC discussing Offshore investments and taxation

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“Secrecy Has No Place in Proper Tax Planning” published in Family Wealth Report
Monday 8 March 2010

OPINION OF THE WEEK

Secrecy Has No Place In Proper Tax Planning

Kenneth Rubinstein, Asset Protection Lawyer, Rubinstein & Rubinstein

Experienced and qualified lawyers who specialize in asset protection law understand that the effective protection of assets from civil adversaries does not involve “hiding” those assets.

Much has been written recently about the U.S. government’s successful campaign to obtain the names of American owners of undeclared Swiss bank accounts. Commentators have almost unanimously reported the death of Swiss bank secrecy, while the Swiss have been quick to paraphrase Mark Twain’s quote that reports of his death have been greatly exaggerated.

Sensing a marketing opportunity in Switzerland’s misfortune, bankers, lawyers and service providers in other offshore centers have been quick to remind the world’s investment community that their jurisdictions are still (purportedly) secret. Thus, the internet and the media are full of ads for “secret” Panama foundations and Cook Island trusts. Articles abound speculating that Singapore will be the next Switzerland, or perhaps Dubai or Mauritius. Domestically, “experts” are explaining that there is no need to go offshore; secret corporations and LLCs in Delaware and Nevada will allow clients to hide assets right here in the U.S.A.

Sadly, the more gullible or desperate among us will rush to hide their assets in the next secret jurisdiction, only to learn, perhaps sooner rather than later, that in the twenty-first century you cannot really hide assets and there are no truly secret havens.

Over the last twenty-five years, the U.S. government has signed Mutual Legal Assistance Treaties (MLATs) with almost every country in the world. (The exceptions are Cuba, Iran and several other countries which, for political, social or economic reasons, would not constitute safe havens for your money.) These MLATs require each participating country to disclose information – including bank account data – to the U.S. government in connection with the investigation of an individual for commission of a serious crime. Serious crime includes tax fraud. Treaty loopholes, such as what constitutes “tax fraud” in a foreign treaty country, have been effectively closed by the successful U.S. attack on UBS and Switzerland. The MLATs specify that local secrecy laws may not form a basis for refusing to provide the requested information.

More recently, the U.S. Treasury Department has negotiated Tax Information Exchange Agreements (TIEs) with many countries. Virtually every tax haven jurisdiction has either signed a TIE, is presently negotiating a TIE or, under pressure from the OECD (the international organization of the world’s largest economic powers), has announced its intention to sign a TIE shortly. TIEs provide for agency-to-agency exchange of financial information in connection with administrative investigations (i.e., civil tax audits). Again, the TIEs expressly preempt local secrecy laws.

Readers must also appreciate that since September 11, 2001, the entire civilized world has embraced the need to prevent terrorist financing, money laundering and the transfer of proceeds from the drug trade and other criminal activity. Thus, virtually every legitimate financial institution throughout the world collects and keeps on file information identifying the true beneficial owner of each account, as well as the source of funds deposited into each account. Shrouding such accounts under nominee owners or signatories is no longer an option.

Thus, people should not be seduced by “secret” corporations, whether in Panama, BVI, Delaware or Nevada. The fact is that virtually every U.S. state and most foreign countries will register a corporation without disclosure of its shareholders or beneficial owners. Such a corporation is, however, nothing more than an empty shell. The minute you try to put assets into the corporation, it loses its secrecy. No bank will open an account for any corporation without first obtaining documents proving the identity of its beneficial owner and the signatory on the bank account, including passport or driver’s license, address and social security number. Every U.S. bank will also require a tax identification number for the corporation. Before issuing this ID number, the IRS will require the name and social security number of the company’s principal. The corporation may be secret; the identity of the true owner of its assets is not.

Finally, public announcements by various major governments that they are willing to pay handsomely for stolen bank information and, in the U.S., the enactment and publication of tax whistleblower laws, has created a world-wide cottage industry among underpaid bank employees and others, for the theft, sale and bounty collection relating to secret bank data.

Combine the above with the U.S. government’s ability to track all wire transfers into or out of the U.S. banking system, and it should be crystal clear that when it comes to the U.S. government, there is no real bank secrecy. Rather than falling for promises of secrecy from unscrupulous marketers, investors should seek guidance from qualified tax counsel and ensure that their international assets are structured in a tax-compliant manner. There is no U.S. law prohibiting ownership of overseas assets; but such assets must be tax compliant. Strategies exist for the legal minimization of U.S. taxes on overseas income. Such strategies do not rely on mythical secrecy.

Experienced and qualified tax lawyers know that proper, legal tax planning does not rely on “hiding”assets or income from the U.S. government; it relies on international tax treaties, tax benefits and advantages bestowed by Congress and loopholes in the U.S. tax laws. Likewise, experienced and qualified lawyers who specialize in asset protection law understand that the effective protection of assets from civil adversaries does not involve “hiding” those assets. It is based upon the use of the laws of various jurisdictions, domestic as well as offshore, to legally protect assets while they are in plain view. Proper asset protection erects a crystal clear bulletproof shield around your assets. In fact, the knowledge that your assets are legally protected often serves to discourage litigation or to force a settlement on favorable terms.

Secrecy did not die in Switzerland or anywhere else; it never really existed.

Watch Asher Rubinstein Interviewed on Bloomberg about Offshore Banking:

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Asher Rubinstein Interviewed on Bloomberg TV about Offshore Banking Secrecy.

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Kenneth Rubinstein’s article, “An Asset Protection Epiphany”,
published on MyLegal.com

We live in the most litigious society on the planet and at the most litigious time in our history. The current recession has eliminated the opportunity for many people to get rich. Some of those people are looking for alternatives to achieve wealth. An increasingly appealing alternative is to find a rich target and sue him, or at least, threaten to sue him, and get a fat settlement. According to statistics, one out of five of us will be sued during our lifetime. Most of us will settle rather than incur heavy legal fees.

The purpose of this article is to show you how to discourage lawsuits and thereby avoid legal fees and coercive settlements. This article can be summarized in four words:

Don’t Become A Target.

Many of us are already targets. Doctors, lawyers and other professionals are targets because our malpractice laws subject them to a higher standard of liability than other service providers. Real estate owners and developers are targets because our negligence laws and landlord-tenant laws subject them to greater liability than ordinary citizens. Businessmen are targets because our product liability, environmental protection and labor laws make them potentially liable to customers, visitors, employees and almost everyone else. Stockbrokers, investment advisors and promoters are targets because our securities laws and contract laws expose them to claims of liability from dissatisfied investors and partners.

All this liability exposure is magnified exponentially by our unique contingency fee system. In America you can sue anybody at no cost to yourself. The plaintiff risks nothing – providing he agrees to give a portion of the winnings to his lawyer. If he loses, he pays nothing. “Heads I win, tails I break even.” So why not sue?

However, most lawyers won’t take a case unless there is a reasonable chance that there will be some winnings to share. But “winning” means not just a court award of damages but also settlement proceeds. Thus, even if the case is not winnable, a lawyer will take it for its nuisance value – the likelihood that you will settle the case to get rid of it and avoid the legal fees.

Why does our legal system work this way? Because of our Constitution; specifically, the 14th Amendment, which guarantees to all citizens equal protection under the law. Equal protection also means equal access to our courts. If people would have to pay to sue, or if, as in other countries, the  loser pays the winner’s legal costs, poor people would be effectively shut out of our courts. Therefore, our system allows you to sue without it costing
you a dime.

Now that we know how the system works and why it works that way, how do we protect ourselves from its abusers? The answer lies in understanding why we are targets and how we can use the very same legal system to erase the bull’s-eye from our backs.

We need to understand that we are not targets because of our professions or because of the liability laws mentioned earlier in this article. They are merely the tools used and abused by those who want to get rich by suing us. We are targets because we are wealthy. Generally, nobody sues a poor doctor, poor businessman or poor anything. The reason is simple – it doesn’t pay.

Now here is the most important point of this article: To avoid being a target, become poor! “No thank you, I’ll take my chances with the lawsuits.” Ah, dear reader, you need to understand how our laws define “poor”. Under our legal system a judgment creditor can take pretty much whatever you own. If you don’t own it, he can’t take it.

Our laws also exclude certain assets from a creditor’s reach even if you own them. The laws vary from state to state as to what assets are excluded. However, one asset is excluded in every state: ownership interest in a limited partnership or limited liability company.

Thus, if you transfer your assets (your home, your money, your business) into a limited partnership, you won’t own those assets and a judgment creditor will not be able to take them. If you have an ownership interest in that limited partnership, it will also be exempt from the creditor’s grasp under state law. If your ownership interest is a controlling partnership interest, you will control all the assets (home, money, business) in the partnership, but you won’t own them.

Thus, here’s the epiphany: To avoid getting sued, don’t be a target. To avoid being a target, own nothing but control everything!

Now that you understand the essence of asset protection, how can you use this information to discourage lawsuits? The answer is: Don’t keep it a secret. Whenever someone threatens a lawsuit, at the first opportunity tell him or, more importantly, his lawyer: “I have no attachable assets; all of my assets are owned by limited partnerships, not by me.” The claimant will realize that he is wasting his effort. More importantly, his lawyer will realize that his share of zero, no matter how large, will still be zero. The lawsuit will be discouraged and for a change, our legal system will have worked for you, instead of against you. Don’t you feel lighter without a bull’s eye on your back?

Kenneth Rubinstein is the senior partner at Rubinstein and Rubinstein, LLP. Mr. Rubinstein received a Bachelor of Business Administration, with Honors, from the City College of New York, Bernard M. Baruch School of Business and Public Administration in 1968, and he received his Juris Doctor degree from the New York University School of Law in 1979. Mr. Rubinstein lectures extensively in the areas of Estate and Tax Planning, and Domestic and International Asset Protection. Mr. Rubinstein can be reached at 212-888-6600, extension 207 or via email at Kenneth.rubinstein@assetlawyer.com or www.assetlawyer.com

This article was published on www.mylegal.com, and can be viewed here.

Asher Rubinstein on “Squawk Box” – CNBC Asia, discussing foreign investments and offshore asset protection.

http://www.cnbc.com/id/15840232?video=1373612666&play=1

Asher Rubinstein’s Recent Media Appearances on Offshore Tax and Asset Protection

First, Asher was interviewed on the Swissinfo News website, the international news portal of the Swiss Broadcasting Corporation, and was quoted in a November 19, 2009 article regarding offshore tax evasion. 

Second, Asher was interviewed by The Wealth Net (Wealthnet.com) and appeared in a November 23, 2009 article regarding offshore tax compliance. 

Finally, Asher’s article titled “Creating a Safety Net for Landlords and Property Owners”, regarding asset protection for real estate owners and investors, was published in the December 3, 2009 issue of Real Estate Business OnLine. 

Contact us for copies or to discuss.