The Politics Of Hiding Cash

[R.A. Hettinga]

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The Wall Street Journal

		FEBRUARY 21, 2009
The Politics Of Hiding Cash

Loss of Financial Privacy Predates the UBS Case; Post-9/11 Rules, the
Web

Not long ago, a rich person in the U.S. could be secure with the
knowledge their finances were, if not top secret, at least private.

Banks rarely asked questions. If you had a closely held company, few
could determine your net worth. Those who had overseas accounts in tax
havens such as Switzerland or Liechtenstein knew banks there wouldn't
give up names.

So this week's news that UBS would be giving to the Internal Revenue
Service names of Americans with accounts at the Swiss bank and that
the U.S. seeks even more no doubt sent a shock through the financial
world.

The rich, especially the older rich, will bemoan the end of the great
refuge for secret stashes. The private-banking world will have the
difficult job of convincing wealthy clients that their names and
accounts are safe.

Yet it is merely the latest example of a longer trend -- the rich are
losing their financial privacy. The post-9/11 "know your client" rules
forced U.S. banks to ask more questions of clients and their sources
of funds. Crackdowns on overseas accounts by the IRS in the past
decade have limited the business of bank havens from rich Americans.
The Internet and legal system have combined to spread all manner of
newly available information about a person's net worth and
investments. How many Madoff investors ever expected not only to lose
their money but also to be outed publicly for doing so?

In short, wealth no longer is a big secret -- or at least it isn't as
secret as it once was. As one private banker once told me: "When it
comes to offshoring and shelters, my advice to my clients is simple:
How would it look if The Wall Street Journal wrote about it? If you
wouldn't be embarrassed, it's OK to do."
Robert Frank, The Wealth Report